Exam 12: Accounting for Partnerships

In Taylor Co., capital balances are Oscor $60,000 and Glenda $75,000. The partners share income equally. Jared is admitted to the firm with a 40% interest by an investment of cash of $65,000. Journalize the admission of Jared.

Which of the following statements is correct?

Judy and Sue have partnership capital account balances of $600,000 and $450,000, respectively and share profits and losses equally. Sara is admitted to the partnership by investing $250,000 for a one-fourth ownership interest. The balance of Sue's Capital account after Sara is admitted is

Capital balances in Carson Co. are Donald $50,000, Anne $38,000, and Harry $25,000. The partners share income equally. Harry receives $35,000 from partnership assets in withdrawing from the firm. Instructions Journalize the withdrawal of Harry.

In a liquidation, the final distribution of cash to partners should be on the basis of their income ratios.

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. In order for Doss and Newlin to have equal capital interests after the retirement of Howe, how much partnership cash would have to be paid to Howe for her partnership interest?

The Mago Company at December 31 has cash $50,000, noncash assets $250,000, liabilities $138,000, and the following capital balances: Gonzalez $112,000 and Maldonado $50,000. The firm is liquidated, and $275,000 in cash is received for the noncash assets. Gonzalez and Maldonado income ratios are 60% and 40%, respectively. Instructions Prepare the entries to record: (a) The sale of noncash assets. (b) The allocation of the gain or loss on liquidation to the partners. (c) Payment of creditors. (d) Distribution of cash to the partners.

King and Otto are partners who share profits and losses equally and have capital balances of $560,000 and $490,000, respectively. Pitts is admitted into the partnership by investing $490,000 for a 30% capital interest. The account balance of Otto, Capital after the admission of Pitts would be

The net income of the Rice and Nance partnership is $180,000. The partnership agreement specifies that Rice and Nance have a salary allowance of $48,000 and $72,000, 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 $120,000. Any remaining net income or net loss is shared equally. What is the balance of Nance's Capital account at the end of the year after net income has been distributed?

Horton invests personally owned equipment, which originally cost $110,000 and has accumulated depreciation of $30,000 in the Horton and Matile partnership. Both partners agree that the fair market value of the equipment was $60,000. The entry made by the partnership to record Horton's investment should be

The most appropriate basis for dividing partnership net income when the partners do not plan to take an active role in daily operations is

The liquidation of a partnership

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

Jeff Lake started the year with a capital balance of $180,000. During the year, his share of partnership net income was $160,000 and he withdrew $30,000 from the partnership for personal use. He made an additional capital contribution of $50,000 during the year. The amount of Jeff Lake's capital balance that will be reported on the year-end balance sheet will be

If salary allowances and interest on capital are stipulated in the partnership profit and loss sharing agreement, they are implemented only if income is sufficient to cover the amounts required by these features.

If a partner invests noncash assets in a partnership, they should be recorded by the partnership at their fair market value.

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

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

The function of the Partners' Capital Statement is to explain the changes in partners' capital account balances during a period.

Which of the following statements about a partnership is correct?