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Exam 16: Partnership Accounting

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Question 31

Multiple Choice

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Partnership accounting does not:

A) Use a capital account for each partner.
B) Use a withdrawals account for each partner.
C) Allocate net income to each partner according to the partnership agreement.
D) Allocate net loss to each partner according to the partnership agreement.
E) Tax the business entity.

F) A) and D)
G) B) and D)

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Question 32

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A partnership that has at least two classes of partners,general and limited,allows the limited partners to have no personal liability beyond the amounts they invest in the partnership,and the limited partners have no active role except as specified in the partnership agreement is a ________ partnership.

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Question 33

Multiple Choice

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T.Andrews contributed $14,000 in to the T & B Partnership.The journal entry to record the transaction for the partnership is:

Bannister invested $110,000 and Wilder invested $99,000 in a new partnership.Their partnership agreement called for Wilder to receive a $70,000 annual salary allowance.Under this agreement,what are the income or loss shares of the partners if the annual partnership income is $90,000?

Jakobs,Penn,and Lundt are partners with beginning-of-year capital balances of $400,000,$320,000,and $160,000,respectively.The partners agreed to share income and loss as follows: Salary of $30,000 to Jakobs,$50,000 to Penn,and $36,000 to Lundt.An interest allowance of 8% on beginning-of-year capital balances.Any remaining balance is to be divided equally.If partnership net income for the year is $190,000,determine each partner's share and make the appropriate journal entry to close the Income Summary to the capital accounts.

Bloom and Plant organize a partnership on January 1.Bloom's initial investment consists of $800 cash,$1,700 equipment and a $500 note payable reflecting a bank loan for the new business.Plant's initial investment is cash of $2,000.These amounts are the values agreed on by both partners.The journal entry to record Bloom's investment is:

Wallace,Simpson,and Prince are partners and share income and losses in a 3:4:3 ratio.The partnership's capital balances are Wallace,$68,000; Simpson,$90,000; and Prince,$42,000.Royal is admitted to the partnership on July 1 with a 20% equity and invests $50,000.The partnership would record the admission of Royal into the partnership as:

Current partners usually require any new partner to pay a bonus for the privilege of joining when the current value of a partnership is greater than the recorded amounts of equity.

In the absence of a partnership agreement,the law says that income of a partnership will be shared equally by the partners.

In a partnership agreement,if the partners agreed to an interest allowance of 10% annually on each partner's investment,the interest allowance:

A bonus may be paid in all of the following situations except:

Zheng invested $100,000 and Murray invested $200,000 in a partnership.They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per year salary allowance to Murray,plus an interest allowance on the partners' beginning-year capital investments at 10%,with the balance to be shared equally. -Assuming net income for the current year is $105,000,the journal entry to allocate net income is:

Partners in a partnership are not taxed on their withdrawals ,but rather on ________.

Wright,Bell,and Edison are partners and share income in a 2:5:3 ratio.The partnership's capital balances are as follows: Wright,$33,000,Bell $27,000 and Edison $40,000.Edison decides to withdraw from the partnership,and the partners agree not to revalue the assets upon Edison's retirement. -The journal entry to record Edison's June 1 withdrawal from the partnership if Edison sells his interest to Whitney for $45,000 after the other two partners approve Whitney as partner is:

Salary allowances are reported as salaries expense on a partnership income statement.

Even if partners devote their time and services to their partnership,their salaries are not expenses on the income statement.

The following information is available on TGR Enterprises,a partnership,for the most recent fiscal year: $\begin{array}{ll}\text { Total partnership capital at beginning of the year } & \$ 180,000 \\\text { Partnership net income for the year } & \$ 150,000 \\\text { Withdrawals by partners during the year } & \$ 120,000 \\\text { Additional investments by partners during the year } & \$ 60,000\end{array}$ There are three partners in TGR Enterprises: Tracey,Gregory and Rodgers.At the end of the year,the partners' capital accounts were in the ratio of 2:1:2,respectively.Compute the ending capital balances of the three partners.

A partnership has a limited life.

When a partner is added to a partnership:

Leto and Duncan allow Gunner to purchase a 25% interest in their partnership for $30,000 cash.Gunner has exceptional talents that will enhance the partnership.Leto's and Duncan's capital account balances are $55,000 each.The partners have agreed to share income or loss equally.Prepare the general journal entry to record the admission of Lepley to the partnership.