Exam 19: Accounting for Partnerships

The allocation of net income and its impact on partners' equity balances should be disclosed on the

After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Golden, $30,000; Chavez, $40,000; McGinnis, $55,000. If McGinnis retired and withdrew $50,000 in settlement of his/her equity, the amount entered in McGinnis's capital account would be a

If a retiring partner agrees to withdraw less than the book value of his/her interest, the effect of the transaction will decrease the capital accounts of the remaining partners.

The admission of a new partner calls for the amendment of the old partnership agreement, but not dissolve the old partnership.

J. O'Keefe and J. Kisha combined for a 50/50 partnership in 1980 and continued to do business successfully for many years. In January 2011, J. Kimley offered to contribute a sizable amount of working capital and was accepted as a partner in the business. J. O'Keefe and J. Kisha each own 40% of the business and J. Kimley 20% of the business partnership. Profits and losses are to be shared according to these percentages. Due to the lagging economy and a sudden loss of profits, all three agree to liquidate the business and enjoy a gain on the sale of their major asset, which was purchased in 1981. This should be distributed

Match the terms with the definitions. -A written agreement containing the various provisions for operating a partnership.

If one partner contributes an asset to the business, the asset is jointly owned by all partners.

If two or more sole proprietors combine their businesses to form a partnership, the basis for the opening entries for the investments of such partners is based upon their respective

Which of the following is an incorrect step in the process of liquidation?

When a partner retires from the business, the partner's interest may be purchased by one or more of the remaining partners or by an outside party.

For a new partner to be admitted to a partnership, there must be a consensus of the existing partners.

Steve and Heather decided to form a partnership on April 1. Steve invested $60,000 and Heather invested $40,000. Net income for the fiscal year ended March 31 was $110,000. Each partner is to receive 10% on their original investment. Steve and Heather are to receive a salary allowance of $35,000 and $45,000, respectively. The remainder is to be divided as follows: 70% to Steve and 30% to Heather. Determine the amount of net income that Steve and Heather would have received.

When a new partner is admitted,

When two single proprietors decide to combine their businesses, generally accepted accounting principles usually require that noncash assets be recorded at their market value as of the date of formation of the partnership.

Partner compensation is reported on the income statement but is not used to compute net income.

After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Boswell, $40,000; Aikido, $60,000; Cooke, $55,000. Partners share profits and losses as follows: Boswell, 20%; Aikido, 30%; and Cooke, 50%. If Cooke retired and withdrew $65,000 in settlement of his equity and settlements are allocated according to capital interests, the amount entered in Aikido's capital account would be a

Dissolution of a partnership

Partnerships file federal income tax returns for informational purposes and to notify partners of the amount of partnership income that must be reported on their individual federal income tax returns.

All assets held by a partnership are

"Mutual agency" means that