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Exam 12: Accounting for Partnerships

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Question 31

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

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share of p...

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Question 32

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Darien and Hayden agree to accept Kevin into their partnership. Kevin will contribute $22,000 in cash. Prepare the journal entry to record this transaction.

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Question 33

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A partnership agreement:

Conklin plans to leave the CAP Partnership. The recorded balance in her capital account is $48,000. The remaining partners, Arthurs and Preston, agree to pay Conklin $58,000 cash and Conklin accepts. The partners share income and loss equally. Prepare the journal entry to record the transaction.

Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. The partnership had income of $150,000 for its first year of operation. When the Income Summary is closed, the journal entry to allocate partner income is:

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 Plant's investment is:

Match the following definitions with the appropriate term

The end of a partnership is referred to as its dissolution.

What factors should be considered before establishing a partnership?

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?

A partner can withdraw from a partnership by any of the following means except:

Partners' withdrawals are debited to their separate withdrawals accounts.

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, $30,000. After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $54,000 in cash to be distributed. The general journal entry to record the final distribution would be:

Admitting a partner by accepting assets is a personal transaction between one or more current partners and the new partner.

Cinema Products LP is organized as a limited partnership that sells movie props. Information related to capital balances is given below. Compute the partner return on equity for each limited partner. How would each partner evaluate the success of the partnership? What would you recommend the partners do with respect to additional investments or withdrawals? $\begin{array} { l r r r } & \text { Turner } & \text { Kelly } & \text { Total } \\\text { Capital balance, beginging of year } & 890,000 & 570,000 & 1,460,000 \\\text { Net income for current year } & 85,000 & 65,000 & 150,000 \\\text { Withdrawals for current year } & 40,000 & 25,000 & 65,000\end{array}$

Define the partner return on equity ratio and explain how a specific partner would use this ratio.

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 $160,000. -The balance in Paul's capital account immediately after his admission is:

A ________ is an unincorporated association of two or more people to pursue a business for profit as co-owners.

The partnership agreement for Wilson, Pickett & Nelson, a general partnership, provided that profits be shared between the partners in the ratio of their financial contributions to the partnership. Wilson contributed $100,000, Pickett contributed $50,000 and Nelson contributed $50,000. In the partnership's first year of operation, it incurred a loss of $110,000. What amount of the partnership's loss, rounded to the nearest dollar, should be absorbed by Nelson?

A capital deficiency exists when at least one partner has a debit balance in his or her capital account at the point of final cash distribution during liquidation.