Exam 12: Accounting for Partnerships

The largest companies in the United States are primarily organized as

A new partner may be admitted to the partnership by ______________ the interest of an existing partner or by ______________ assets in the partnership.

Brekke and Fig decide to organize a partnership. Brekke invests $30000 cash and Fig contributes $24000 cash and equipment having a book value of $12000. Choose the entry to record Fig's investment in the partnership assuming the equipment has a fair value of $18000. a. Cash 24,000 Equipment 12,000 Fig, Capital 36,000 b. Equipment 12,000 Fig, Capital 12,000 c. Cash 24,000 Fig, Capital 24,000 d. Cash 24,000 Equipment 18,000 Fig, Capital 42,000

Walter Bector and Sandy Melos began detail work on automobiles as a hobby. First they used a mail-order kit to add "pin striping" to their own cars a 1968 Mustang and a 1970 GTO Judge respectively. Then Walter added more flourishes including his name. Sandy practiced painting flames on his Judge. Gradually their cars became recognized around town and others began to ask them to add a flourish here or there to their cars. They were talked into attending a "muscle car" show in a nearby large city to show off their cars. They had more requests for work than they could handle. Now they are considering quitting their other jobs and making this a permanent business. Sandy for example turns down more jobs than he accepts and still gets more requests every week. Walter and Sandy are unsure how to proceed. They like the idea of a partnership but they only know they work well together-things like how to split payment have just been settled individually for each job depending on which one did more work. Walter's father suggests a written partnership agreement. Walter disagrees. He believes that it will spoil the whole arrangement by reducing it to words. Required: Write a brief note to Walter explaining why he needs a partnership agreement.

In the liquidation of a partnership any partner who has a capital deficiency

On November 30 capital balances are Forsytha $720000 Lagassi $600000 and Kelly $600000. The income ratios are 20% 20% and 60% respectively. Forsytha decides to retire from the partnership. In order for Lagassi and Kelly to have equal capital interests after the retirement of Forsyth how much partnership cash would have to be paid to Forsytha for her partnership interest?

Which of the following would not be considered an expense of a partnership in determining income for the period?

The first step in the liquidation of a partnership is to

The Fig & Olive Co. reports net income of $24000. Interest allowances are Fig $3000 and Olive $5000; partner salary allowances are Fig $18000 and Olive $10000 and the remainder is shared equally. Instructions Indicate the division of net income to each partner and prepare the entry to distribute the net income.

Use the following account balance information for Granobfin Partnership with income ratios of 2:4:4 for Granger Noble and Finn respectively. -Assume that as part of liquidation proceedings Granobfin sells its noncash assets for $360000. As a result one of the partners has a capital deficiency which that partner decides not to repay. The amount of cash that would ultimately be distributed to Finn would be

Which of the following statements is incorrect regarding partnership agreements?

Partners Cantor and Dickens have capital balances in a partnership of $160000 and $240000 respectively. They agree to share profits and losses as follows: As salaries \ 40,000 \ 48,000 As interest on capital at the beginning of the year 10\% 10\% Remaining profits or losses 50\% 50\% If income for the year was $200000 what will be the distribution of income to Dickens?

Prior to the distribution of cash to the partners the accounts of ABC Company are: Cash $35000 Acock Capital (Dr.) $5000 Buster Capital (Cr.) $25000 and Cutter Capital (Cr.) $15000. They share income on a 5:3:2 basis. Instructions Prepare entries to record (a) the absorption of Acock's capital deficiency by the other partners and (b) the distribution of cash to the partners with credit balances.

Brian and Sandy are forming a partnership. Brian will invest a truck with a book value of $10000 and a fair value of $14000. Sandy will invest a building with a book value of $30000 and a fair value of $42000 with a mortgage of $15000. At what amount should the building be recorded?

194 Elam Kamins and Rubio have capital balances of $150000 $100000 and $75000 respectively and their income ratios are 4:2:4. Instructions Record the withdrawal of Rubio from the partnership under each of the following assumptions: 1. Rubio is paid $75000 from partnership assets. 2. Rubio is paid $93000 from partnership assets. 3. Rubio is paid $60000 from partnership assets.

A hybrid form of business organization with certain features like a corporation is a(n)

The partner in a limited partnership that has unlimited liability is referred to as the

Partners Cantor and Dickens have capital balances in a partnership of $160000 and $240000 respectively. They agree to share profits and losses as follows: As salaries \ 40,000 \ 48,000 As interest on capital at the beginning of the year 10\% 10\% Remaining profits or losses 50\% 50\% If income for the year was $120000 what will be the distribution of income to Cantor?

A partnership is an association of no more than two persons to carry on as co-owners of a business for profit.

The partnership agreement between partners must be in writing.