Exam 14: Partnerships: Formation and Operation

Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was Goodman's total share of net income for 2020?

When the hybrid method is used to record the withdrawal of a partner, the partnership

The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows: Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.What is the balance of May's capital account after the new partnership is created?

Jell and Dell were partners with capital balances of $600 and $800, and an income-sharing ratio of 2:3. They admitted Zell with a 30% interest in the partnership, and the total amount of goodwill credited to the original partners was $700. What amount did Zell contribute to the business?

The ABCD Partnership has the following balance sheet at January 1, 2020, prior to the admission of new partner, Eden. Eden acquired a 20% interest in the partnership by contributing a total of $71,500 directly to the other four partners. No goodwill is to be recorded.Profits and losses have previously been split according to the following percentages: Adams, 15%, Barnes, 35%, Cordas, 30%, and Davis, 20%.After Eden made his investment, what were the individual capital balances?

Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was White's capital balance at the end of 2020?

Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively.The partners share profits and losses 20%, 40%, and 40% respectively.What is the total partnership capital after Anne retires receiving $80,000 and using the bonus method?

A partnership began its first year of operations with the following capital balances: The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was Young's total share of net loss for the first year?

Assume the partnership of Dean, Hardin, and Roth has been in existence for a number of years.Dean decides to withdraw from the partnership when the partners' capital balances are as follows: An appraisal of the business and its property estimates the fair value to be $ 100,000. Dean has agreed to receive $64,000 in exchange for his partnership interest.Prepare the journal entry for the payment to Dean in the dissolution of his partnership interest, assuming the bonus method is to be applied.

The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows: Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.What is the new total balance of the partnership accounts?

Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was the total capital balance for the partnership at December 31, 2020?

Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was Pinkman's capital balance at the end of 2021?

Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was the total capital balance for the partnership at December 31, 2021?

Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was Pinkman's total share of net income for 2021?

A partnership began its first year of operations with the following capital balances: The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was the balance in Eaton's Capital account at the end of the second year?

P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest.If C is to contribute an amount equal to his book value share of the new partnership, how much should C contribute?

The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows: Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.What is the balance of Donald's capital account after the new partnership is created?

The partnership contract for Hanes and Jones LLP provides that Hanes is to receive a bonus of 20% of net income (after the bonus) and that the remaining net income is to be divided equally. If the partnership income before the bonus for the year is $57,600, Hanes' share of this pre-bonus income is:

Jerry, a partner in the JSK partnership, begins the year on January 1, 2021 with a capital balance of $20,000. The JSK partnership agreement states that Jerry receives 6% interest on his monthly weighted average capital balance without regard to normal drawings. Each partner draws $5,000 in cash from the business every quarter. Any withdrawal in excess of that will be accounted for as a direct reduction of the partner's capital balance.On March 1, 2021, when the partnership tax return for 2020 was completed, Jerry's capital account was credited for his share of 2020 profit of $120,000.Jerry withdrew $5,000 quarterly, beginning March 31st.On September 1, Jerry's capital account was credited with a special bonus of $60,000 for business he brought to the partnership.What amount of interest will be attributed to Jerry for the year 2021 that will go toward his profitdistribution for the year?

Peter, Roberts, and Dana have the following capital balances; $80,000, $100,000 and $60,000, respectively.The partners share profits and losses 20%, 40%, and 40% respectively.Roberts retires and is paid $160,000 based on an independent appraisal of the business.If the goodwill method is used, what is the capital balance of Peter?