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Exam 16: Partnership Accounting

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Question 1

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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 ________.

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limited li...

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Question 2

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Partners can invest assets but not liabilities into a partnership.

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B) False

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Question 3

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Henry,Luther,and Gage are dissolving their partnership.Their partnership agreement allocates each partner 1/3 of all income and losses.The current period's ending capital account balances are Henry,$45,000; Luther,$37,000; and Gage,$(5,000) .After all assets are sold and liabilities are paid,there is $77,000 in cash to be distributed.Gage is unable to pay the deficiency. -The journal entry to record the distribution should be:

Match each of the following terms with the appropriate definitions. -A corporation with 100 or fewer stockholders that can elect to be treated as a partnership for income tax purposes but retain the same limited liability as other corporations.

A partnership in which all partners have mutual agency and unlimited liability is called:

Wheadon,Davis,and Singer formed a partnership with Wheadon contributing $60,000,Davis contributing $50,000 and Singer 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 thousand) would be credited to Singer's capital account?

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?

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

Wright,Bell,and Edison are partners and share income in a 2:5:3 ratio.The partnership's capital balances are as follows: Wright,$33,000,Bell $27,000 and Edison $40,000.Edison decides to withdraw from the partnership,and the partners agree not to revalue the assets upon Edison's retirement. -The journal entry to record Edison's June 1 withdrawal from the partnership if Edison is paid $40,000 for his equity is:

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

When a new partner is admitted,all parties usually must agree to the admission.

Explain the steps involved in the liquidation of a partnership.

Christie and Jergens formed a partnership with capital contributions of $300,000 and $400,000,respectively.Their partnership agreement calls for Christie 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 Christie and Jergens's respective shares are:

Glade,Marker,and Walters are partners with beginning-year capital balances of $250,000,$150,000,and $100,000,respectively.Partnership net income for the year is $192,000.Make the necessary journal entry to close Income Summary to the capital accounts if partners agree to divide income based on their beginning-year capital balances.

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.

The life of a partnership is ________ in duration.

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.

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 Atkins's return on equity?

Glade,Marker,and Walters are partners with beginning-year capital balances of $100,000,$50,000,and $50,000,respectively.Partnership net income for the year is $84,000.Make the necessary journal entry to close Income Summary to the capital accounts if: a.Partners agree to divide income based on their beginning-year capital balances. b.Partners agree to divide income based on the ratio of 5:3:2 (Glade:Marker:Walters),respectively. c.Partnership agreement is silent as to division of income and less.

Lin and Coral 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. 1.The partnership contract specifies salary allowances of $45,000 to Lin and $60,000 to Coral,and any balance shared equally. $\begin{array} { | l | l | l | l | } \hline & \text { Lin } & \text { Coral } & \text { Allocated } \\\hline \text { Net Income } & & & \\\hline \text { Salary allowance } & & & \\\hline \text { Remainder } & & & \\\hline \text { Allocation of remainder } & & & \\\hline \text { Total } & & & \\\hline\end{array}$ 2.The partnership contract specifies salary allowances of $45,000 to Lin and $60,000 to Coral,interest allowance of 10% on the partners' beginning capital balance for the year. $\begin{array} { | l | l | l | l | } \hline & \text { Lin } & \text { Coral } & \text { Allocated } \\\hline \text { Net Income } & & & \\\hline \text { Salary allowance } & & & \\\hline \text { Interest allowance } & & & \\\hline \text { Remainder } & & & \\\hline \text { Allocation of remainder } & & & \\\hline \text { Total } & & & \\\hline\end{array}$