Exam 12: Accounting for Partnerships

If a partner's investment in a partnership consists of equipment that has accumulated depreciation of $8000 it would not be appropriate for the partnership to record the accumulated depreciation.

Which of the following is not a principal characteristic of the partnership form of business organization?

L. Hampton invests the following assets in a new partnership: $30000 in cash and equipment that cost $70000 but has a book value of $34000 and fair value of $40000. Hampton Capital will be credited for $64000.

Nate is investing in a partnership with Deidre. Nate contributes as part of his initial investment Accounts Receivable of $60000; an Allowance for Doubtful Accounts of $9000; and $6000 cash. The entry that the partnership makes to record Nate's initial contribution includes a

Unless the partnership agreement specifically indicates an income ratio partnership net income or loss is not allocated to the partners.

In liquidation balances prior to the distribution of cash to the partners are: Cash $204000; Paley Capital $112000; Stengel Capital $104000 and King Capital $12000 deficiency. The income ratio is 6:2:2 respectively. How much cash should be distributed to Stengel if King does not pay his deficiency?

The capital accounts indicate each partner's ______________ investment while the partner's drawing accounts are ______________ owner's equity accounts.

The liquidation of a partnership may result from each of the following except the

Bingham and Ecuyer sell 1/4 of their partnership interest to Ives receiving $600000 each. At the time of admission Bingham and Ecuyer each had a $1050000 capital balance. The admission of Ives will cause the net partnership assets to

In the final step of the liquidation process remaining cash is distributed to partners

Three doctors Marshall Murrey Andrew Shaw and Austin Taylor opened a family medicine clinic. All three doctors had been lifelong friends. All belonged to the same religious faith. All were very active in church affairs and tried to mold their professional behavior to their religious beliefs. About a year ago Dr. Murrey announced that he was leaving the church. The others noticed that his personality also began to change. He began to dress in flamboyant styles and he started wearing expensive-looking jewelry. His temper became unstable-one minute he was calm and the next he might be throwing charts down the hall and screaming. He started coming to the office late and forgetting to see some of his patients before he left again. The other two at first were stunned at the changes. His wife asked them whether they thought he might have a drinking problem. After finally deciding to investigate they found what looked to them like a large amount of cocaine (hundreds of plastic sacks of white powder) tucked away in boxes of old medical equipment. Frightened Drs. Shaw and Taylor decided to act quickly. Their partnership agreement said nothing about dissolving the partnership-only about what to do if one of them died. They therefore secretly rented office space across town and began to move the most necessary equipment and supplies to the new office. A month later they changed the locks on the old office and began seeing patients in the new office without any notice to Dr. Murrey at all. Dr. Murrey simply came in at around ten o'clock as usual and found himself locked out of an empty office. Required: Did Drs. Shaw and Taylor act ethically in their ending of the partnership? Explain.

The act of any partner is binding on all other partners if the act appears to be appropriate for the partnership.

Juanita Gomez and Brandi Toomey have formed the GT Partnership and have capital balances of $130000 and $100000 respectively on January 1 2017. On June 1 2017 Toomey invested an additional $30000. Also during the year Gomez withdrew $60000 and Toomey withdrew $48000. Sales for the year amounted to $360000 and expenses were $240000. Gomez and Toomey share income and losses on a 3:1 basis. Instructions (a) Prepare the closing entries at December 31 2017 for the GT Partnership. (b) Prepare a partners' capital statement for 2017.

The partnership agreement should include each of the following except the

Each of the following is used in preparing the partners' capital statement except the

Before distributing any remaining cash to partners in a partnership liquidation it is necessary to do each of the following except

The partners' drawing accounts are closed each period into the Income Summary account.

Thao and Leslie are partners who share profits 60% and 40%. Their capital balances were both $120000 before Kiley was admitted to the partnership. Kiley contributed $160000 in cash to the partnership for a 30% interest. Instructions Compute the capital balances of Thao and Leslie after Kiley is admitted to the partnership.

The admission of a new partner results in the legal dissolution of the existing partnership and the beginning of a new partnership.

An entry is not required in the liquidation of a partnership to record the