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Exam 16: Accounting for Partnerships

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Question 21

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Mutual agency means

A) Creditors can apply their claims to partners' personal assets.
B) Partners are taxed on partnership withdrawals.
C) All partners must agree before the partnership can act.
D) The partnership has a limited life.
E) A partner can commit or bind the partnership in any contract within the scope of the partnership business.

F) C) and E)
G) C) and D)

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Question 22

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When a partner invests in a partnership, his/her capital account is __________ for the invested amount.

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Question 23

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Alberts and Bartel are partners.On October 1, Alberts' capital balance is $75,000 and Bartel's capital balance is $125,000.With the partnership's approval, Bartel sells one-half of his partnership interest to Camero for $70,000.Prepare the journal entry to record this transaction in the partnership records.

Armstrong plans to leave the FAP Partnership.The recorded balance in her capital account is $48,000.The remaining partners, Peters and Floyd, agree to pay Armstrong $58,000 cash.The partners have agreed to share income and loss equally.Prepare the journal entry to record the transaction.

When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

Miller and Reising formed a partnership.Miller contributed land valued at $90,000 and a building valued at $115,000.Reising contributed $90,000 cash.In addition, the partnership assumed responsibility for Miller's $85,000 mortgage payable associated with the land and building.What are the balances of the partners' capital accounts after these transactions have been recorded?

A capital deficiency means that:

Tanner, Schmidt, and Hayes are partners with capital account balances of $100,000, $120,000, and $96,000 respectively.They share profits and losses in a 3:4:3 ratio.Schmidt wishes to leave the partnership and will be paid $125,000.What are the remaining capital account balances after Schmidt withdraws?

Rice, Hepburn and DiMarco formed a partnership with Rice contributing $60,000, Hepburn contributing $50,000, and DiMarco contributing $40,000.Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments.If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest dollar) would be credited to DiMarco's capital account?

Arthur, Barnett and Cummings form a partnership.Arthur contributes $250,000 cash and Barnett contributes $230,000 in cash.Cummings contributes equipment worth $255,000.Prepare the single journal entry to record the formation of this partnership.

If a partner withdraws from a partnership and the recorded value of his or her equity is overstated, then a bonus goes to _____________________; if the recorded value of the withdrawing partner's equity is understated, then a bonus goes to _______________________.

Chad Forrester is a limited partner in a sports management firm.During the previous year his return on partnership equity was 16%.The beginning balance in his capital account was $450,000 and his partnership net income for this year was $75,000.What was the balance in Chad's capital account at the end of last year?

Assets invested by a partner into a partnership remain the property of the individual partner.

Jimmy Hayes is a partner in Sports Promoters.His beginning partnership capital balance for the current year $65,000 and his ending partnership capital balance for the current year is $62,000.His share of this year's partnership income was $5,250.What were his withdrawals for the period?

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a:

If the partners agree on a formula to share income and say nothing about losses, then the losses are shared equally.

Shelby and Mortonson formed a partnership with capital contributions of $300,000 and $400,000, respectively.Their partnership agreement calls for Shelby to receive a $60,000 per year salary.Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments.The remaining income or loss is to be divided equally.If the net income for the current year is $135,000, then Shelby and Mortonson's respective shares are: A.$67,500; $67,500 B.$92,500; $42,500 C.$57,857; $77,143 D.$90,000; $40,000 E.$35,000; $100,000

Brown and Rubix are partners.Brown's capital balance in the partnership is $73,000 and Rubix's capital balance is $62,000.Brown and Rubix have agreed to share equally in income or loss.Brown and Rubix agree to accept Cabela with a 20% interest.Cabela will invest $41,500 in the partnership.The bonus that is granted to Brown and Rubix equals:

A partnership cannot use salary allowances or interest allowances if it uses the stated ratio method to allocate income and losses to the partners.

Summers and Winters formed a partnership on January 1, 2012.Summers contributed $90,000 cash and equipment with a market value of $60,000.Winters' investment consisted of: cash, $30,000; inventory, $20,000; all at market values.Partnership net income for 2013 and 2012 was $75,000 and $120,000, respectively. Determine each partner's share of the net income for each year, assuming each of the following independent situations: a.Income is divided based on the partners' failure to sign an agreement. b.Income is divided based on a 2:1 ratio (Summers: Winters). c.Income is divided based on the ratio of the partners' original capital investments. d.Income is divided based on partners allowed 12% of the original capital investments, with salaries to Summers of $30,000 and Winters of $25,000 and the remainder to be divided equally. Prepare the journal entry to record the allocation of the 2013 income under alternative (d)above.