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Exam 12: Accounting for Partnerships

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Question 41

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What are the ways that a new partner can be admitted to an existing partnership? Explain how to account for the admission of the new partner under each of these circumstances.

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A new partner may purchase a partnership...

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Question 42

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Partners in a partnership are taxed on the partnership income, not the amounts they withdraw from the partnership.

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Question 43

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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.

R. Stetson contributed $14,000 in cash plus office equipment valued at $7,000 to the SJ Partnership. The journal entry to record the transaction for the partnership is:

Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. -If the partnership reports income of $150,000 for its first year, what amount of income is credited to Lee's capital account? (Do not round your intermediate calculations.)

The income or loss of a partnership is allocated to the partners according to the partnership agreement, and it is included in determining the taxable income for each partner's tax return.

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

Partners' withdrawals of assets are:

The withdrawals account of each partner is:

What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.

Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Caitlin, $120,000; Chris, $80,000; and Molly, $100,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $60,000. -The balance in Caitlin's capital account immediately after Paul's admission is:

Total partnership income is reported to the IRS on Form 1065.

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from the acts of other partners is a __________ partnership.

The withdrawals account of each partner is closed to income summary at the end of the accounting period.

Peters and Chong are partners and share equally in income or loss. Peters' current capital balance is $140,000 and Chong's is $130,000. Peters and Chong agree to accept Aaron with a 30% interest in the partnership. Aaron invests $98,000 in the partnership. - The balances in Peters's and Chong's capital accounts after admission of the new partner equal:

Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $64,000, and Martin's capital balance $61,000. Hewlett and Martin have agreed to share equally in income or loss. Hewlett and Martin agree to accept Black with a 25% interest. Black will invest $35,000 in the partnership. The bonus that is granted to Black equals:

Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $64,000, and Martin's capital balance $67,000. Hewlett and Martin have agreed to share equally in income or loss. The existing partners agree to accept Black with a 20% interest. Black will invest $35,000 in the partnership. The bonus that is granted to Hewlett and Martin equals:

Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Masters, $15,000; Hardy, $15,000; Rowen, $(2,000) . After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $28,000 in cash to be distributed. Rowen pays $2,000 to cover the deficiency in his account. The general journal entry to record the final distribution would be:

A partnership that has two classes of partners, general and limited, where the limited partners have no personal liability beyond the amounts they invest in the partnership, and no active role in the partnership, except as specified in the partnership agreement is a:

Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage, $(5,000) . After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency. - What amount of cash will Gage receive upon liquidation?