Exam 12: Accounting for Partnerships

Harvey and Quick have decided to form a partnership.Harvey 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 Harvey is available: Based on this information,Harvey's beginning equity balance in the partnership will be:

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?

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

Maxwell and Smart are forming a partnership.Maxwell is investing a building that has a market value of $180,000.However,the building carries a $56,000 mortgage that will be assumed by the partnership.Smart is investing $120,000 cash.The balance of Maxwell's Capital account will be:

A partnership recorded the following journal entry: This entry reflects:

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

Dalworth and Minor have decided to form a partnership.Minor is going to contribute a depreciable asset to the partnership as her equity contribution to the partnership.The following information regarding the asset to be contributed by Minor is available: Based on this information,Minor's beginning equity balance in the partnership will be:

Barber and Atkins are partners in an accounting firm and share net income and loss equally.Barber's beginning partnership capital balance for the current year is $285,000,and Atkins' beginning partnership capital balance for the current year is $370,000.The partnership had net income of $250,000 for the year.Barber withdrew $90,000 during the year and Atkins withdrew $100,000.What is Barber's return on equity?

Pat and Nicole formed Here & There as a limited liability company.Unless the member owners elect to be treated otherwise,the Internal Revenue Service will tax the LLC as:

Fontaine and Monroe are forming a partnership.Fontaine invests a building that has a market value of $250,000;the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property.Monroe invests $100,000 in cash and equipment that has a market value of $55,000.For the partnership,the amounts recorded for the building and for Fontaine's Capital account are:

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a(n):

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

Sharon and Nancy formed a partnership 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 Sharon and $35,000 to Nancy;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?

Christie and Jergens formed a partnership with capital contributions of $300,000 and $400,000,respectively.Their partnership agreement calls for Christie to receive a $60,000 per year salary.Also,each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments.The remaining income or loss is to be divided equally.If the net income for the current year is $135,000,then Christie and Jergens's respective shares are:

Even if partners devote their time and services to their partnership,their salaries are not expenses on the income statement.

Cox,North,and Lee form a partnership.Cox contributes $180,000,North contributes $150,000,and Lee contributes $270,000.Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally.If the partnership reports income of $174,000 for its first year,what amount of income is credited to Lee's capital account?

A bonus may be paid in all of the following situations except:

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

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

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