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Exam 16: Accounting for Partnerships

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Question 71

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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) A) and E)
G) C) and D)

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Question 72

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

A) True
B) False

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Question 73

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In closing the accounts at the end of a period,the partners' capital accounts are credited for their share of the partnership loss or debited for their share of the partnership net income.

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?

Assume that the S & B partnership agreement gave Steely 60% and Breck 40% of partnership income and losses.The partnership recorded a loss of $27,000 in the current period.Steely's share of the loss equals $16,200 and Breck's share equals $10,800.

The partnership shows the following capital balances at the date of Lance's withdrawal: Willow,$84,000,Lance,$38,000,and Jordan,$38,000.The partners (Willow,Lance,and Jordan) share income and loss equally.Lance withdraws and is paid $38,000 of cash.How would the partnership record the withdrawal of Lance?

A partnership recorded the following journal entry: This entry reflects:

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

Web Services is organized as a limited partnership,with Wren Littlefeather as one of its partners.Wren's capital account began the year with a balance of $87,000.During the year,Wren's share of the partnership income was $60,000 and she received $25,000 in distributions from the partnership.What is Wren's partner return on equity?

In the absence of a partnership agreement,the law says that income and loss should be allocated based on:

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:

The BlueFin Partnership agreed to dissolve.The remaining cash balance after liquidating partnership assets and liabilities is $60,000.The final capital account balances are: Smith,$30,000; Nagy,$20,000; and Russ,$10,000.Prepare the journal entry to distribute the remaining cash to the partners.

The equity section of the balance sheet of a partnership can report the separate capital account balances of each partner.

The BlueFin Partnership agrees to dissolve.The cash balance after selling all assets and paying all liabilities is $56,000.The final capital account balances are: Smith,$33,000; Nagy,$27,000; and Russ, ($4,000).Russ 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.