Exam 14: Partnerships: Formation and Operation

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. 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 Goodman's capital account balance at the end of 2021?

The dissolution of a partnership occurs

The appropriate format of the December 31, 2020closing entry for John & Hope Limited Liability Partnership, whose two partners had withdrawn their salaries from the partnership during the year, is:

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.Anne retires and is paid $80,000 based on the terms of the original partnership agreement.If the bonus method is used, what is the capital of the remaining partners?

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 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 Thurman's total share of net loss for the first year?

Norr and Caylor established a partnership on January 1, 2020.Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000.For both partners, the beginning capital balance was to equal the initial investment.Norr and Caylor agreed to the following procedure for sharing profits and losses:- 12% interest on the yearly beginning capital balance- $10 per hour of work that can be billed to the partnership's clients- the remainder allocated ona 3:2 ratioThe Articles of Partnership specified that each partner should withdraw no more than $1,000 per month, which is accounted as direct reduction of that partner's capital balance.For 2020, the partnership's income was $70,000.Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours.In 2021, the partnership's income was $24,000, and Norr and Caylor worked 800 and 1,200 billable hours respectively.Each partner withdrew $1,000 per month throughout 2020and 2021.Determine the balance in both capital accounts at the end of 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 will be the amount of interest attributed to Goodman in the income distribution for 2022?

Which of the following could be used as a basis to allocate profits among partners who are active in the management of the partnership? 1) Allocation of salaries. 2) The number of years with the partnership. 3) The amount of time each partner works. 4) The average capital invested.

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 remainder portion of net income allocated to White 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 Eaton's total share of net income for the second year?

What theoretical argument could be made against the recognition of goodwill when there is a change in the ownership of a partnership?

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 Thurman's Capital account at the end of the first 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.What is the total partnership capital after Roberts retires receiving $160,000 and using the goodwill method?

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 capital balance at the end of 2020?

For what events or conditions should the Articles of Partnership make provision?

Which of the following type of organization is classified as a partnership, or similar to a partnership, for tax purposes?(I.) Limited Liability Company(II.) Limited Liability Partnership(III.) Subchapter S Corporation

Under what circumstances does a partner's balance in his or her capital account have practical consequences for the partner?

A local partnership has two partners, Jim and Pam. Jim has a capital balance of $150,000 and Pam has a capital balance of $125,000. These two partners share profits and losses 60 percent (Jim) and 40 percent (Pam). Cece invests $75,000 in cash in the partnership for a 25 percent ownership. The bonus method will be used. What is Pam's capital balance after this new investment?