Q&A Hero

Q: Jane, Castle, and Sean are partners who share income and loss in a 4:2:2 ratio. The partnerships capital balances are as follows: Jane, $292,000; Castle, $114,000; and Sean, $194,000. Conner is admitted to the partnership on March 1 with a 25% equity. Prepare the journal entries to record Conners entry into the partnership under each of the following separate assumptions: Conner invests (a) $200,000; (b) $180,000; and (c) $240,000.

Q: Jane, Castle, and Sean are partners who share income and loss in a 3:2:2 ratio. The partnerships capital balances are as follows: Jane, $332,000; Castle, $124,000; and Sean, $214,000. Sean decides to withdraw from the partnership, and the partners agree not to have the assets revalued upon Seans retirement. Prepare journal entries to record Seans withdrawal from the partnership under each of the following separate assumptions: Sean (a) sells his interest to Conner for $200,000 after Jane and Castle approve the entry of Conner as a partner; (b) is paid $214,000 in partnership cash for his equity; (c) is paid $205,000 in partnership cash for his equity; (d) is paid $220,000 in partnership cash for his equity.

Q: Paul and Peggy's company is organized as a partnership. At the prior year-end, Paul's equity balance was $352,000 and Peggy's was $256,000. For the current year, partnership net income is $137,000 ($77,000 allocated to Paul and $60,000 allocated to Peggy); withdrawals are $87,000 ($45,000 for Paul and $42,000 for Peggy). Compute the total partnership return on equity and the individual partner return on equity ratios.

Q: Suze and Bess formed the Suzy B Company by making capital contributions of $130,000 and $195,000 respectively. The annual partnership income of $230,000 is to be allocated assuming a salary allowance of $40,000 to Suze and $35,000 to Bess; interest allowances of 12% on their initial capital investments; and the balance shared equally. Prepare the entries to record the initial capital investments, the allocation of net income, and close the partner's withdrawal accounts assuming that Suze withdrew $50,000 and Bess withdrew $55,000.

Q: Suze and Bess formed the Suzy B Company by making capital contributions of $130,000 and $195,000 respectively. They predict annual partnership income of $230,000 and are considering the following alternative plans of sharing income and loss: (a) in the ratio of their initial capital investments; or (b) salary allowances of $40,000 to Suze and $35,000 to Bess; interest allowances of 12% on their initial capital investments; and the balance shared equally. Assuming that both partners put about the same amount of time into the business, which method of allocating income would be best?

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 agrees 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 and Armstrong accepts. The partners 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 and Armstrong accepts. The partners 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 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: 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. Paco's Share Kate's 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, interest allowance of 10% on the partners beginning year capital balance and any $__________ $ balance shared equally

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: Market Value Land............................................................. $100,000 Building............................................................. 300,000 Note payable............................................................. 198,000 The note payable is associated with the building and the partnership will assume responsibility for the loan. Wolf invested $60,000 in cash and $105,000 in equipment in the new partnership. Prepare the journal entries to record the two partners' original investments in the new partnership.

Q: Basketball Products LP is organized as a limited partnership that sells sporting equipment. Information related to the two partner's capital balances is given below. Compute the partner return on equity for each limited partner. How would each partner evaluate the success of the partnership? What would you recommend the partners do with respect to additional investments or withdrawals? Ball Basquette Capital balance, beginning of year 870,000 580,000 Net income for current year 85,000 55,000 Withdrawals for current year 40,000 25,000

Q: What factors should be considered before establishing a partnership? What were some of the areas that the partners of Hunks and Junk focused on before and after forming their partnership?

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: 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 other organizations that possess the positive aspects of both partnerships and corporations.

Q: Nee High and Low Jack are partners in an accounting firm and share net income and loss equally. Highs beginning partnership capital balance for the current year is $285,000, and Jacks beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. High withdrew $90,000 during the year and Jack withdrew $100,000. What is Jacks return on equity? A. 41.3% B. 43.9% C. 32.7% D. 33.8% E. 36.5%

Q: Nee High and Low Jack are partners in an accounting firm and share net income and loss equally. Highs beginning partnership capital balance for the current year is $285,000, and Jacks beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. High withdrew $90,000 during the year and Jack withdrew $100,000. What is Highs return on equity? A. 41.3% B. 43.9% C. 32.7% D. 33.8% E. 36.5%

Q: Jane, Castle, and Sean are dissolving their partnership. Their partnership agreement allocates each partner an equal share of all income and losses. The current period's ending capital account balances are Jane, $54,000; Castle, $42,000; and Sean, $(6,000). After all assets are sold and liabilities are paid, there is $90,000 in cash to be distributed. Sean is unable to pay the deficiency. The journal entry to record the distribution should be: A. Debit Jane, Capital $54,000; debit Castle, Capital $36,000; credit Cash $90,000. B. Debit Jane, Capital $54,000; debit Castle, Capital $42,000; credit Cash $96,000. C. Debit Jane, Capital $51,000; debit Castle, Capital $39,000; credit Cash $90,000. D. Debit Cash $90,000, debit Sean, Capital $6,000, credit Jane, Capital $54,000, credit Castle, Capital $42,000. E. Debit Cash $90,000; credit Jane, Capital $30,000; credit Castle, Capital $30,000; credit Sean, Capital $30,000.

Q: Jane and Castle are partners and share equally in income or loss. Janes current capital balance is $140,000 and Castles is $130,000. Jane and Castle agree to accept Sean with a 30% interest in the partnership. Sean invests $108,000 in the partnership. The amount credited to Seans capital account is: A. $108,000. B. $102,600. C. $110,500. D. $115,000. E. $113,400.

Q: Jane and Castle are partners and share equally in income or loss. Janes current capital balance is $140,000 and Castles is $130,000. Jane and Castle agree to accept Sean with a 30% interest in the partnership. Sean invests $108,000 in the partnership. The balances in Janes and Castles capital accounts after admission of the new partner equal: A. Jane $140,000; Castle $130,000. B. Jane $142,700; Castle $132,700. C. Jane $145,000; Castle $135,000. D. Jane $137,300; Castle $127,300. E. Jane $135,000; Castle $124,000.

Q: Chase and Hatch are partners and share equally in income or loss. Chases current capital balance is $135,000 and Hatchs is $120,000. Chase and Hatch agree to accept Flax with a 30% interest in the partnership. Flax invests $115,000 in the partnership. The balances in Chases and Hatchs capital accounts after admission of the new partner equal: A. Chase $135,000; Hatch $120,000. B. Chase $137,000; Hatch $122,000 C. Chase $133,000; Hatch $118,000. D. Chase $139,000; Hatch $120,000. E. Chase $135,000; Hatch $124,000.

Q: Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes $150,000, and Krug contributes $270,000. Their partnership agreement calls for a 5% interest allowance on the partners capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $174,000 for its first year, what amount of income is credited to Wests capital account? A. $58,000. B. $57,000. C. $61,500. D. $55,500. E. $48,000.

Q: Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes $150,000, and Krug contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $175,000 for its first year, what amount of income is credited to Krugs capital account? A. $43,750. B. $78,750. C. $52,500. D. $58,333. E. $60,000.

Q: Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes $150,000, and Krug contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $175,000 for its first year, what amount of income is credited to Smiths capital account? A. $43,750. B. $78,750. C. $52,500. D. $58,333. E. $60,000.

Q: Badger and Fox are forming a partnership. Badger invests a building that has a market value of $350,000; the partnership assumes responsibility for a $125,000 note secured by a mortgage on the property. Fox invests $100,000 in cash and equipment that has a market value of $75,000. For the partnership, the amounts recorded for total assets and for total capital account are: A. Total assets $525,000; total capital $400,000. B. Total assets $400,000; total capital $400,000. C. Total assets $650,000; total capital $650,000. D. Total assets $400,000; total capital $525,000. E. Total assets $525,000; total capital $525,000.

Q: Badger and Fox are forming a partnership. Badger invests a building that has a market value of $350,000; the partnership assumes responsibility for a $125,000 note secured by a mortgage on the property. Fox invests $100,000 in cash and equipment that has a market value of $75,000. For the partnership, the amounts recorded for Badgers Capital account and for Foxs Capital account are: A. Badger, Capital $350,000; Fox, Capital $175,000. B. Badger, Capital $225,000; Fox, Capital $100,000. C. Badger, Capital $225,000; Fox, Capital $75,000. D. Badger, Capital $350,000; Fox, Capital $100,000. E. Badger, Capital $225,000; Fox, Capital $175,000.

Q: Badger and Fox are forming a partnership. Badger invests a building that has a market value of $350,000; the partnership assumes responsibility for a $125,000 note secured by a mortgage on the property. Fox invests $100,000 in cash and equipment that has a market value of $75,000. For the partnership, the amounts recorded for the building and for Badgers Capital account are: A. Building $350,000; Badger, Capital $350,000. B. Building $225,000; Badger, Capital $225,000. C. Building $225,000; Badger, Capital $125,000. D. Building $350,000; Badger, Capital $225,000. E. Building $350,000; Badger, Capital $300,000.

Q: Sam, Bart, and Lex 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 Sam, $45,000; Bart, $37,000; and Lex, $(5,000). After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Lex is unable to pay the deficiency. The journal entry to record the distribution should be: A. Debit Sam, Capital $25,667; debit Bart, Capital $25,667; debit Lex, Capital $25,666; credit Cash $77,000. B. Debit Sam, Capital $42,500; debit Bart, Capital $34,500; credit Cash $77,000. C. Debit Sam, Capital $45,000; debit Bart, Capital $37,000; credit Lex, Capital $5,000; credit Cash $77,000. D. Debit Cash $77,000, debit Lex, Capital $5,000, credit Sam, Capital $45,000, credit Bart, Capital $37,000. E. Debit Cash $77,000; credit Sam, Capital $25,667; credit Bart, Capital $25,667; credit Lex, Capital $25,666.

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 before distribution of cash. C. The partnership ends before distribution of cash. D. The deficient partner is relieved of the liability. E. The remaining partners must wait for the deficiency to be paid before cash is distributed.

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: 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. All of the choices are correct.

Q: Mack, Harris, and Huss are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Mack, $15,000; Harris, $15,000; Huss, $(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. Huss pays $2,000 to cover the deficiency in his account. The general journal entry to record the final distribution would be: A. Debit Mack, Capital $15,000; debit Harris, Capital $15,000; credit Cash $30,000. B. Debit Mack, Capital $14,000; debit Harris, Capital $14,000; credit Cash $28,000. C. Debit Mack, Capital $15,000; debit Harris, Capital $15,000; credit Huss, Capital $2,000; credit Cash $28,000. D. Debit Cash $28,000; debit Huss, Capital $2,000; credit Mack, Capital $15,000; credit Harris, Capital $15,000. E. Debit Mack, Capital $9,334; debit Harris, Capital $9,333; debit Huss, Capital $9,333; credit Cash $28,000.

Q: Groh and Jackson are partners. Groh's capital balance in the partnership is $64,000, and Jackson's capital balance $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 $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 end. C. The underlying business operations must close and then re-open. D. The partnership must continue. E. The partnership equity always increases.

Q: A bonus may be paid: A. By a new partner when the current value of a partnership is greater than the recorded amounts of equity. B. By a withdrawing partner to remaining partners if the recorded value of the equity is overstated. C. To a new partner with exceptional talents. D. By remaining partners to a withdrawing partner if the recorded equity is understated. E. In all of the situations listed.

Q: A partner can withdraw from a partnership by: A. Selling his/her interest to another person for cash. B. Selling his/her interest to another person in exchange for assets. C. Receiving cash from the partnership in the amount of his/her interest. D. Receiving assets from the partnership in the amount of his/her interest. E. All of the options are correct.

Q: The following information is available on Stewart Enterprises, a partnership, for the most recent fiscal year: Total partnership capital at beginning of the year $180,000 Partnership net income for the year $150,000 Withdrawals by partners during the year $120,000 Additional investments by partners during the year $ 60,000 There are three partners in Stewart Enterprises: Stewart, Tedder and Armstrong. At the end of the year, the partners' capital accounts were in the ratio of 2:1:2, respectively. Compute the ending capital balances of the three partners. A. Stewart = $108,000; Tedder = $54,000; Armstrong = $108,000. B. Stewart = $90,000; Tedder = $90,000; Armstrong = $90,000. C. Stewart = $204,000; Tedder = $102,000; Armstrong = $204,000. D. Stewart = $84,000; Tedder = $102,000; Armstrong = $84,000. E. Stewart = $60,000; Tedder = $30,000; Armstrong = $60,000.

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Q: 11) The internal rate of return (IRR) is the rate of return, based on discounted cash flows, that a company can expect to earn by investing in a capital asset.

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Q: When calculating the net present value of future cash streams, dollars that are received sooner are worth more than dollars received later.

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Q: Which of the following describes the term time value of money?A) Money can only be used at certain times and for certain purposes.B) Money loses its purchasing power over time through inflation.C) Wasted time can result in wasted money.D) When money is invested over time, it earns income and grows.

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Q: Which of the following best describes the internal rate of return?A) The discount rate that makes the cost of the investment equal to the present value of the cash flowsB) The discount rate that is used to borrow funds from a lenderC) The ratio of average annual income to average amount investedD) The rate at which an investment pays back