Exam 12: Accounting for Partnerships

Ron and Linda are partners who share profits 60% and 40%. Their capital balances were both $90,000 before Kelly was admitted to the partnership. Kelly contributed $120,000 in cash to the partnership for a 30% interest. Instructions Compute the capital balances of Ron and Linda after Kelly is admitted to the partnership.

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

A hybrid form of business organization with certain features like a corporation is a(n)

Which of the following would not cause an increase in partnership capital?

Lance joins the partnership of Kubek and Musial by paying $30,000 in cash. If the net assets of the partnership are still the same amount after Lance has been admitted as a partner, then Lance

Partners Bob and Don have agreed to share profits and losses in an 80:20 ratio respectively, after Bob is allowed a salary allowance of $140,000 and Don is allowed a salary allowance of $70,000. If the partnership had net income of $140,000 for 2010, Don's share of the income would be

Northern Co. had beginning capital balances on January 1, 2010, as follows: Andy Golic $30,000 and Jim Carney $25,000. During the year, drawings were Golic $15,000 and Carney $8,000. Net income was $50,000, and the partners share income equally. Instructions Prepare the partners' capital statement for the year.

A partnership

The basis for dividing partnership net income or net loss is referred to as any of the following except the

A bonus to a new partner

Fink & Elston Co. reports net income of $34,000. The partnership agreement provides for annual salaries of $24,000 for Fink and $15,000 for Elston and interest allowances of $4,000 to Fink and $6,000 to Elston. Any remaining income or loss is to be shared 70% by Fink and 30% by Elston. Instructions Compute the amount of net income distributed to each partner.

The owners' equity statement for a partnership is called the

When a new partner's capital interest on the date of admittance is less than his or her investment in the firm, a ______________ results for the ______________ partner(s).

Ard, Ball, and Dole have partnership capital account balances of $400,000 each. Income and losses are shared equally. Dole agrees to sell three-fourths of his ownership interest to Ard for $350,000 and one-fourth to Ball for $125,000. Ard and Ball will use personal assets to purchase Dole's interest. The partnership's entry to record Dole's withdrawal from the partnership would be

Danny and Vicky are forming a partnership. Danny will invest a truck with a book value of $10,000 and a fair market value of $14,000. Vicky will invest a building with a book value of $30,000 and a fair market value of $42,000 with a mortgage of $15,000. At what amount should the building be recorded?

The liquidation of a partnership is a process containing the following steps: 1) Pay partnership liabilities in cash. 2) Allocate the gain or loss on realization to the partners on their income ratios. 3) Sell noncash assets for cash and recognize a gain or loss on realization. 4) Distribute remaining cash to partners on the basis of their remaining capital balances. Identify the proper sequencing of the steps in the liquidation process.

The personal assets, liabilities, and personal transactions of partners are excluded from the accounting records of the partnership.

Partners Don and Ron have agreed to share profits and losses in an 80:20 ratio respectively, after Don is allowed a salary allowance of $80,000 and Ron is allowed a salary allowance of $40,000. If the partnership had net income of $80,000 for 2010, Ron's share of the income would be

Santo Company and Renfro Company decide to merge their proprietorships into a partnership called Crestwood Company. The balance sheet of Renfro Company shows: The partners agree that the net realizable value of the receivables is $12,500 and that the fair market value of the equipment is $15,000. Instructions Indicate how the four accounts should appear in the opening balance sheet of the partnership.

Which of the following statements about partnerships is incorrect?