Q&A Hero

Q: At the end of 2010, the partnership of Piatta, Ragoo, and Sauss was dissolved. By February 1, 2011, all assets had been converted into cash and all partnership liabilities were paid. The partnership balance sheet on February 1, 2011 (with partner residual profit and loss sharing percentages) was as follows: Cash $ 220,000 Piatta,capital (20%) $ 20,000 Ragoo, capital (40%) (180,000) Sauss, capital (40%) 380,000 Total assets $ 220,000 Total equity $ 220,000 The value of partners' personal assets and liabilities on February 1, 2011 were as follows: Piatta Ragoo Sauss Personal assets $ 86,000 $ 310,000 $ 210,000 Personal liabilities 79,000 250,000 250,000 Required: Prepare the final statement of partnership liquidation.

Q: The partnership of May, Novem, and Octo was dissolved. By August 1, 2011, all assets had been converted into cash and all partnership liabilities were paid. The partnership balance sheet on August 1, 2011 (with partner residual profit and loss sharing percentages) was as follows: Cash $ 100,000 May, capital (30%) $ 8,000 Novem, capital (20%) (120,000) Octo, capital (50%) 212,000 Total assets $ 100,000 Total equity $ 100,000 The value of partners' personal assets and liabilities on August 1, 2011 were as follows: May Novem Octo Personal assets $ 148,000 $ 240,000 $ 112,000 Personal liabilities 144,000 160,000 120,000 Required: Prepare the final statement of partnership liquidation.

Q: The Justin, Kyle, and Lulu partnership was dissolved by the partners on May 1, 2011. Their balance sheet on that date is shown below: Cash $ 26,000 Liabilities $ 41,000 Other assets 96,000 Loan from Kyle 3,000 Loan to Justin 10,000 Justin,capital (20%) 19,000 Kyle, capital (20%) 26,000 Lulu, capital (60%) 43,000 Total assets $ 132,000 Total liab./equity $ 132,000 In May, other assets with a book value of $46,000 were sold for $50,000 in cash. Required: Determine how the available cash on May 31, 2011 will be distributed.

Q: The balance sheet of the Flail, Gail, and Hale partnership on October 1, 2011 (the date of partnership dissolution) was as follows: Cash $ 3,000 Liabilities $ 9,000 Other assets 33,000 Loan from Flail 1,000 Loan to Gail 4,000 Flail,capital (20%) 3,000 Gail, capital (30%) 6,000 Hale, capital (50%) 21,000 Total assets $ 40,000 Total liab./equity $ 40,000 In October, other assets with a book value of $15,000 were sold for $17,000 in cash. Required: Determine how the available cash on October 31, 2011 will be distributed.

Q: The Catt, Dogg, and Eustus partnership was dissolved by the partners in early 2011. On March 1, the partners prepared the following financial statement before commencement of final liquidation: Cash $ 80,000 Accounts payable $ 125,000 Accounts Receivable 160,000 Notes payable 70,000 Inventory 130,000 Loan from Dogg 5,000 Loan to Catt 10,000 Catt, capital (20%) 130,000 Loan to Eustus 15,000 Dogg, capital (20%) 95,000 Plant assets-net 210,000 Eustus, capital(60%) 180,000 Total assets $ 605,000 Total liab./equity $ 605,000 Liquidation events in March were as follows: - Receivables recorded at $120,000 were collected at $110,000; - Inventory recorded at cost of $80,000 was sold for $60,000; - Plant assets with a book value of $100,000 were sold for $140,000. Required: Determine how the available cash on March 31, 2011 should be distributed.

Q: The balance sheet of the Ama, Bade, and Calli partnership on May 1, 2011 (before commencement of partnership liquidation) was as follows: Cash $ 108,000 Accounts payable $ 56,000 Inventory 120,000 Notes payable 120,000 Loan to Ama 20,000 Ama, capital (30%) 64,000 Loan to Calli 32,000 Bade, capital (50%) 180,000 Plant assets-net 220,000 Calli, capital (20%) 80,000 Total assets $ 500,000 Total liab./equity $ 500,000 Liquidation events in May were as follows: - The inventory was sold for $12,000 below book value; - Plant assets with a book value of $100,000 were sold for $120,000. Required: Determine how the available cash on May 31, 2011 should be distributed.

Q: The Vera, Wade, and Xena partnership was dissolved, and a cash distribution plan was developed, as follows: Priority Creditors Vera Wade Xena First $462,000 100% Next $173,000 60% 40% Next $240,000 7/12 5/12 Remainder 20% 30% 50% Required: If $1,000,000 of cash was distributed by the partnership, how much was received respectively by the priority creditors, Vera, Wade, and Xena?

Q: A cash distribution plan for the Sammi, Tammy, and Udd partnership was as follows: Priority Creditors Sammi Tammy Udd First $250,000 100% Next $100,000 70% 30% Next $150,000 11/15 4/15 Remainder 20% 35% 45% Required: If $850,000 of cash was distributed by the partnership, how much was received respectively by the priority creditors, Sammi, Tammy, and Udd?

Q: The balance sheet of the Park, Quid, and Reggie partnership on November 1, 2011 (before commencement of partnership liquidation) was as follows: Cash $ 60,000 Accounts payable $ 110,000 Accounts Receivable 130,000 Loan from Quid 40,000 Loan to Park 16,000 Park, capital (20%) 60,000 Loan to Reggie 22,000 Quid, capital (40%) 52,000 Plant assets-net 120,000 Reggie, capital (40%) 86,000 Total assets $ 348,000 Total liab./equity $ 348,000 Liquidation events in November were as follows: - All receivables were settled for $110,000; - Plant assets with a book value of $90,000 were sold for $52,000. Required: Determine how the available cash on November 31, 2011 should be distributed.

Q: The balance sheet of the Maude, Ned, and Oscar partnership on November 1, 2011 (before commencement of partnership liquidation) was as follows: Cash $ 12,000 Georgia, capital (40%) $ 36,000 Holly, capital (30%) 6,000 Festus, capital (50%) 31,000 Total assets $ 90,000 Total liab./equity $ 90,000 Cash $ 70,000 Accounts payable $ 42,000 Inventory 60,000 Notes payable 68,000 Loan to Maude 10,000 Maude, capital(20%) 30,000 Loan to Oscar 18,000 Ned, capital(20%) 32,000 Plant assets-net 80,000 Oscar, capital(60%) 66,000 Total assets $ 238,000 Total liab./equity $ 238,000 Liquidation events in November were as follows: - All the inventory was sold for $10,000 above book value; - Plant assets with a book value of $60,000 were sold for $34,000. Required: Determine how the available cash on November 31, 2011 should be distributed.

Q: The balance sheet of the partnership of Jim, Kim, and Larry is shown below as of September 1, 2011. The partners had decided to dissolve the partnership earlier in the year, and all assets were converted into cash and all partnership liabilities were paid. The remains of the partnership (with partner residual profit and loss sharing percentages) was as follows: Cash $ 150,000 Jim, capital (20%) $ (300,000) Kim, capital (40%) (150,000) Larry, capital (40%) 600,000 Total assets $ 150,000 Total liab./equity $ 150,000 The value of partners' personal assets and liabilities on July 1, 2011 were as follows: Jim Kim Larry Personal assets $ 450,000 $ 370,000 $ 400,000 Personal liabilities 200,000 210,000 195,000 Required: Prepare the final statement of partnership liquidation.

Q: The partnership of Georgia, Holly, and Izzy was dissolved, and by July 1, 2011, all assets had been converted into cash and all partnership liabilities were paid. The partnership balance sheet on July 1, 2011 (with partner residual profit and loss sharing percentages) was as follows: Cash $ 10,000 Georgia, capital (40%) $ (20,000) Holly, capital (30%) (10,000) Izzy, capital (30%) 40,000 Total assets $ 10,000 Total liab./equity $ 10,000 The value of the partners' personal assets and liabilities on July 1, 2011 were as follows: Georgia Holly Izzy Personal assets $ 45,000 $ 30,000 $ 25,000 Personal liabilities 30,000 20,000 10,000 Required: Prepare the final statement of partnership liquidation.

Q: The partnership of Dolla, Earl, and Festus was dissolved on January 1, 2011. The balance sheet at that date is shown below: Cash $ 12,000 Liabilities $ 36,000 Other assets 70,000 Loan from Dolla 1,000 Loan to Clara 8,000 Dolla, capital (20%) 6,000 Earl, capital (30%) 16,000 Festus, capital (50%) 31,000 Total assets $ 90,000 Total liab./equity $ 90,000 In January, $34,000 of the accounts receivable was collected, and an additional $6,000 was determined to be uncollectible. The remaining receivables are still expected to be collected. Required: Determine how the available cash on January 31, 2011 will be distributed. (Use a safe payments schedule.)

Q: The balance sheet of the Addy, Bess, and Clara partnership on January 1, 2011 (the date of partnership dissolution) was as follows: Cash $ 4,000 Liabilities $ 8,000 Other assets 26,000 Loan from Addy 1,000 Loan to Clara 2,000 Addy, capital (20%) 2,000 Bess, capital (40%) 9,000 Clara, capital (40%) 12,000 Total assets $ 32,000 Total liab./equity $ 32,000 In January, other assets with a book value of $16,000 were sold for $10,000 in cash. Required: Determine how the available cash on January 31, 2011 will be distributed. (Use a safe payments schedule.)

Q: Creditors of the partnership may seek the personal assets of the partners to satisfy amounts owed. When this happens A) creditors may only file against partnership assets. B) creditors must file against all partners and recover their claims based on the individual partner's profit and loss distribution percentage. C) creditors must file against all partners and recover their claims based on the individual partner's percentage ownership. D) creditors may file against an individual partner to recover their claims, or against any combination of partners.

Q: Which partner is considered the most vulnerable as a result of a computation of vulnerability rankings? A) The partner who has the lowest loss absorption potential B) The partner who has the highest loss absorption potential C) The partner with the highest capital account balance D) The partner with the lowest capital account balance

Q: In a schedule of assumed loss absorptions A) the partner with lowest loss absorption is eliminated last. B) it is necessary to have a cash distribution plan first. C) the least vulnerable partner is eliminated first. D) the most vulnerable partner is eliminated first.

Q: The Leo, Mark and Natalie Partnership had the following capital balances and profit/loss sharing percentages: Balance Sharing % Leo $200,000 50% Mark $160,000 40% Natalie $140,000 10% Newsome is going to buy into the partnership by paying $200,000 for a 20% ownership in the partnership. Required: 1. If Newsome pays the partnership directly, what are the four partner capital balances immediately following Newsome's admission to the partnership using the bonus method? Assume the partnership assets are not revalued. 2. If Newsome pays the partnership directly, what are the four partner capital balances immediately following Newsome's admission to the partnership using the goodwill method? Assume the partnership assets are revalued. The $200,000 amount paid by Newsome is fair value for a 20% share of the partnership.

Q: A summary balance sheet for the Akerly, Baskin, and Crow partnership on December 31, 2011 is shown below. Partners Akerly, Baskin, and Crow allocate profit and loss in their respective ratios of 3:2:1. The partnership agreed to pay partner Baskin $500,000 for his partnership interest upon his retirement from the partnership on January 1, 2012. The partnership financials on January 1, 2012 are: Assets Cash $ 70,000 Marketable securities 190,000 Inventory 360,000 Land 110,000 Building-net 570,000 Total assets $1,300,000 Equities Akerly, capital $630,000 Baskin, capital 420,000 Crow, capital 250,000 Total equities $1,300,000 Required: Prepare the journal entry to reflect Baskin's retirement from the partnership: 1. Assuming a bonus to Baskin. 2. Assuming a revaluation of total partnership capital based on excess payment. 3. Assuming goodwill equal to the excess payment is recorded.

Q: A summary balance sheet for the Ash, Brown, and Curly partnership on December 31, 2011 is shown below. Partners Ash, Brown, and Curly allocate profit and loss in their respective ratios of 2:1:1. The partnership agreed to pay partner Brown $135,000 for his partnership interest upon his retirement from the partnership on January 1, 2012. The partnership financials on January 1, 2012 are: Assets Cash $ 75,000 Marketable securities 60,000 Inventory 85,000 Land 90,000 Building-net 110,000 Total assets $420,000 Equities Ash, capital $210,000 Brown, capital 105,000 Curly, capital 105,000 Total equities $420,000 Required: Prepare the journal entry to reflect Brown's retirement from the partnership: 1. Assuming a bonus to Brown. 2. Assuming a revaluation of total partnership capital based on excess payment. 3. Assuming goodwill equal to the excess payment is recorded.

Q: A summary balance sheet for the Sissy, Jody, and Buffy partnership on December 31, 2011 is shown below. Partners Sissy, Jody, and Buffy allocate profit and loss in their respective ratios of 3:4:6. The partnership agreed to pay Buffy $360,000 for her partnership interest upon her retirement from the partnership on January 1, 2012. Any payments exceeding Buffy's capital balance are treated as a bonus from partners Sissy and Jody. Assets Cash $110,000 Marketable securities 100,000 Inventory 240,000 Land 90,000 Building-net 140,000 Total assets $680,000 Equities Sissy, capital $220,000 Jody, capital 170,000 Buffy, capital 290,000 Total equities $680,000 Required: Prepare the journal entry to reflect Buffy's retirement.

Q: A summary balance sheet for the Uma, Van, and Walter partnership on December 31, 2011 is shown below. Partners Uma, Van, and Walter allocate profit and loss in their respective ratios of 4:5:7. The partnership agreed to pay Walter $227,500 for his partnership interest upon his retirement from the partnership on January 1, 2012. Any payments exceeding Walter's capital balance are treated as a bonus from partners Uma and Van.AssetsCash $ 75,000Marketable securities 60,000Inventory 87,500Land 90,000Building-net 150,000Total assets $462,500EquitiesUma, capital $212,500Van, capital 112,500Walter, capital 137,500Total equities $462,500Required:Prepare the journal entry to reflect Walter's retirement.

Q: A summary balance sheet for the partnership of Quail, Rainne and Selma on December 31, 2011 is shown below. Partners Quail, Rainne and Selma allocate profit and loss in their respective ratios of 6:3:1. Assets Cash $ 320,000 Marketable securities 640,000 Inventory 270,000 Land 130,000 Building-net 210,000 Total assets $1,570,000 Equities Quail, capital $ 670,000 Rainne, capital 580,000 Selma, capital 320,000 Total equities $1,570,000 The partners agree to admit Trask for a one-tenth interest. The fair market value for partnership land is $260,000, and the fair market value of the inventory is $370,000. Required: 1. Record the entry to revalue the partnership assets prior to the admission of Trask. 2. Calculate how much Trask will have to invest to acquire a 10% interest. 3. Assume the partnership assets are not revalued. If Trask paid $300,000 to the partnership in exchange for a 10% interest, what would be the bonus that is allocated to each partner's capital account?

Q: A summary balance sheet for the partnership of Maddy, Nelson and Olsen on December 31, 2011 is shown below. Partners Maddy, Nelson and Olsen allocate profit and loss in their respective ratios of 9:6:10. Assets Cash $ 50,000 Marketable securities 120,000 Inventory 75,000 Land 80,000 Building-net 400,000 Total assets $725,000 Equities Maddy, capital $425,000 Nelson, capital 225,000 Olsen, capital 75,000 Total equities $725,000 The partners agree to admit Poosh for a one-tenth interest. The fair market value for partnership land is $180,000, and the fair market value of the inventory is $150,000. Required: 1. Record the entry to revalue the partnership assets prior to the admission of Poosh. 2. Calculate how much Poosh will have to invest to acquire a 10% interest. 3. Assume the partnership assets are not revalued. If Poosh paid $200,000 to the partnership in exchange for a 10% interest, what is the bonus that is allocated to each partner's capital account?

Q: The profit and loss sharing agreement for the Jill, Kelly, and Lila partnership provides that each partner receives a bonus of 5% on the original amount of partnership net income if net income is above $25,000. Jill and Kelly receive a salary allowance of $7,500 and $10,500, respectively. Lila has an average capital balance of $260,000, and receives a 10% interest allocation on the amount by which her average capital account balance exceeds $200,000. Residual profits and losses are allocated to Jill, Kelly, and Lila in their respective ratios of 7:5:8. Required: Prepare a schedule to allocate $88,000 of partnership net income to the partners.

Q: Greta, Harriet, and Ivy have a retail partnership business selling personal computers. The partners are allowed an interest allocation of 6% on their average capital. Capital account balances on the first day of each month are used in determining weighted average capital, regardless of additional partner investment or withdrawal transactions during any given month. Withdrawals of capital that are debited to the capital account are used in the average calculation. Partner capital activity for the year was: Capital accounts Greta Harriet Ivy Jan 1 balance $680,000 $500,000 $580,000 Feb 12 investment 40,000 Mar 26 investment 20,000 Apr 20 withdrawal (10,000) May 8 withdrawal (15,000) (8,000) Jul 3 investment 14,000 Sep 29 investment 8,000 3,000 6,000 Nov 5 investment 3,000 Required: Calculate weighted average capital for each partner, and determine the amount of interest that each partner will be allocated. Round all calculations to the nearest whole dollar.

Q: Daniel, Ethan, and Frank have a retail partnership business selling personal computers. The partners are allowed an interest allocation of 8% on their average capital. Capital account balances on the first day of each month are used in determining weighted average capital, regardless of additional partner investment or withdrawal transactions during any given month. Withdrawals of capital that are debited to the capital account are used in the average calculation. Partner capital activity for the year was: Capital accounts Daniel Ethan Frank Jan 1 balance $ 200,000 $ 300,000 $ 250,000 Feb 2 investment 50,000 Mar 6 investment 10,000 20,000 Apr 20 withdrawal (10,000) Jul 3 withdrawal and investment (7,000) 10,000 Sep 29 investment 5,000 4,000 5,000 Nov 5 investment 5,000 Required: Calculate weighted average capital for each partner, and determine the amount of interest that each partner will be allocated. Round all calculations to the nearest whole dollar.

Q: Use the following information to answer the question(s) below.Adam, Bella, and Chris operate a partnership with a complex profit and loss sharing agreement. The average capital balance for Adam, Bella and Chris on December 31, 2011 is $120,000, $270,000, and $340,000, respectively. A 6% interest allocation is provided to each partner based on the average capital balance on December 31, 2011. Adam and Bella receive salary allocations of $40,000 and $50,000, respectively. If partnership net income is above $160,000, after the salary allocations are considered (but before the interest allocations are considered), Chris will receive a bonus of 10% of the income (pre-salary and interest, but net of the bonus). All residual income is allocated in the ratios of 2:2:6 to Adam, Bella, and Chris, respectively.Required:1. Prepare a schedule to allocate income or loss to the partners assuming that the partnership incurs a net loss of $26,200 for 2011.2. Prepare a journal entry to distribute the partnership's loss to the partners (assume that an Income Summary account is used by the partnership).

Q: Xavier, Young, and Zane operate a partnership with a complex profit and loss sharing agreement. The average capital balance for each partner on December 31, 2011 is $300,000 for Xavier, $250,000 for Young, and $325,000 for Zane. An 8% interest allocation is provided to each partner based on the average capital balance on December 31, 2011. Xavier and Young receive salary allocations of $10,000 and $15,000, respectively. If partnership net income is above $25,000, after the salary allocations are considered (but before the interest allocations are considered), Zane will receive a bonus of 10% of the original amount of net income. All residual income is allocated in the ratios of 2:3:5 to Xavier, Young, and Zane, respectively.Required:1. Prepare a schedule to allocate income or loss to the partners assuming that the partnership incurs a net loss of $36,000 for 2011.2. Prepare a journal entry to distribute the partnership's loss to the partners (assume that an Income Summary account is used by the partnership).

Q: Use the following information to answer the question(s) below.Xavier, Young, and Zane operate a partnership with a complex profit and loss sharing agreement. The average capital balance for each partner on December 31, 2011 is $300,000 for Xavier, $250,000 for Young, and $325,000 for Zane. An 8% interest allocation is provided to each partner based on the average capital balance on December 31, 2011. Xavier and Young receive salary allocations of $10,000 and $15,000, respectively. If partnership net income is above $25,000, after the salary allocations are considered (but before the interest allocations are considered), Zane will receive a bonus of 10% of the original amount of net income. All residual income is allocated in the ratios of 2:3:5 to Xavier, Young, and Zane, respectively.Required:1. Prepare a schedule to allocate income to the partners assuming that partnership net income for 2011 is $250,000.2. Prepare a journal entry to distribute the partnership's income to the partners (assume that an Income Summary account is used by the partnership).

Q: The profit and loss sharing agreement for the Tuttle, Upman, and Veer partnership provides for residual profits and losses to be allocated 2:3:6 to Tuttle, Upman, and Veer, respectively. In 2011, the partnership recorded $11,000 of net income that was properly allocated to the partners' capital accounts. On January 18, 2012, after the books were closed for 2011, Tuttle discovered that the $16,500 payment for the partnership's liability and workers compensation insurance for 2012 was recorded as insurance expense when it was paid on December 28, 2011. Required: Prepare the necessary correcting entry(s) for the partnership.

Q: The profit and loss sharing agreement for the Mason, Nell, and Odell partnership provides for a $15,000 salary allowance to Nell. Residual profits and losses are allocated 5:3:2 to Mason, Nell, and Odell, respectively. In 2010, the partnership recorded $120,000 of net income that was properly allocated to the partners' capital accounts. On January 25, 2011, after the books were closed for 2010, Mason discovered that office equipment, purchased for $12,000 on December 29, 2010, was recorded as office expense by the company bookkeeper. Required: Prepare the necessary correcting entry(s) for the partnership.

Q: On July 1, 2011, Joe, Kline, and Lama began a partnership in which Joe and Kline each contributed cash of $200,000; and Lama contributed property with a fair value of $100,000 and a tax basis $150,000. Joe receives a 10% bonus of partnership income. Kline and Lama receive salaries of $40,000 each. The partnership agreement of Joe, Kline, and Lama provides that all partners receive 5% interest on capital and that profits and losses of the remaining income be distributed to Joe, Kline, and Lama by a 1:1:3 ratio. Required: Prepare a schedule to distribute $225,000 of partnership net income to the partners.

Q: On February 1, 2011, George, Hamm, and Ishmael began a partnership in which George and Ishmael each contributed cash of $25,000; and Hamm contributed property with a fair value of $50,000 and a tax basis $40,000. Hamm receives a 5% bonus of partnership income. George and Ishmael receive salaries of $10,000 each. The partnership agreement of George, Hamm, and Ishmael provides that all partners receive 5% interest on capital, and that profits and losses of the remaining income be distributed to George, Hamm, and Ishmael by a 1:3:1 ratio. Required: Prepare a schedule to distribute $25,000 of partnership net income to the partners.

Q: Dan and Ellie share partnership profits and losses at 70% and 30%, respectively. The partners agree to admit Fran into the partnership for a 50% interest in capital and earnings. Capital accounts immediately before the admission of Fran are: Dan (70%) $ 800,000 Ellie (30%) 400,000 Total $ 1,200,000 Required: 1. Prepare the journal entry(s) for the admission of Fran to the partnership assuming Fran invested $800,000 for the ownership interest, and that this is a fair price for that share of the partnership to be acquired. Fran paid the money directly to Dan and to Ellie for 50% of each of their respective capital interests. The partnership records goodwill. 2. Prepare the journal entry(s) for the admission of Fran to the partnership assuming Fran invested $1,000,000 for the ownership interest. Fran paid the money to the partnership for a 50% interest in capital and earnings. Assume the valuation is based on the capital of the current partnership, which is fairly valued. The partnership records goodwill. 3. Prepare the journal entry(s) for the admission of Fran to the partnership assuming Fran invested $1,400,000 for the ownership interest, and that this is a fair price for that share of the partnership to be acquired. Fran paid the money to the partnership for a 50% interest in capital and earnings. The partnership records goodwill.

Q: Anna and Bess share partnership profits and losses at 60% and 40%, respectively. The partners agree to admit Cal into the partnership for a 50% interest in capital and earnings. Capital accounts immediately before the admission of Cal are: Anna (60%) $ 300,000 Bess (40%) 300,000 Total $ 600,000 Required: 1. Prepare the journal entry(s) for the admission of Cal to the partnership assuming Cal invested $400,000 for the ownership interest, and that this is a fair price for that share of the partnership to be acquired. Cal paid the money directly to Anna and to Bess for 50% of each of their respective capital interests. The partnership records goodwill. 2. Prepare the journal entry(s) for the admission of Cal to the partnership assuming Cal invested $500,000 for the ownership interest. Cal paid the money to the partnership for a 50% interest in capital and earnings. Assume the valuation is based on the capital of the current partnership, which is fairly valued. The partnership records goodwill. 3. Prepare the journal entry(s) for the admission of Cal to the partnership assuming Cal invested $700,000 for the ownership interest, and that this is a fair price for that share of the partnership to be acquired. Cal paid the money to the partnership for a 50% interest in capital and earnings. The partnership records goodwill.

Q: In a limited partnership, a general partner A) is excluded from management of the business. B) is not entitled to a bonus at the end of the year. C) has limited liability for partnership debt. D) has unlimited liability for partnership debt.

Q: Which of the following is a reason to use a partnership as the legal form of a business? A) Partnerships avoid the issue of mutual agency. B) Partnerships avoid the issue of unlimited liability. C) Partnerships avoid the issue of double-taxation faced by corporations. D) Partnerships avoid the difficulty of raising capital.

Q: Use the following information to answer the question(s) below.Quincy has decided to retire from the partnership of Quincy, Robert, and Sam. The partnership will pay Quincy $400,000. Total partnership capital should be revalued based on the excess payment to Quincy. (Assume the book values of the assets listed below equals fair values.) A summary balance sheet for the Quincy, Robert, and Sam partnership appears below. Quincy, Robert, and Sam share profits and losses in a ratio of 1:1:3, respectively.AssetsCash $ 150,000Marketable securities 76,000Inventory 164,000Land 300,000Building-net 510,000Total assets $1,200,000EquitiesQuincy, capital 320,000Robert, capital 280,000Sam, capital 600,000Total equities $1,200,000What partnership capital will Robert have after Quincy retires?A) $200,000B) $280,000C) $360,000D) $440,000

Q: If the partnership agreement provides a formula for the computation of a bonus to the partners, the bonus would be computed A) next to last, because the final allocation is the distribution of the profit residual. B) before income tax allocations are made. C) after the salary and interest allocations are made. D) in any manner agreed to by the partners in the partnership agreement.

Q: Drawings A) are advances to a partnership. B) are loans to a partnership. C) are a function of interest on partnership average capital. D) are the same nature as withdrawals.

Q: Use the following information to answer the question(s) below.Alfred and Barne share profits and losses in a ratio of 2:3, respectively, after salary allowances, interest allowances and bonus allocations. Alfred and Barne receive salary allowances of $30,000 and $60,000, respectively, and both partners receive 10% interest based upon the balance in their capital accounts on January 1. Partners' drawings are not used in determining the average capital balances. Total net income for 2011 is $180,000. If net income after deducting the interest and salary allocations is more than $60,000, Barne receives a bonus of 5% of the original amount of net income.Alfred BarneJanuary 1 capital balances $ 600,000 $ 900,000Yearly drawings ($3,000 a month) 36,000 36,000The XYZ partnership provides a 10% bonus to Partner Y that is based upon partnership income, after deduction of the bonus. If the partnership's income is $140,000, how much is Partner Y's bonus allocation?A) $12,727B) $13,860C) $14,000D) $15,400

Q: Use the following information to answer the question(s) below.Bertram and Ernest share profits and losses equally after salary and interest allowances. Bertram and Ernest receive salary allowances of $40,000 and $60,000, respectively, and both partners receive 10% interest on their average capital balances. Average capital balances are calculated at the beginning of each month, regardless of when additional capital contributions or permanent withdrawals are made subsequently within the month. Partners' drawings of $3,000 per month are not used in determining the average capital balances. Total net income for 2011 is $240,000.Bertram ErnestJanuary 1 capital balances $200,000 $240,000Yearly drawings ($3,000 a month) (36,000) (36,000)Permanent withdrawals of capital:June 3 (24,000)May 2 (30,000)Additional investments of capital:July 3 80,000October 2 100,000If the average capital balances for Bertram and Ernest are $200,000 and $240,000, what will the total partnership profit allocations be for Bertram and Ernest in 2011?A) $100,000 and $140,000B) $108,000 and $132,000C) $120,000 and $120,000D) $140,000 and $100,000

Q: Use the following information to answer the question(s) below.A summary balance sheet for the Lemon, Mango, and Nobb partnership appears below. Lemon, Mango, and Nobb share profits and losses in a ratio of 2:3:5, respectively.AssetsCash $ 100,000Marketable securities 200,000Inventory 125,000Land 100,000Building-net 500,000Total assets $1,025,000EquitiesLemon, capital $ 425,000Mango, capital 400,000Nobb, capital 200,000Total equities $1,025,000The partners agree to admit Oran for a one-fifth interest. The fair market value of partnership land is appraised at $200,000 and the fair market value of inventory is $175,000. The assets are to be revalued prior to the admission of Oran and there is $30,000 of goodwill that attaches to the old partnership.What will the profit and loss sharing ratios be after Oran's investment?A) 1:2:4:2B) 2:3:5:2C) 3:4:6:2D) 4:6:10:5

Q: Austin contributes his computer equipment to the landscaping partnership he starts with Bentley. At what amount should the computer equipment be credited to Austin's partnership capital? A) The tax basis B) The fair value at the date of contribution C) Austin's original cost D) At the amount that Bentley contributes, with the assumption that they both contribute equally to the partnership

Q: Partnerships A) are required to prepare annual reports. B) are required to file income tax returns but do not pay Federal income taxes. C) are required to file income tax returns and pay Federal income taxes. D) are not required to file income tax returns or pay Federal income taxes.

Q: In the Uniform Partnership Act, partners have I. mutual agency. II. unlimited liability. A) I only B) II only C) I and II D) Neither I nor II

Q: A partner assigned his partnership interest to a third party. Which statement best describes the legal ramifications to the assignee? A) The assignment of the partnership interest does not entitle the assignee to partnership assets upon a liquidation. B) The assignment dissolves the partnership. C) The assignee has the right to share in the management of the partnership. D) The assignee does not become a partner but has the right to share in future partnership profits and to receive the proper share of partnership assets upon liquidation.

Q: Under the Uniform Partnership Act, loans made by a partner to the partnership are treated as A) liabilities to the partnership for which interest shall be paid from the date of the advance. B) advances to the partnership that are carried in the partners' capital accounts. C) Accounts Payable of the partnership for which interest is paid. D) advances to the partnership for which interest does not have to be paid.

Q: Tillman Fabrications has five operating segments, as summarized below: WoodPlasticMetalPaperFabricSales to outside entities5,200,0001,200,0007,800,0001,600,0006,300,000Intersegment sales390,0004,700,000-0--0-750,000Operating Profit(520,000)(590,000)1,700,000190,000(960,000)Assets690,000450,000880,000280,000760,000 Required:Determine which of the operating segments of Tillman Fabrications are reportable segments for the period shown.

Q: Snodberry Catering has five operating segments, as summarized below: BuffetAlcoholBakeryWait ServiceBar ServiceSales to outside entities26,000110,00022,00024,0005,000Intersegment sales-0-20,0004,000-0-56,000Cost of goods sold16,00050,00019,00023,00069,000Operating Expenses9,00070,0006,0002,0004,000Interest Expense-0-5,000-0-2,0001,000Income Tax Expense-0-2,000-0--0-(3,000)Assets2,00022,0002,0001,0001,000 Required:Determine which of the operating segments of Snodberry Catering are reportable segments for the period shown.

Q: Rollins Publishing has five operating segments, as summarized below: FictionNon-fictionReferenceChildrensPeriodicalsSales to outside entities870,000416,000796,000236,000517,000Intersegment sales-0--0-80,000-0-50,000Cost of goods sold430,000270,000290,00065,000420,000Operating Expenses120,00089,00095,00074,000238,000Interest Expense-0-61,000-0--0-24,000Income Tax Expense80,000(1,000)120,00024,000(28,000)Assets22,00024,00029,00016,000100,000 Required:Determine which of the operating segments of Rollins Publishing are reportable segments for the period shown.

Q: Quantex Corporation has five operating segments, as summarized below: HouseholdIndustrialPackagingStorageServicesSales to outside entities700,0004,300,000400,0001,700,000100,000Intersegment sales50,000600,000800,000200,000-0-Cost of goods sold300,0002,700,000700,000900,000-0-Operating Expenses200,0001,300,000200,000600,00030,000Interest Expense10,00040,0005,000-0--0-Income Tax Expense60,000210,00070,000100,00018,000Assets540,0001,900,0001,600,00070,00032,000Required:Determine which of the operating segments of Quantex Corporation are reportable segments for the period shown.

Q: The following information was collected together for the Lawson Company relating to the preparation of their annual financial statements for 2011. For each item, indicate "yes" or "no" as to whether the item must be disclosed in the annual report._____ 1. Names of major customers for all reportable segments_____ 2. Interest revenue and expense for all reportable segments_____ 3. Cost of Goods Sold for all reportable segments_____ 4. Depreciation expense and amortization expense for all reportable segments_____ 5. Revenue from external customers for all reportable segments_____ 6. The basis for aggregating any operating segments to arrive at reporting segments_____ 7. Income tax expense (or benefit) for all reportable segments_____ 8. Total assets for all reportable segments_____ 9. Type of product or service for all reportable segments_____ 10. Extraordinary items for all reportable segments

Q: Osprin Corporation has three operating segments, as summarized below: CapsulePillLiquidTotalSales to retailers25,00035,0005,00065,000Intersegment sales4,00010,0002,00016,000Operating Expenses10,00018,0005,00033,000Interest Expense2,0003,0001,0006,000Income Tax Expense4,0006,0001,00011,000Assets12,0003,00016,00031,000Required:1. Using the revenue test, what is the minimum amount of revenue of a reportable segment?2. Using the operating profit or loss test, what is the minimum amount of operating profit or loss of a reportable segment?3. Using the asset test, what is the minimum amount of assets of a reportable segment?4. Based on the three tests, which segments will be separately reported?

Q: Nettle Corporation is preparing its first quarterly interim report. It is subject to a corporate income tax rate of 20% on the first $50,000 of taxable income and 35% on taxable income above $50,000. Its estimated pretax accounting income for 2011, by quarter, is:1st 2nd 3rd 4th 2011Quarter Quarter Quarter Quarter TotalEst. Income $75,000 $165,000 $143,000 $120,000 $503,000Nettle expects to earn and receive operating income for the year and does not contemplate any changes in accounting procedures or principles that would affect its pretax accounting income.Required:1. Determine Nettle's estimated effective tax rate for 2011.2. Prepare a schedule to show Nettle's estimated net income for each quarter of 2011.

Q: Krull Corporation is preparing its interim financial statements for the third quarter of calendar 2011.The following trial balance information is available for third quarter:Account Debit CreditCash $98,000Accounts Receivable 285,000Inventory 750,000Fixed assets 600,000Accounts Payable $300,000Common Stock 50,000Retained Earnings 80,000Sales 4,400,000Administrative expense 312,000Cost of goods sold 2,650,000Loss on sale of securities sold on July 30 75,000Annual equipment overhaul costs paid on August 1 60,000Totals $4,830,000 $4,830,000Additional information:At the end of the year, Krull distributes annual employee bonuses and charitable donations that are estimated at $40,000, and $12,000, respectively. The cost of goods sold includes the liquidation of a $45,000 base layer in inventory that Krull will restore in the fourth quarter at a cost of $75,000. Effective corporate tax rate for 2011 is 32%.Required:Prepare Krull's interim income statement for the third quarter of calendar 2011.

Q: Maxtil Corporation estimates its income by calendar quarter as follows for 2011:1st 2nd 3rd 4th 2011Quarter Quarter Quarter Quarter TotalEst. Income $40,000 $30,000 $20,000 $20,000 $110,000Income tax rates applicable to Maxtil:From: $0 to $50,000 15%From: $50,001 to $75,000 25%Over: $75,000 35%Required:Determine Maxtil's estimated effective tax rate.

Q: Leotronix Corporation estimates its income by calendar quarter as follows for 2011:1st 2nd 3rd 4th 2011Quarter Quarter Quarter Quarter TotalEst. Income $30,000 $40,000 $40,000 $50,000 $160,000Income tax rates applicable to Leotronix:From: $ 0 to $50,000 15%From: $50,001 to $75,000 25%Over: $75,000 35%Required:Determine Leotronix's estimated effective tax rate.

Q: Jeale Corporation is preparing its interim financial statements for the third quarter of calendar 2011. The following information was provided for the preparation of the statements:Credit sales for the quarter $1,700,000Cash sales for the quarter 800,000Inventories, July 1 (FIFO cost method) 250,000Cash purchases of inventory during the quarter 400,000Inventory purchases made on account for the quarter 650,000Estimated cost of goods sold ratio 45%Selling and general administrative expenses paid 111,000Effective corporate tax rate 28%Loss on sale of securities sold on June 30, 2011 75,000Annual insurance premiums paid on August 1(the 84,000 anniversary date of the policy) (Last year's insurance expense is included in general administrative expenses.)Additional information:At the end of the year, Jeale accrues its annual pension and depreciation expenses which amount to $60,000 and $42,000, respectively.Required:Prepare Jeale's interim income statement for the third quarter of calendar 2011.

Q: Illiana Corporation has several accounting issues with respect to its interim financial statements for the first quarter of calendar 2011.Required:For each of the independent situations given below, state whether or not the method proposed by Illiana is acceptable. Justify each answer with appropriate reasoning.1. Illiana will not perform a physical inventory at the end of the calendar quarter. It intends to estimate the cost of sales by using the gross profit inventory method.2. Illiana grants volume discounts to its customers based upon their total annual purchases. The discounts are calculated on a sliding scale ranging from 1% to 8%. The amount of discount applied will progressively increase for a customer as the cumulative purchase total for the customer increases during the year. Illiana will use the average rate of discounts earned for each customer in the prior year as the expected discount rate for the current year.3. At the beginning of the current quarter, Illiana incurred a large loss on the sale of some of its marketable securities. It intends to distribute the loss evenly to each of the four calendar quarters.4. Illiana incurs maintenance costs during its year-end holiday shut down, but has minimal maintenance costs during the rest of the year. It intends to deduct one-fourth of the yearly estimated cost on its interim income statement.

Q: The following data relate to Elle Corporation's industry segments. (Elle HQ represents the corporate headquarters). All other segments are geographical sales segments.Attribute Europe Russia China Japan Elle HQExternal sales $35,000 $24,000 $33,000 $0 $0IntersegmentSales 2,000 1,000 4,000 0 0Expenses 27,000 18,000 29,000 5,000 12,000Assets assigned 20,000 22,000 30,000 14,000 15,000Income fromEquity investee 5,000Required:1. Prepare a report which reconciles the reportable segment profits to total consolidated profits assuming that corporate expenses are not allocated to the operating segments.2. Prepare a report which reconciles the reportable segment profits to total consolidated profits assuming that corporate expenses are allocated evenly among the operating segments.

Q: What will be the minimum number of segments that must be reported?Answer:Requirement 1The reporting segments will be those segments whose segment revenue is 10% or more of the combined revenues of all operating segments. The total combined revenue of the operating segments is $149,500,000 and 10% of that number is $14,950,000. Only Canada and the United States will satisfy the 10% revenue test.Requirement 2The appropriate test value is the "75% of consolidated revenues" test which is $112,125,000 ($149,500,000 75%).Requirement 3Canada and the United States have combined revenues that total $98,000,000. The next largest segment in revenues is Other European at $14,000,000 which would get the total revenues to $112,000,000. Falcon would have to report one additional segment, European Union, to meet the 75% test for revenue.7) For internal decision-making purposes, Geogh Corporation identifies its industry segments by geographical area. For 2011, the total revenues of each segment are provided below. There are no intersegment revenues.TotalRevenuesCanada $980,000United States 1,410,000Mexico 1,260,000South America 430,000China 710,000Russia 660,000Australia 370,000European Union 1,220,000Other European 1,650,000Total revenues $8,690,000Required:1. Which operating segments will be considered reporting segments based on the revenue test?2. What is the test value for determining whether a sufficient number of segments are reported?3. What will be the minimum number of segments that must be reported?

Q: For internal decision-making purposes, Falcon Corporation identifies its industry segments by geographical area. For 2011, the total revenues of each segment are provided below. There are no intersegment revenues.TotalRevenuesCanada $22,000,000United States 76,000,000Mexico 10,000,000South America 9,000,000China 2,000,000Russia 1,500,000Australia 3,000,000European Union 12,000,000Other European 14,000,000Total revenues $149,500,000Required:1. Which operating segments will be considered reporting segments based on the revenue test?2. What is the test value for determining whether a sufficient number of segments are reported?3. What will be the minimum number of segments that must be reported?

Q: The following data relate to Falcon Corporation's industry segments:Sales toExternal IntersegmentIndustry Segment Customers Sales AssetsOil Exploration $80,000 $$310,000Refinery 240,000 720,000Plastics 20,000 $20,000 120,000Chemicals 220,000 160,000 980,000Solar Power 20,000 75,000 270,000Totals $580,000 $255,000 $$2,400,000Required:1. Which of Falcon's operating segments would be considered reporting segments under the "revenue" test?2. Which of Falcon's operating segments would be considered reporting segments under the "asset" test?

Q: For internal decision-making purposes, Elom Corporation's operating segments have been identified as follows:OperatingProfit IdentifiableOperating Segment Revenues or Loss AssetsAppliances $110,000 $(15,000) $120,000Lawn and Garden 85,000 15,000 15,000Auto Accessories 100,000 10,000 20,000Service Contracts 65,000 (5,000) 10,000Catalog Sales 230,000 5,000 50,000Corporate ________ ________ 25,000$590,000 $10,000 $240,000Corporate assets are typically allocated back evenly to the segments for internal analysis purposes.Required:1. In applying the "asset" test to identify reporting segments, what is the test value for Elom Corporation?2. Using the "asset" test, which of Elom's operating segments will also be reporting segments?

Q: Using the "revenue" test, which of Dashwood's operating segments will also be reportable segments?Answer:Requirement 1In the revenue test, there is no separation of revenue earned from sales to other segments, thus the test value to be used is 10% of the total revenues listed, or $12,400,000 10% = $1,240,000.Requirement 2Reportable segments are Clothing, Catalog Sales, Home Furnishings and Tools. The revenue from these four segments does not exceed 75% of consolidated revenue of $11,800,000, which equals $8,850,000. As a result, another operating segment, Appliances, must be reportable.3) For internal decision-making purposes, Calam Corporation's operating segments have been identified as follows:OperatingProfit IdentifiableOperating Segment Revenues or Loss AssetsAppliances $110,000 $(15,000) $120,000Clothing 130,000 (75,000) 40,000Lawn and Garden 85,000 15,000 15,000Auto Accessories 100,000 10,000 20,000Service Contracts 65,000 (5,000) 10,000Catalog Sales 230,000 5,000 50,000Home Furnishings 280,000 25,000 100,000Tools 240,000 30,000 25,000$1,240,000 (10,000) $380,000Required:1. In applying the "operating profit or loss" test to identify reporting segments, what is the test value for Calam Corporation?2. Using the "reported profit or loss" test, which of Calam's operating segments will also be reporting segments?

Q: For internal decision-making purposes, Dashwood Corporation's operating segments have been identified as follows:Revenues Operating(includes Profit IdentifiableOperating Segment intersegment or Loss Assetsrevenues)Appliances $1,100,000 $(150,000) $1,200,000Clothing 1,300,000 (750,000) 400,000Lawn and Garden 850,000 150,000 150,000Auto Accessories 1,000,000 100,000 200,000Service Contracts 650,000 (50,000) 100,000Catalog Sales 2,300,000 50,000 500,000Home Furnishings 2,800,000 250,000 1,000,000Tools 2,400,000 300,000 250,000$12,400,000 $(100,000) $3,800,000Revenues of the segments are external, with the exception of tools, which sold $400,000 to other segments, and Appliances, which sold $200,000 to other segments.Required:1. In applying the "revenue" test to identify reporting segments, what is the test value for Dashwood Corporation?2. Using the "revenue" test, which of Dashwood's operating segments will also be reportable segments?

Q: The accountant for Baxter Corporation has assigned most of the company's assets to its three segments as follows:Electronics $1,760,000Hardware 3,420,000Plumbing 490,000Total $5,670,000The unassigned assets consist of $430,000 of unallocated goodwill and $270,000 of assets attached to the corporate headquarters. For internal decision-making purposes, goodwill is not assigned to the segments and the assets assigned to the corporate headquarters are allocated equally to the operating segments.Required:1. What is the proper threshold value to use in determining which of the operating segments shown above are reporting segments?2. Which of the operating segments are considered reporting segments?

Q: On January 5, 2011, Eagle Corporation paid $50,000 in real estate taxes for the calendar year. In March of 2011, Eagle paid $180,000 for an annual machinery overhaul and $10,000 for the annual CPA audit fee. What amount was expensed for these items on Eagle's quarterly interim financial statements?A)Quarter 1Quarter 2Quarter 3Quarter 4$202,500$12,500$12,500$12,500B)Quarter 1Quarter 2Quarter 3Quarter 4$195,000$15,000$15,000$15,000C)Quarter 1Quarter 2Quarter 3Quarter 4$67,500$57,500$57,500$57,500D)Quarter 1Quarter 2Quarter 3Quarter 4$60,000$60,000$60,000$60,000

Q: The estimated taxable income for Shebill Corporation on January 1, 2011, was $80,000, $100,000, $100,000, and $120,000, respectively, for each of the four quarters of 2011. Shebill's estimated annual effective tax rate was 30%. During the second quarter of 2011, the estimated annual effective tax rate was increased to 34%. Given only this information, Shebill's second quarter income tax expense wasA) $30,000.B) $34,000.C) $37,200.D) $61,200.

Q: Sandpiper Corporation paid $120,000 for annual property taxes on January 15, 2011, and $20,000 for building repair costs on March 10, 2011. Total repair expenses for the year were estimated to be $200,000, and are normally accrued during the year until incurred. What total amount of expense for these items was reported in Sandpiper's first quarter 2011 interim income statement?A) $ 50,000B) $ 80,000C) $100,000D) $140,000

Q: In general, GAAP encourages the identification of reportable segments based on the following:A) Reported segments must account for at least 75% of all external and inter-segment sales.B) Reported segments must ideally account for at least 75% of all sales, unless there are many smaller divisions and separate reporting would create less clarity in reporting.C) If there are more than 10 reportable segments, the company should consider additional aggregation of their segments.D) Reported segments must account for 100% of the external sales, but only 75% of external and inter-segment sales.

Q: How does GAAP view interim accounting periods?A) As discrete units for which net income may be separately determinedB) As integral units of the entire year for which each interim period is an essential part of an annual periodC) As integral units of the entire year with each interim period as an independent accounting periodD) As discrete units of the entire year using the same principles that are applied to the annual period

Q: Jacana Company uses the LIFO inventory method. During the second quarter, Jacana experienced a 100-unit liquidation in its LIFO inventory at a LIFO cost of $430 per unit. Jacana considered the liquidation temporary and expects to replace the units in the third quarter at an estimated replacement cost of $460 a unit. The cost of goods sold computation in the interim report for the second quarter willA) include the 100 liquidated units at the $460 estimated replacement unit cost.B) include the 100 liquidated units at the $430 LIFO unit cost.C) be understated by $3,000.D) be overstated by $3,000.

Q: The following table is provided in the disclosures for interim reporting by Bigg Company, regarding the location of their assets.United States$1,860,000Mexico1,270,000Canada880,000Brazil440,000Other50,000Based on the table, which of the following statements is true?A) Only the U.S. and Mexico divisions would be reportable geographic divisions.B) The U.S., Mexico and Canada divisions would be reportable geographic divisions.C) All geographic divisions would be reportable, except for "other."D) All geographic divisions would be reportable.

Q: What is the purpose of interim reporting?A) Provide shareholders with more timely informationB) Provide shareholders with more accurate informationC) Provide shareholders with more extensive detail about specific accounts and transactionsD) Provide shareholders with more current audited information

Q: Which one of the following operating segment information items is not directly named by GAAP to be reconciled to consolidated totals?A) AssetsB) LiabilitiesC) RevenuesD) Profit or loss

Q: Which one of the following operating segment disclosures is not required by GAAP?A) Total AssetsB) EquityC) Intersegment salesD) Extraordinary items

Q: Dott Corporation experienced a $100,000 extraordinary loss in the second quarter of 2011 in their East Coast operating segment. The loss should be recognizedA) only at the consolidated report level at the end of the year.B) entirely in the second quarter of 2011 in the East Coast operating segment.C) in equal amounts allocated to the remaining three quarters of 2011 at the corporate level.D) in equal amounts allocated to the remaining three quarters of 2011 of the East Coast segment.