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Exam 12: Accounting for Partnerships

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Question 61

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Partners' withdrawals are debited to their separate withdrawals accounts.

A) True
B) False

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Question 62

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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.They also agreed to an annual interest allowance of 5% on the partners' beginning-year capital balance,with the balance of income or loss to be divided equally.Under this agreement,what are the income or loss shares of the partners if the annual partnership income is $82,000?

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Question 63

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Reno contributed $104,000 in cash plus equipment valued at $27,000 to the RD Partnership.The journal entry to record the transaction for the partnership is:

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:

Tower,Knight,and Spears are partners who share income and loss in a 4:2:2 ratio.The partnership's capital balances are as follows: Tower,$292,000;Knight,$114,000;and Spears,$194,000.Damsel is admitted to the partnership on March 1 with a 25% equity.Prepare the journal entries to record Damsel's entry into the partnership under each of the following separate assumptions: Damsel invests (a)$200,000; (b)$180,000;and (c)$240,000.

The statement of changes in partners' equity shows the beginning balance in retained earnings,plus investments,less withdrawals,plus the income (or less the loss)and the ending balance in retained earnings.

A partnership agreement:

Barber and Atkins are partners in an accounting firm and share net income and loss equally.Barber's beginning partnership capital balance for the current year is $285,000,and Atkins' beginning partnership capital balance for the current year is $370,000.The partnership had net income of $250,000 for the year.Barber withdrew $90,000 during the year and Atkins withdrew $100,000.What is Barber's ending equity?

The Redtail Partnership agrees to dissolve.The cash balance after selling all assets and paying all liabilities is $56,000.The final capital account balances are: Paulson,$33,000;Gray,$27,000;and Chang, ($4,000).Chang agrees to pay $4,000 cash from personal funds to settle his deficiency.Prepare the journal entries to record the transactions required to dissolve this partnership.

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:

Partner return on equity can be used by each partner to help decide whether additional investment or withdrawal of resources is best for that partner.

During the closing process,each partner's withdrawals account is closed to _________________________.

MacArthur,Strong,and Viet form a partnership.MacArthur contributes $190,000 cash and Strong contributes $200,000 in cash.Viet contributes equipment worth $215,000.Prepare the single journal entry to record the formation of this partnership.

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 a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally.If the partnership reports income of $150,000 for its first year,what amount of income is credited to North's capital account?

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.

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:

Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000,respectively.Their partnership agreement calls for Farmer to receive a $70,000 per year salary.The remaining income or loss is to be divided equally.If the net income for the current year is $135,000,then Farmer and Taylor's respective shares are:

The withdrawals account of each partner is:

Caroline Meeks and Charlie Fox decide to form a partnership on August 1.Meeks invests the following assets and liabilities in the new partnership: The note payable is associated with the building and the partnership will assume responsibility for the loan.Fox invested $100,000 in cash and $95,000 in equipment in the new partnership.Prepare the journal entries to record the two partners' original investments in the new partnership.

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: