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Exam 16: Accounting for Partnerships

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Question 41

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A partnership has an unlimited life.

A) True
B) False

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Question 42

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Force and Zabala are partners.Force's capital balance in the partnership is $98,000 and Zabala 's capital balance is $53,000.Force and Zabala have agreed to share equally in income or loss.Force and Zabala agree to accept Burns with a 25% interest.Burns will invest $56,000 in the partnership.Which of the following statements is correct?

A) Force's capital balance after the admission of Burns is $50,875.
B) Burns' capital after admission is $51,750.
C) Zabala's capital after the admission of Burns is $98,000.
D) Burns' capital after admission is $56,000.
E) Force's capital balance after the admission of Burns is $53,000.

F) A) and B)
G) A) and E)

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Question 43

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The withdrawals account of each partner is closed to retained earnings at the end of the accounting period.

A relatively new form of business organization that protects partners with limited liability, allows limited partners to assume an active management role, and is taxed as a partnership is a ______________________________.

The withdrawals account of each partner is:

Elaine Valero is a limited partner in a marketing and design firm.During the previous year her return on partnership equity was 14%.During this time, the beginning and ending balances in her capital account were $210,000 and $230,000 respectively.What was Elaine's partnership net income for this year?

The life of a partnership is ____________________ in duration.

Renee Jackson is a partner in Sports Promoters.Her beginning partnership capital balance for the current year is $55,000 and her ending partnership capital balance for the current year is $62,000.Her share of this year's partnership income was $5,250.What is her partner return on equity?

Web Services is organized as a limited partnership, with David White as one of its partners.David's capital account began the year with a balance of $45,000.During the year, David's share of the partnership income was $7,500 and David received $4,000 in distributions from the partnership.What is David's partner return on equity?

Paco and Kate invested $99,000 and $126,000, respectively, in a partnership they began one year ago.Assuming the partnership earned $120,000 during the current year, compute the share of the net income each partner should receive under each of these independent assumptions.

Which of the following statements is true?

Groh and Jackson are partners.Groh's capital balance in the partnership is $64,000 and Jackson's capital balance is $61,000.Groh and Jackson have agreed to share equally in income or loss.Groh and Jackson agree to accept Block with a 25% interest.Block will invest $35,000 in the partnership.The capital account balances after admission of Block are:

Partners can invest both assets and liabilities into a partnership.

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

Armstrong withdraws from the FAP Partnership.The remaining partners agree to buy out her share for her capital balance of $35,000.Prepare the journal entry to record the withdrawal from the partnership.

A _________________________ means that at least one partner has a debit balance in his/her capital account at the point of the final distribution of cash.

If a partnership contract provides for interest at 10% annually on each partner's investment, the interest:

Partner return on equity is calculated as ______________________________.

Limited liability partnerships are designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.

___________________________ means that partners can commit or bind the partnership to any contract within the scope of the partnership business.