Q&A Hero

Q: On August 1, a corporation issued 15,000 shares of no-par common stock in exchange for a tract of land having a market value of $215,000. The common stock has a stated value of $10 per share. Prepare the general journal entry to record this transaction.

Q: The stockholders' equity section of a corporation's balance sheet follows: Preferred stock, $25 par value, 6%, cumulative, 10,000 shares authorized, 5,000 shares issued and outstanding .. $125,000 Paid-in capital in excess of par value, Preferred stock. 50,000 Common stock, $10 par value, 50,000 shares authorized, 10,000 shares issued and outstanding... 100,000 Paid-in capital in excess of par value, Common stock 40,000 Retained earnings . 95,000 Total stockholders' equity . $410,000 (1) Assuming that the preferred stock is not callable and no dividends are in arrears, compute the book values per preferred share and per common share. (2) Assuming that the preferred stock has a call price of $30 per share and one year of cumulative preferred dividends is in arrears, compute the book values per preferred share and per common share.

Q: A corporation reports the following year-end stockholders' equity: Paid-in capital: Preferred stock, 8%, 100,000 shares authorized, 50,000 shares issued . $ 2,500,000 Paid-in capital in excess of par, Preferred.. 125,000 Common stock, $10 par, 500,000 shares Authorized, 400,000 shares issued .. 4,000,000 Paid-in capital in excess of par, Common .. 1,200,000 Total paid-in capital .. $ 7,825,000 Retained earnings .. 10,775,000 Total stockholders' equity . $18,600,000 Determine the following: (1) Par value for the preferred stock. (2) Book value per share for both preferred stock and common stock assuming a call price per share of $52 for preferred and no dividends in arrears.

Q: The stockholders' equity section of a company's year-end balance sheet follows: Preferred stock, $100 par value, 9% cumulative and nonparticipating, 5,000 shares outstanding $500,000 Paid-in capital in excess of par value, preferred stock 50,000 Total capital paid-in by preferred Stockholders .. $550,000 Common stock, $5 par value, 150,000 shares outstanding . $750,000 Paid-in capital in excess of par value, common stock ... 150,000 Total capital paid-in by common Stockholders . 900,000 Total paid-in capital $1,450,000 Retained earnings 1,660,000 Total stockholders equity $3,110,000 The preferred stock has a call price of $103 per share plus dividends in arrears. Only one year of dividends is in arrears. Calculate the book value per (1) preferred share, and (2) common share.

Q: 178. A company reports the following stockholders' equity: Paid-in Capital: Common stock, $10 par, 500,000 shares authorized .. $3,000,000 Paid-in capital in excess of par, Common stock . 1,300,000 Total paid-in capital $4,300,000 Retained earnings 1,400,000 Total stockholders' equity $5,700,000 Compute the (1) number of common shares outstanding and (2) book value per common share.

Q: A company has $2,400,000 in stockholders' equity that includes 500 shares of $50 par value noncallable preferred stock outstanding and 250,000 shares of common stock outstanding. Calculate the book value per (1) preferred share, and (2) common share.

Q: A corporation has $1,750,000 in stockholders' equity and 350,000 weighted-average shares of common stock outstanding. Calculate the book value per common share.

Q: A company has 500,000 common shares authorized, 400,000 common shares issued, and 15,000 common shares in treasury stock at the current year-end. It paid $0.24 per share in cash dividends during the year. The year-end market price of the stock is $15. Calculate (1) the total dividends paid and (2) the dividend yield.

Q: A company paid a cash dividend of $0.44 per share during the current year, and reported 18,000 shares of common stock issued, and 2,000 common shares in treasury stock during the current year. The year-end market price per share was $27.50. Calculate the following: (1) total amount of cash dividends paid to common shareholders, and (2) dividend yield.

Q: A company reported earnings per share of $9.75, paid a $6.00 cash dividend per share to preferred shareholders, and paid a $0.54 cash dividend per share to common shareholders. There were 1,000 shares of preferred stock outstanding and 6,000 shares of common stock outstanding during the year, and the market price per share of common stock was $45. Calculate the company's dividend yield for common stock.

Q: A corporation paid a cash dividend of $0.07 per share during the current year. It had 550,000 common shares outstanding at year-end, its current year earnings per share was $3.85, and the stock's year-end market price was $17.50 per share. Calculate the company's dividend yield.

Q: A company's stock is selling for $35 per share at year-end. This current year it paid shareholders a $2.45 per share cash dividend, reported earnings per share of $12.00, and had 750,000 common shares outstanding at year-end. Calculate the company's dividend yield.

Q: A company reported net income of $478,000 and paid $5,500 in preferred cash dividends during the current year. The company had 100,000 common shares issued, and 10,000 common shares in treasury during the year. The year-end market price per common share was $43.05. Calculate the company's price-earnings ratio.

Q: Nguyen invested $100,000 and Hansen invested $200,000 in a partnership. They agreed to share incomes and losses 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 $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 $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: 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 thousand) would be credited to DiMarco's capital account? A. $20,000. B. $25,000. C. $30,000. D. $40,000. E. $75,000.

Q: In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance: A. Is ignored when earnings are not sufficient to pay interest. B. Can make up for unequal capital contributions. 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: Trump and Hawthorne have decided to form a partnership. Trump is going to contribute a depreciable asset to the partnership as his equity contribution to the partnership. The following information regarding the asset to be contributed by Trump is available: Historical cost of the asset $76,000 Accumulated depreciation on the asset $40,000 Note payable secured by the asset* $18,000 Agreed-upon market value of the asset $45,000 *will be assumed by the partnership Based on this information, Trump's beginning equity balance in the partnership will be: A. $76,000 B. $36,000 C. $18,000 D. $27,000 E. $45,000

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: 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: Partnership accounting: A. Uses a capital account for each partner. B. Uses a withdrawals account for each partner. C. Allocates net income to each partner according to the partnership agreement. D. Allocates net loss to each partner according to the partnership agreement. E. All of the choices are correct.

Q: The following information is available regarding John Smith's capital account in Technology Consulting Group, a general partnership, for a recent year: Beginning of the year balance $22,000 His share of partnership income $ 8,500 Withdrawals made during the year $ 6,000 What is Smith's partner return on equity during the year in question? A. 36.6% B. 34.7% C. 10.8% D. 11.4% E. 55.7%

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: 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. 10.47% E. 10.60%

Q: A partnership in which all partners have mutual agency and unlimited liability is called: A. Limited partnership. B. Limited liability partnership. C. General partnership. D. S corporation. E. Limited liability company.

Q: David and Jeannie formed This & That as a limited liability company. Unless the member owners elect to be treated otherwise, the Internal Revenue Service will tax the LLC as: A. An S corporation. B. A C corporation. C. A non-taxable entity. D. A joint venture. E. A partnership.

Q: Mutual agency implies that each partner in a partnership is a fully authorized agent of the partnership. Which of the following statements is correct regarding the authority of a partner to bind the partnership in dealings with third parties? A. The partner's authority must be derived from the partnership agreement. B. The partner's authority may be effectively limited by a formal resolution of the other partners, even if third parties are not aware of that limitation. C. Only a partner with a majority interest in a partnership has the authority to represent the partnership to third parties. D. A partner has authority to deal with third parties on the behalf of the other partners only if he has written permission to do so. E. A partner may be able to legally bind the partnership to actions even if the other partners are unaware of his actions.

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 company.

Q: A partnership that has two classes of partners, general and limited, where the limited partners have no personal liability beyond the amounts they invest in the partnership, and no active role in the partnership, except as specified in the partnership agreement is a: A. Mutual agency partnership. B. Limited partnership. C. Limited liability partnership. D. General partnership. E. Limited liability company.

Q: 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.

Q: A partnership agreement: A. Is not binding unless it is in writing. B. Is the same as a limited liability partnership. C. Is binding even if it is not in writing. D. Does not generally address the issue of the rights and duties of the partners. E. Is also called the articles of incorporation.

Q: Disadvantages of a partnership include: A. Limited life. B. Mutual agency. C. Unlimited liability. D. Co-ownership of property. E. All of the choices are disadvantages.

Q: An unincorporated association of two or more persons to carry on a business for profit as co-owners is a: A. Partnership. B. Proprietorship. C. Contractual company. D. Mutual agency. E. Voluntary organization.

Q: If a partner is unable to cover a deficiency and the other partners absorb the deficiency, then the partner with the deficiency is thus relieved of all liability.

Q: A capital deficiency can arise from liquidation losses, excessive withdrawals before liquidation, or recurring losses in prior periods.

Q: A capital deficiency exists when all partners have a credit balance in their capital accounts.

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

Q: When the current value of a partnership is greater than the recorded amounts of equity, the current partners usually require any new partner to pay a bonus for the privilege of joining.

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

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

Q: When a partner leaves a partnership, the present partnership ends, but the business can still continue to operate.

Q: To buy into an existing partnership, the new partner must contribute cash to the partnership.

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

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

Q: If partners devote their time and services to their partnership, their salaries are expenses on the income statement.

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

Q: The statement of changes in partners' equity shows the beginning balance in retained earnings, plus investments, less withdrawals, plus the income (or less the loss) and the ending balance in retained earnings.

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

Q: In the absence of a partnership agreement, the law says that income of a partnership will be shared equally by the partners.

Q: 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.

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

Q: When partners invest in a partnership, their capital accounts are credited for the amount invested.

Q: Benson is a partner in B&D Company. Benson's share of the partnership income is $18,600 and her average partnership equity is $155,000. Her partner return on equity equals 8.33.

Q: Partner return on equity can be used by each partner to help decide whether additional investment or withdrawal of resources is best for that partner.

Q: A partnership cannot use salary allowances or interest allowances to allocate income and losses to the partners because these items are not reported on the partnership income statement.

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

Q: Partners in a partnership are taxed on the amounts they withdraw from the partnership, not the partnership income.

Q: Accounting procedures for all items are the same for both C corporations and S corporations in all aspects.

Q: Mutual agency means each partner can commit or bind the partnership to any contract within the scope of the partnership business.

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

Q: Accounting for Partnerships True /False Questions

Q: 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.

Q: If a partner withdraws from a partnership and the recorded value of his or her equity is overstated, then a bonus goes to ________________; if the recorded value of the withdrawing partner's equity is understated, then a bonus goes to ____________________.

Q: A partner can be admitted into a partnership by _______________ or by ___________.

Q: If partners agree on how to share income, but say nothing about losses, then losses are shared ___________________.

Q: During the closing process, partner's capital accounts are _______________ for their share of net income and _________________ for their share of net loss.

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, allows the limited partners to have no personal liability beyond the amounts they invest in the partnership, and 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: Sam and Daves company is organized as a partnership. At the prior year-end, Sam's equity balance was $258,000 and Daves was $212,000. For the current year, partnership net income is $125,000 ($75,000 allocated to Sam and $50,000 allocated to Dave); withdrawals are $77,000 ($40,000 for Sam and $37,000 for Dave). Compute the total partnership return on equity and the individual partner return on equity ratios.

Q: On May 1, Fine and Max formed a partnership. Fine contributed cash of $90,000 and equipment valued at $152,000. Max contributed land valued at $120,000 and a building valued at $250,000. The partnership also assumed responsibility for Maxs $110,000 long-term note payable associated with the land and building. The partners agreed to share income as follows: Fine is to receive a salary allowance of $38,000, both are to receive an annual interest allowance of 8% of their beginning-year capital investments, and any remaining income or loss is to be shared equally. During the year, Fine withdrew $40,000 and Max withdrew $42,000 cash. After the adjusting and closing entries are made to the revenue and expense accounts at the end of the year, the Income Summary account had a credit balance of $140,000. Prepare the journal entries to record (a) the partners initial capital investments, (b) their cash withdrawals, and (c) closing of both the Withdrawals and Income Summary accounts.