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Questions
Q:
Partner return on equity is calculated as ______________________________.
Q:
Partners in a partnership are taxed on _______________________, not on their withdrawals.
Q:
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 ______________________________.
Q:
A partnership designed to protect innocent partners from malpractice or negligence claims resulting from the acts of other partners is a ____________________________ partnership.
Q:
A partnership that has at least two classes of partners, general and limited, that allows the limited partners to have no personal liability beyond the amounts they invest in the partnership, and in which the limited partners have no active role except as specified in the partnership agreement is a ________________________ partnership.
Q:
___________________________ implies that each partner in a partnership can be called on to pay a partnership's debts.
Q:
___________________________ means that partners can commit or bind the partnership to any contract within the scope of the partnership business.
Q:
A _____________________ is an unincorporated association of two or more people to pursue a business for profit as co-owners.
Q:
Beard, Tanner, Williams are operating as a partnership. The capital account balances at December 31, 2013 are $254,000, $195,000 and $286,000 respectively. Record the entries for the following independent situations.
a. The partners vote to admit Sturges. She is going to invest $150,000 for a 15% interest in the partnership. Profit and losses are split equally between the existing partners.
b. Sturges agrees to buy 50% of Williams interest by paying him $150,000 directly.
c. The partners need new ideas and agree to give Sturges a 20% interest in exchange for $150,000. Profits and losses are shared equally between the existing partners.
d. Williams wants to retire and is willing to leave the partnership in exchange for $281,000. Profits and losses were shared on the ratio of 2:3:5.
Q:
The BlueFin Partnership agrees to dissolve. The cash balance after selling all assets and paying all liabilities is $60,000. The final capital account balances are: Smith, $35,000; Nagy, $29,000; and Russ, ($4,000). Russ is unable to pay the capital deficiency. Prepare the journal entries to record the transactions required to dissolve this partnership.
Q:
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.
Q:
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.
Q:
Conley and Liu allow Lepley to purchase a 25% interest in their partnership for $50,000 cash. Conley and Liu both have capital balances of $55,000 each and have agreed to share income and loss equally. Prepare the journal entry to record the admission of Lepley to the partnership.
Q:
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.
Q:
Armstrong plans to leave the FAP Partnership. The recorded value of her capital account is $48,000. The remaining partners, Floyd and Peters, agree to pay Armstrong $40,000 cash. The partners have agreed to share income and loss equally. Prepare the general journal entry to record the withdrawal from the partnership.
Q:
Conley and Liu allow Lepley to purchase a 25% interest in their partnership for $35,000 cash. Lepley has exceptional talents that will enhance the partnership. Conley's and Liu's capital account balances are $55,000 each. The partners have agreed to share income or loss equally. Prepare the general journal entry to record the admission of Lepley to the partnership.
Q:
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.
Q:
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.
Q:
Marquis and Bose agree to accept Sherman into their partnership. Sherman will contribute $25,000 in cash. Prepare the journal entry to record this transaction.
Q:
Khalid, Dina, and James are partners with beginning-year capital balances of $400,000, $320,000, and $160,000, respectively. The partners agreed to share income and loss as follows: salary of $30,000 to Khalid; $50,000 to Dina; and $55,000 to James and an interest allowance of 10% on beginning-of-year capital balances. Any remaining balance is to be divided equally. If partnership net income for the year is $190,000, determine each partner's share and make the appropriate journal entry to close the Income Summary to the capital accounts.
Q:
Holden, Phillips, and Rogers are partners with beginning-year capital balances of $120,000, $60,000, and $60,000, 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 (Holden:Phillips:Rogers), respectively.
c. Partnership agreement is silent as to division of income and loss.
Q:
Pacos Share
Kates Share 1.
The partnership contract specifies salary allowances of $45,000 to Paco and $60,000 to Kate, and any balance shared equally.
$
$ 2.
The partnership contract specifies salary allowances of $45,000 to Paco and $60,000 to Kate with interest allowance of 10% on the partners beginning year capital balance and any remaining balance shared equally.
$___________________
$__________________
Q:
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.
Q:
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.
Q:
Baldwin and Tanner formed a partnership. Baldwins initial capital account balance was $125,000 and Tanners was $105,000. They agreed to share income and loss as follows: Baldwin 40%, Tanner 60%. Income was $102,000 in year 1 and $150,000 in year 2. Assume they each withdrew $10,000 per year. Calculate the capital balances for Baldwin and Tanner at the end of year 2.
Q:
Juanita invested $100,000 and Jacque invested $95,000 in a new partnership. They agreed to a $50,000 annual salary allowance to Juanita and a $40,000 annual salary allowance to Jacque. They also agreed to an annual interest allowance of 10% on the partners' beginning-year capital balance, with the balance to be divided equally. Under this agreement, what are the income or loss shares of the partners if the annual partnership income is $102,000?
Q:
Durango and Verde formed a partnership with capital contributions of $150,000 and $190,000, respectively. Their partnership agreement called for Durango to receive a $50,000 annual salary allowance. They also agreed to allow each partner a share of income equal to 10% of their initial capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $120,000, what are Durango's and Verde's respective shares?
Q:
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.
Q:
Sierra and Jenson formed a partnership. Sierra contributed $25,000 cash and accounts receivable worth $11,000. Jenson's investment included cash, $5,000; inventory, $18,000; and supplies, $1,000. Prepare the journal entries to record each partner's investment in the new partnership.
Q:
Kathleen Reilly and Ann Wolf decide to form a partnership on August 1. Reilly invested the following assets and liabilities in the new partnership: Cost/Book Value
Market Value Land
$75,000
$100,000 Building
$250,000
$300,000 Note Payable
$198,000
$198,000 The note payable is associated with the building and the partnership will assume the responsibility for the loan. Wolf invested $60,000 in cash and $105,000 in new equipment in the new partnership. Prepare the journal entries to record the two partners original investments in the new partnership.
Q:
Active Sports LP is organized as a limited partnership consisting of two partners: Basketball Products LP and Hockey Products LP. Each of the partners sell sporting equipment for their respective sports. Compute the partner return on equity for each limited partnership and for the total limited partnership for the year ended September 30, 2013, using the following data: Basketball Products LP
Hockey Products LP
Active Sports LP Capital balance at 10/1/12
$870,000
$580,000
$1,450,000 Net income
65,000
35,000
100,000 Cash distribution
(40,000)
(25,000)
(65,000) Capital balance at 9/30/13
$895,000
$590,000
$1,485,000
Q:
What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.
Q:
What are the ways that a new partner can be admitted to an existing partnership? Explain how to account for the admission of the new partner under each of these circumstances.
Q:
Discuss the options for the allocation of income and loss among partners, including with and without a partnership agreement.
Q:
Define the partner return on equity ratio and explain how a specific partner would use this ratio.
Q:
Identify and discuss the key characteristics of partnerships. Also, identify nonpartnership organizations that possess the positive aspects of both partnerships and corporations.
Q:
Match each of the following terms with the appropriate definitions: _______ A. Statement of changes in partners equity _______ B. Limited partnership _______ C. Limited liability partnership _______ D. Unlimited liability of partners _______ E. Partnership contract _______ F. Partnership _______ G. General partner _______ H. Mutual agency _______ I. C Corporation _______ J. S Corporation 1. An unincorporated association of two or more persons to pursue a business for profit as co-owners. 2. The agreement between partners that sets terms under which the affairs of the partnership are conducted. 3. A financial statement that shows total capital balances at the beginning of the period, any additional investment by partners, the income or loss of the period, the partners' withdrawals and the ending capital balances. 4. The legal relationship among general partners that makes each of them responsible for paying the debts of the partnership if the other partners are unable to pay their shares. 5. A corporation that meets special tax qualifications so as to be treated like a partnership for income tax purposes. 6. A partner who assumes unlimited liability for the debts of the partnership. 7. A corporation that does not qualify for and elect to be treated like a partnership for income tax purposes and therefore is subject to income taxes. 8. A partnership that has two classes of partners, limited partners and general partners. Limited partners have no personal liability beyond the amount they invest in the partnership and have no active role except as specified in the partnership agreement. 9. A partnership that protects innocent partners from malpractice or negligence claims resulting from the acts of another partner. 10. The legal relationship among partners whereby each partner can commit or bind the partnership to any contract within the scope of the partnership's business.
Q:
Rodriguez, Sate, and Melton are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Rodriguez, $32,000; Sate, $28,000; and Melton, $(4,000). After all the assets are sold and liabilities are paid, but before any contributions are considered to cover any deficiencies, there is $56,000 in cash to be distributed. Melton pays $2,000 to cover the deficiency in her account. The final distribution of cash would be as follows:
A. Rodriquez $30,000 and State $26,000.
B. Rodriquez $32,000 and State $26,000.
C. Rodriquez $30,000 and State $28,000.
D. Rodriquez $30,000 and State $27,000.
E. Rodriquez $31,000 and State $27,000.
Q:
Rodriguez, Sate, and Melton are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Rodriguez, $30,000; Sate, $30,000; and Melton, $(4,000). After all the assets are sold and liabilities are paid, but before any contributions are considered to cover any deficiencies, there is $56,000 in cash to be distributed. Melton pays $4,000 to cover the deficiency in her account. The general journal entry to record the final distribution would be:
A. Rodriguez, Capital....................................
30,000 Sate, Capital.............................................
30,000 Cash............................................... 60,000 B. Rodriguez, Capital....................................
28,000 Sate, Capital.............................................
28,000 Cash............................................... 56,000 C. Rodriguez, Capital....................................
30,000 Sate, Capital.............................................
30,000 Melton, Capital.............................. 4,000 Cash............................................... 56,000 D. Cash.........................................................
56,000 Melton, Capital........................................
4,000 Rodriguez, Capital........................ 30,000 Sate, Capital................................... 30,000 E. Rodriguez, Capital....................................
18,667 Sate, Capital.............................................
18,667 Melton, Capital........................................
18,666 Cash............................................... 56,000
Q:
McCartney, Harris, and Hussin 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 McCartney, $13,000; Harris, $13,000; and Hussin, $(2,000). After all assets are sold and liabilities are paid, there is $24,000 in cash to be distributed. Hussin is unable to pay the deficiency. The journal entry to record the distribution should be:
A. McCartney, Capital.................................
8,000 Harris, Capital.........................................
8,000 Hussin, Capital........................................
8,000 Cash............................................... 24,000 B. McCartney, Capital.................................
12,000 Harris, Capital.........................................
12,000 Cash............................................... 24,000 C. McCartney, Capital.................................
13,000 Harris, Capital.........................................
13,000 Hussin, Capital............................. 2,000 Cash............................................... 24,000 D. Cash.........................................................
24,000 Hussin, Capital.........................................
2,000 McCartney, Capital........................ 13,000 Harris, Capital................................ 13,000 E. Cash.........................................................
24,000 McCartney, Capital........................ 8,000 Harris, Capital................................ 8,000 Hussin, Capital................................ 8,000
Q:
McCartney, Harris, and Hussin are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are McCartney, $15,000, Harris, $15,000, Hussin, $(2,000). After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $28,000 in cash to be distributed. Hussin pays $2,000 to cover the deficiency in his account. The general journal entry to record the final distribution would be:
A. McCartney, Capital.................................
15,000 Harris, Capital.........................................
15,000 Cash............................................... 30,000 B. McCartney, Capital.................................
14,000 Harris, Capital.........................................
14,000 Cash............................................... 28,000 C. McCartney, Capital.................................
15,000 Harris, Capital.........................................
15,000 Hussin, Capital.............................. 2,000 Cash............................................... 28,000 D. Cash..........................................................
15,000 Hussin, Capital.........................................
15,000 McCartney, Capital......................... 2,000 Harris, Capital................................. 28,000 E. McCartney, Capital.................................
9,334 Harris, Capital.........................................
9,333 Hussin, Capital........................................
9,333 Cash............................................... 28,000
Q:
When a partner is unable to pay a capital deficiency:
A. The partner must take out a loan to cover the deficient balance.
B. The deficiency is absorbed by the remaining partners.
C. The partnership ends.
D. The deficient partner has no personal liability to pay the deficiency.
E. The partnership must be liquidated.
Q:
A capital deficiency means that:
A. The partnership has a loss.
B. The partnership has more liabilities than assets.
C. At least one partner has a debit balance in his/her capital account.
D. At least one partner has a credit balance in his/her capital account.
E. The partnership has been sold at a loss.
Q:
When a partnership is liquidated, which of the following is not true?
A. Noncash assets are converted to cash.
B. Any gain or loss on liquidation is allocated to the partners' capital accounts using the income and loss sharing ratio.
C. Liabilities are paid or settled.
D. Any remaining cash is distributed to the partners based on their capital balances.
E. Any remaining cash is distributed to partners in accordance with the income- and loss-sharing ratio.
Q:
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. $3,100 each.
B. $6,200 each.
C. $35,300 in total.
D. $41,500 in total.
E. $0, because Brown and Rubix actually grant a bonus to Cabela.
Q:
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. Forces capital balance after the admission of Burns is $50,875.
B. Burns capital after admission is $51,750.
C. Zabalas capital after the admission of Burns is $98,000.
D. Burns capital after admission is $56,000.
E. Forces capital balance after the admission of Burns is $53,000.
Q:
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. The total bonus that is granted to the existing partners equals:
A. $6,500.
B. $9,125.
C. $2,125.
D. $4,250.
E. $0, because Force and Zabala actually grant a bonus to Burns.
Q:
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?
A. Tanner $95,500; Hayes $95,500.
B. Tanner $102,500; Hayes $98,500.
C. Tanner $100,000; Hayes $96,000.
D. Tanner $97,500; Hayes $93,500.
E. Tanner $100,000; Hayes $91,000.
Q:
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:
A. Block $35,000, Groh $64,000, and Jackson $61,000.
B. Block $35,000, Groh $66,500, and Jackson $63,500.
C. Block $40,000, Groh $64,000, and Jackson $61,000.
D. Block $40,000, Groh $61,500, and Jackson $58,500.
E. Block $40,000, Groh $66,500, and Jackson $63,500.
Q:
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 bonus that is granted to Block equals:
A. $5,000.
B. $2,500.
C. $6,667.
D. $3,333.
E. $0, because Block must actually grant a bonus to Groh and Jackson.
Q:
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 20% interest. Block will invest $35,000 in the partnership. The bonus that is granted to Groh and Jackson equals:
A. $1,500 each.
B. $1,875 each.
C. $3,750 each.
D. $1,920 to Groh; $1,830 to Jackson.
E. $0, because Groh and Jackson actually grant a bonus to Block.
Q:
A partnership recorded the following journal entry: Cash.........................................
70,000 B. Tanner, Capital...................
10,000 R. Jackson, Capital..................
10,000 H. Rivera, Capital............... 90,000 This entry reflects:
A. Acceptance of a new partner who invests $70,000 and receives a $20,000 bonus.
B. Withdrawal of a partner who pays a $10,000 bonus to each of the other partners.
C. Addition of a partner who pays a bonus to each of the other partners.
D. Additional investment into the partnership by Tanner and Jackson.
E. Withdrawal of $10,000 each by Tanner and Jackson upon the admission of a new partner.
Q:
When a partner is added to a partnership:
A. The previous partnership ends.
B. The underlying business operations ends.
C. The underlying business operations must close and then reopen.
D. The partnership must continue.
E. The partnership equity always increases.
Q:
During 2013, Schmidt invested $75,000 and Baldwin invested $90,000 in a partnership. They agreed that Baldwin would get a salary allowance of $30,000 and they would share any remaining income or loss equally. During 2013 the partnership earned net income of $300,000 and they each withdrew $12,000 from the partnership. Which of the following statements is correct?
A. Schmidt Capital at the end of 2013 is $213,000.
B. Schmidt Capital at the end of 2013 is $210,000.
C. Baldwin Capital at the end of 2013 is $243,000.
D. Baldwin Capital at the end of 2013 is $255,000.
E. Total Capital at the end of 2013 has increased by $300,000.
Q:
During 2013, Carpenter invested $75,000 and DiAngelo invested $90,000 in a partnership. They agreed to share income and loss by allowing a $40,000 per year salary allowance to Carpenter and a $42,000 per year salary allowance to DiAngelo, plus an interest allowance on the partners' beginning-year capital investments at 8%, with the balance to be shared equally. Under this agreement, if the partnership earns net income of $300,000 during 2013 the income allocated to each partner is:
A. $40,000 to Carpenter; $42,000 to DiAngelo.
B. $148,400 to Carpenter; $151,600 to DiAngelo.
C. $43,200 to Carpenter; $45,360 to DiAngelo.
D. $150,000 to Carpenter; $150,000 to DiAngelo.
E. $105,720 to Carpenter; $105,720 to DiAngelo.
Q:
Nguyen invested $100,000 and Hansen invested $200,000 in a partnership. They agreed to share income and loss by allowing a $60,000 per year salary allowance to Nguyen and a $40,000 per year salary allowance to Hansen, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns a $105,000 in income are:
A. $52,500 to Nguyen; $52,500 to Hansen.
B. $35,000 to Nguyen; $70,000 to Hansen.
C. $57,500 to Nguyen; $47,500 to Hansen.
D. $42,500 to Nguyen; $62,500 to Hansen.
E. $70,000 to Nguyen; $60,000 to Hansen.
Q:
Which of the following statements is true?
A. Partners are employees of the partnership.
B. Salaries to partners are expenses on the partnership income statement.
C. Salary allowances usually reflect the relative value of services provided by partners.
D. Salary allowances are expenses.
E. Interest allowances are expenses.
Q:
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 $125,000, then Shelby and Mortonson's respective shares are:
A. $62,500; $62,500
B. $90,000; $35,000
C. $87,500; $37,500
D. $85,000; $40,000
E. $92,000; $33,000
Q:
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
Q:
Blaser, Lukins, and Franko formed a partnership with Blaser contributing $160,000, Lukins contributing $520,000, and Franko contributing $240,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $275,000 for its first year of operation, what amount of income (rounded to the nearest dollar) would be credited to Franko's capital account?
A. $50,000
B. $240,000
C. $91,667
D. $71,739
E. $275,000
Q:
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?
A. $20,000
B. $25,000
C. $30,000
D. $40,000
E. $75,000
Q:
If a partnership contract provides for interest at 10% annually on each partner's investment, the interest:
A. Is ignored when earnings are not sufficient to pay interest.
B. Is an allowance that can make up for unequal capital contribution.
C. Is an expense of the business.
D. Must be paid because the partnership contract has unlimited life.
E. Legally becomes a liability of the general partner.
Q:
In the absence of a partnership agreement, the law says that income and loss should be allocated based on:
A. A fractional basis.
B. The ratio of capital investments.
C. Salary allowances.
D. Equal shares.
E. Interest allowances.
Q:
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. Miller: $120,000; Reising: $90,000.
B. Miller: $205,000; Reising: $90,000.
C. Miller: $105,000; Reising: $105,000.
D. Miller: $90,000; Reising: $120,000.
E. Miller: $90,000; Reising: $205,000.
Q:
Collins and Farina are forming a partnership. Collins is investing a building that has a market value of $80,000 and a book value of $65,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Farina is investing $20,000 cash. Total capital in the partnership will be:
A. $80,000
B. $24,000
C. $56,000
D. $44,000
E. $60,000
Q:
Collins and Farina are forming a partnership. Collins is investing a building that has a market value of $80,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Farina is investing $20,000 cash. The balance of Collins' Capital account will be:
A. $80,000
B. $24,000
C. $56,000
D. $44,000
E. $60,000
Q:
Chen and Wright are forming a partnership. Chen will invest a building that currently is being used by another business owned by Chen. The building has a market value of $90,000. Also, the partnership will assume responsibility for a $30,000 note secured by a mortgage on that building. Wright will invest $50,000 cash. For the partnership, the amounts to be recorded for the building and for Chen's Capital account are:
A. Building, $90,000 and Chen, Capital, $90,000.
B. Building, $60,000 and Chen, Capital, $60,000.
C. Building, $60,000 and Chen, Capital, $50,000.
D. Building, $90,000 and Chen, Capital, $60,000.
E. Building, $60,000 and Chen, Capital, $90,000.
Q:
S. Reising contributed $48,000 in cash plus equipment valued at $73,000 to the Reising Construction Partnership. The equipment had a book value of $65,000. The journal entry to record the transaction for the partnership would include a:
A. Debit to Equipment for $73,000.
B. Debit to Equipment for $65,000.
C. Credit to S. Reising, Capital for $113,000.
D. Credit to Common Stock for $121,000
E. Credit to the Gain on Asset for $8,000.
Q:
S. Reising contributed $48,000 in cash plus equipment valued at $73,000 to the Reising Construction Partnership. The journal entry to record the transaction for the partnership is:
A. Cash......................................................................
48,000 Equipment.............................................................
73,000 S. Reising, Capital.......................................... 121,000 B. Cash......................................................................
48,000 Equipment.............................................................
73,000 Reising Construction Partnership, Capital..... 121,000 C. Reising Construction Partnership.........................
121,000 S. Reising, Capital.......................................... 121,000 D. S. Reising, Capital................................................
121,000 Reising Construction Partnership, Capital..... 121,000 E. Cash......................................................................
48,000 Equipment.............................................................
73,000 Common Stock............................................... 121,000
Q:
B. Tanner contributed $14,000 in cash plus office equipment valued at $7,000 to the JT Partnership. The journal entry to record the transaction for the partnership is:
A. Cash.................................................................................
14,000 Office equipment.............................................................
7,000 B. Tanner, Capital...................................................... 21,000 B. Cash.................................................................................
14,000 Office equipment.............................................................
7,000 JT Partnership, Capital...................................................... 21,000 C. JT Partnership, Capital......................................................
21,000 B. Tanner, Capital...................................................... 21,000 D. Partnership Assets
21,000 JT Partnership, Capital.................................................. 21,000 E. B. Tanner, Capital..................................................................
21,000 JT Partnership, Capital.................................................. 21,000
Q:
The withdrawals account of each partner is:
A. Closed to that partner's capital account with a credit.
B. Closed to that partner's capital account with a debit.
C. A permanent account that is not closed.
D. Credited with that partner's share of net income.
E. Debited with that partner's share of net loss.
Q:
Partners' withdrawals of assets are:
A. Credited to their withdrawals accounts.
B. Debited to their withdrawals accounts.
C. Credited to their retained earnings.
D. Debited to their retained earnings.
E. Debited to their asset accounts.
Q:
Partnership accounting:
A. Is the same as accounting for a sole proprietorship.
B. Is the same as accounting for a corporation.
C. Is the same as accounting for a sole proprietorship, except that separate capital and withdrawal accounts are kept for each partner.
D. Is the same as accounting for an S corporation.
E. Is the same as accounting for a corporation, except that retained earnings is used to keep track of partners' withdrawals.
Q:
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?
A. $525,000
B. $937,500
C. $487,500
D. $468,750
E. $37,500
Q:
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?
A. $29,400.00
B. $30,800.00
C. $32,200.00
D. $1,500,000.00
E. $1,642,857.14
Q:
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?
A. 57.42%
B. 49.18%
C. 68.97%
D. 33.49%
E. 40.23%
Q:
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?
A. 7.8%
B. 8.9%
C. 15.4%
D. 16.0%
E. 16.7%
Q:
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. $8,250
B. $3,000
C. $2,250
D. $0
E. $5,250
Q:
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?
A. 8.47%
B. 8.97%
C. 9.54%
D. 1047%
E. 1060%
Q:
A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a:
A. Partnership
B. Limited partnership
C. Limited liability partnership
D. General partnership
E. Limited liability corporation