Exam 12: Accounting for Partnerships

D. Dieker purchases a 25% interest for $30,000 when the Reeves, Porter, Kiner partnership has total capital of $270,000. Prior to the admission of Dieker, each partner has a capital balance of $90,000. Each partner relinquishes an equal amount of his capital balance to Dieker. The amount to be relinquished by Kiner is

The liquidation of a partnership means that a new partner has been admitted to the partnership.

A partner's share of net income is recognized in the accounts through

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

Pinella (beginning capital, $80,000) and H. Johnston (beginning capital $120,000) are partners. During 2010, the partnership earned net income of $90,000, and Pinella made drawings of $24,000 while Johnston made drawings of $32,000. Instructions (a) Assume the partnership income-sharing agreement calls for income to be divided 45% to Pinella and 55% to Johnston. Prepare the journal entry to record the allocation of net income. (b) Assume the partnership income-sharing agreement calls for income to be divided with a salary of $40,000 to Pinella and $35,000 to Johnston, with the remainder divided 45% to Pinella and 55% to Johnston. Prepare the journal entry to record the allocation of net income. (c) Assume the partnership income-sharing agreement calls for income to be divided with a salary of $55,000 to Pinella and $45,000 to Johnston, interest of 10% on beginning capital, and the remainder divided 50%-50%. Prepare the journal entry to record the allocation of net income. (d) Compute the partners' ending capital balances under the assumption in part (c).

The partners' income and loss sharing ratio is 2:3:5, respectively. If the Cindi, Jenni, and Becki Partnership is liquidated by selling the noncash assets for $750,000, and creditors are paid in full, what is the total amount of cash that Cindi will receive in the distribution of cash to partners?

Partnership income is shared in proportion to each partner's capital equity interest unless the partnership contract specifically indicates the manner in which net income or net loss is to be divided.

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

The financial statements of a partnership are similar to those of a proprietorship.

Identify and explain the principal characteristics of the partnership form of business organization.

L. Trevino and B. Hogan combine their individual sole proprietorships to start the Trevino-Hogan partnership. L. Trevino and B. Hogan invest in the partnership as follows: The entries to record the investment will include a credit to:

The Butkus, Sayers, and Halas partnership is terminated when the claims of company creditors exceed partnership assets by $50,000. The capital balances for Butkus, Sayers, and Halas are $35,000, $5,000, and $0, respectively. The original claims of the creditors were negotiated by Sayers and Halas. Which partner(s) is(are) personally and individually liable for all partnership liabilities?

The individual assets invested by a partner in a partnership

Amber contributes, as part of her initial investment, accounts receivable with an allowance for doubtful accounts. Which of the following reflects a proper treatment?

The first step in the liquidation of a partnership is to

On November 30, capital balances are Howe $90,000, Doss $75,000 and Newlin $75,000. The income ratios are 20%, 20% and 60%, respectively. Howe decides to retire from the partnership. The partnership pays Howe $75,000 cash for her partnership interest. After Howe's retirement, what is the balance of Newlin's capital account?

A bonus to old partners results when the new partner's capital credit on the date of admittance is greater than his or her investment in the firm.

Bell and Herr sell 1/4 of their partnership interest to Ives receiving $200,000 each. At the time of admission, Bell and Herr each had a $350,000 capital balance. The admission of Ives will cause the net partnership assets to

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

The Frick & Frack Co. reports net income of $28,000. Interest allowances are Frick $3,000 and Frack $5,000; partner salary allowances are Frick $18,000 and Frack $10,000 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.