Exam 12: Accounting for Partnerships

The partnership agreement of Nieto, Keller, and Pickert provides for the following income ratio: (a) Nieto, the managing partner, receives a salary allowance of $36,000, (b) each partner receives 15% interest on average capital investment, and (c) remaining net income or loss is divided equally. The average capital investments for the year were: Nieto $200,000, Keller $400,000, and Pickert $600,000. If partnership net income is $240,000, the amount distributed to Keller should be:

Eaton, Korman, and Roland have capital balances of $150,000, $100,000, and $75,000, respectively, and their income ratios are 4:2:4. Instructions Record the withdrawal of Roland from the partnership under each of the following assumptions: 1. Roland is paid $75,000 from partnership assets. 2. Roland is paid $90,000 from partnership assets. 3. Roland is paid $55,000 from partnership assets.

In a partnership, mutual agency means

Partnership income or loss need not be closed to partners' capital accounts each period because of the unlimited life characteristic of partnerships.

Use the following account balance information for Grinotfin Partnership with income ratios of 2:4:4 for Grigsby, Nott, and Fine, respectively. Assume that, as part of liquidation proceedings, Grinotfin sells its noncash assets for $120,000. 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 Fine would be:

Roper and Walton have partnership capital balances of $320,000 and $240,000, respectively. Walton negotiates to sell his partnership interest to Molle for $280,000. Roper agrees to accept Molle as a new partner. The partnership entry to record this transaction is

Dauber and Jackson decide to organize a partnership. Dauber invests $25,000 cash, and Jackson contributes $5,000 and equipment having a book value of $3,500 and a fair market value of $10,000. Instructions Prepare the entry to record each partner's investment.

When admitting a new partner by investment, a bonus to old partners

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

Ace, Goran, and Notte are forming The Acgono Partnership. Ace is transferring $45,000 of personal cash and equipment worth $38,000 to the partnership. Goran owns land worth $27,000 and a small building worth $112,000, which he transfers to the partnership. There is a long-term mortgage of $30,000 on the land and building, which the partnership assumes. Notte transfers cash of $10,000, accounts receivable of $54,000, supplies worth $5,000, and equipment worth $33,000 to the partnership. The partnership expects to collect $48,000 of the accounts receivable. Instructions Prepare a classified balance sheet for the partnership after the partner's investments on December 31, 2010.

All of the following are characteristics of partnerships except

Mark Bahr and Robert Engler decide to form a partnership. Bahr invests $25,000 cash and accounts receivable of $30,000 less allowance for doubtful accounts of $2,000. Engler contributes $20,000 cash and equipment having a $6,000 book value. It is agreed that the allowance account should be $3,000 and the fair market value of the equipment is $10,000. Instructions Prepare the necessary journal entry to record the formation of the partnership.

A bonus to a new partner will

A partner invests into a partnership a building with an original cost of $90,000 and accumulated depreciation of $40,000. This building has a $70,000 fair market value. As a result of the investment, the partner's capital account will be credited for

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

If a partner's investment in a partnership consists of equipment that has accumulated depreciation of $8,000, it would not be appropriate for the partnership to record the accumulated depreciation.

Mary, Jim, and Mike have partnership capital account balances of $225,000, $450,000 and $105,000, respectively. The income sharing ratio is Mary, 50%; Jim, 40%; and Mike, 10%. Mary desires to withdraw from the partnership and it is agreed that partnership assets of $195,000 will be used to pay Mary for her partnership interest. The balances of Jim's and Mike's Capital accounts after Mary's withdrawal would be

Which of the following is not an advantage of the partnership form of business?

The partners' drawing accounts are

Mary, Ann, and Tina formed a partnership with income-sharing ratios of 50%, 30%, and 20%, respectively. Cash of $300,000 was available after the partnership's assets were liquidated. Prior to the final distribution of cash, Mary's capital balance was $200,000, Ann's capital balance was $150,000, and Tina had a capital deficiency of $50,000. Assuming Tina contributes cash to match her capital deficiency, Mary should receive