Exam 12: Accounting for Partnerships

Dailey Company at December 31 has cash $40,000, noncash assets $200,000, liabilities $110,000, and the following capital balances: Dickinson $90,000 and Meierhoff $40,000. The firm is liquidated, and $240,000 in cash is received for the noncash assets. Dickinson and Meierhoff income ratios are 60% and 40%, respectively. Instructions Prepare a cash distribution schedule.

The income earned by a partnership will always be greater than the income earned by a proprietorship because in a partnership there is more than one owner contributing to the success of the business.

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 $180,000, the amount distributed to Nieto should be:

The Raney and Kiser partnership agreement stipulates that profits and losses will be shared equally after salary allowances of $160,000 for Raney and $80,000 for Kiser. At the beginning of the year, Raney's Capital account had a balance of $320,000, while Kiser' Capital account had a balance of $280,000. Net income for the year was $200,000. The balance of Kiser' Capital account at the end of the year after closing is

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 $390,000 and creditors are paid in full, what is the amount of cash that can be safely distributed to each partner?

The ABC Partnership is to be liquidated and you have been hired to prepare a Schedule of Cash Payments for the partnership. Partners Andie, Becka, and Candice share income and losses in the ratio of 4:3:3, respectively. Assume the following: 1. The noncash assets were sold for $75,000. 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:

Eberle and Lankton are partners who share income and losses in the ratio of 3:2, respectively. On August 31, their capital balances were: Eberle, $175,000 and Lankton, $150,000. On that date, they agree to admit Newman as a partner with a one-third capital interest. If Newman invests $200,000 in the partnership, what is Lankton's capital balance after Newman's admittance?

A partnership characteristic which enables each partner to act on behalf of the partnership when engaging in partnership business is called ______________.

Hoy, Lever, and Stone share income on a 6:3:1 basis. They have capital balances of $80,000, $60,000, and $45,000, respectively, when Morton is admitted to the partnership. Instructions Prepare the journal entry to record the admission of Morton into the partnership if Morton purchases one-half of Hoy's equity for $45,000; one-half of Lever's equity for $22,000; and one-third of Stone 's equity for $18,000.

When a partnership interest is purchased

The capital accounts indicate each partner's ______________ investment, while the partner's drawing accounts are ______________ owner's equity accounts.

In liquidation, balances prior to the distribution of cash to the partners are: Cash $255,000; Presley, Capital $140,000; Laswell, Capital $130,000, and Hunter, Capital $15,000 deficiency. The income ratio is 6:2:2, respectively. How much cash should be distributed to Laswell if Hunter does not pay his deficiency?

The partnership form of business is

The Partners' Capital Statement for the United Center reported the following information in total: The partnership has three partners: Kent, Hall, and Penn with ending capital balances in a ratio 40:20:40. What are the respective ending balances of the three partners?

Drift and Wood are discussing how income and losses should be divided in a partnership they plan to form. What factors should be considered in determining the division of net income or net loss?

In the liquidation of a partnership, the gains and losses from assets sold are

Total partners' equity of a partnership is equal to the sum of all partners' capital account balances.

Limited partnerships

On November 30, capital balances are Gast $120,000, Cook $100,000 and Irving $100,000. The income ratios are 20%, 20% and 60% respectively. Gast decides to retire from the partnership. The partnership pays Gast $100,000 cash for her partnership interest. After Gast's retirement, what is the balance of Irving's capital account?

A major advantage of the partnership form of organization is that the partners have unlimited liability.