Exam 12: Accounting for Partnerships

If a partner has a capital deficiency and does not have the personal resources to eliminate it

If a partner with a capital deficiency is unable to pay the amount owed to the partnership the deficiency is allocated to the partners with credit balances

Hu Marcos and Letterman share income on a 6:3:1 basis. They have capital balances of $80000 $60000 and $45000 respectively when Buffett is admitted to the partnership. Instructions Prepare the journal entry to record the admission of Buffett into the partnership if Buffett purchases one-half of Hu's equity for $45000; one-half of Marcos's equity for $22000; and one-third of Letterman's equity for $18000.

Actor Brees and Cotswald are forming The ABC Partnership. Actor is transferring $40000 of personal cash and equipment worth $38000 to the partnership. Brees owns land worth $27000 and a small building worth $112000 which he transfers to the partnership. There is a long-term mortgage of $40000 on the land and building which the partnership assumes. Cotswald transfers cash of $10000 accounts receivable of $54000 supplies worth $5000 and equipment worth $28000 to the partnership. The partnership expects to collect $48000 of the accounts receivable. Instructions Prepare a classified balance sheet for the partnership after the partner's investments on December 31 2017.

Capital balances in Carson Co. are Dene $50000 Aneta $38000 and Harriet $25000. The partners share income equally. Harriet receives $31000 from partnership assets in withdrawing from the firm. Instructions Journalize the withdrawal of Harriet.

Partners Gary and Elaine have agreed to share profits and losses in an 80:20 ratio respectively after Gary is allowed a salary allowance of $30000 and Elaine is allowed a salary allowance of $15000. If the partnership had net income of $30000 for 2017 Elaine's share of the income would be

On November 30 capital balances are Ross $300000 Ellis $250000 and Gise $250000. The income ratios are 20% 20% and 60% respectively. Ross decides to retire from the partnership. In order for Ellis and Gise to have equal capital interests after the retirement of Ross how much partnership cash would have to be paid to Ross for her partnership interest?

The ABC Partnership is to be liquidated and you have been hired to prepare a Schedule of Cash Payments for the partnership. Partners Alexa Bitsy and Coco share income and losses in the ratio of 4:3:3 respectively. Assume the following: 1. The noncash assets were sold for $70000. 2. Liabilities were paid in full. 3. The remaining cash was distributed to the partners. (If any partner has a capital deficiency assume that the partner is unable to make up the capital deficiency.) Instructions Using the above information complete the Schedule of Cash Payments below:

The partners' drawing accounts are

M. Abadie and S. Collier combine their individual sole proprietorships to start the Abadie - Collier partnership. M. Abadie and S. Collier invest in the partnership as follows The entries to record the investment will include a credit to:

If a new partner is admitted into a partnership by investment the total assets and total capital will change.

Which of the following statements about partnerships is incorrect?

Elkins and Landry are partners who share income and losses in the ratio of 3:2 respectively. On August 31 their capital balances were: Elkins $140000 and Landry $120000. On that date they agree to admit Neumark as a partner with a one-third capital interest. If Neumark invests $100000 in the partnership what is Elkins's capital balance after Neumark's admittance?

The distribution of cash to partners in a partnership liquidation is always made based on the partners' income sharing ratio.

The withdrawal of a partner legally dissolves the partnership.

All of the following are characteristics of partnerships except

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. What amount should be recorded in Brian's capital account?

The net income of the Crowe and Browning partnership is $450000. The partnership agreement specifies that Crowe and Browninghave a salary allowance of $120000 and $180000 respectively. The partnership agreement also specifies an interest allowance of 10% on capital balances at the beginning of the year. Each partner had a beginning capital balance of $300000. Any remaining net income or net loss is shared equally. What is Crowe's share of the $450000 net income?

A debit balance in a partner's capital account is called a _____________.

The adjusted trial balance of the Ricci and Napoli Partnership for the year ended December 31 2017 appears below: The partnership agreement stipulates that a division of partnership net income or net loss is to be made as follows: 1. A salary allowance of $12000 to Ricci and $23000 to Napoli. 2. The remainder is to be divided equally. Instructions (a) Prepare a schedule which shows the division of net income to each partner. (b) Prepare the closing entries for the division of net income and for the drawings accounts at December 31 2017.