Exam 12: Accounting for Partnerships

The Cliff and Saha partnership agreement stipulates that profits and losses will be shared equally after salary allowances of $80,000 for Cliff and $40,000 for Saha. At the beginning of the year, Cliff's capital account had a balance of $80,000, while Saha's capital account had a balance of $70,000. Profit for the year was $100,000. The balance of Saha's capital account at the end of the year after closing is

Salaries to partners and interest on partner's capital balances are expenses of the partnership.

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

When accounts receivable are contributed to a partnership, they are valued at their expected realizable value.

The admission of a new partner to an existing partnership from an existing partner

When a long-lived asset is contributed to a partnership by a partner, the entry will record the fair value of the asset and the accumulated depreciation which has accumulated on it.

The profit of the Miskell and Leblanc partnership is $30,000. The partnership agreement specifies that Miskell and Leblanc have a salary allowance of $8,000 and $12,000, 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 $20,000. Any remaining profit or loss is shared equally. -What is the balance of Leblanc's Capital account at the end of the year after profit has been distributed?

Partnership profit or loss must be divided equally in a partnership.

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 profit 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.

Which of the following is NOT a necessary action that the partnership must take upon the death of a partner?

As in a proprietorship, changes in capital for a partnership may result from three causes. Which one of the following is NOT a cause for change?

In a partnership, mutual agency means

All provinces in Canada have a Partnership Act that sets out the basic rules for the forming and operating of partnerships.

Which of the following is NOT a principal characteristic of the partnership form of business organization?

The admission of a new partner may result in a bonus to the new partner from the existing partners.

Partnership profit or loss must be divided according to the formulas which are outlined in the partnership agreement.

The Statement of Partners' Equity for the Allied Centre reported the following information in total: The partnership has three partners: Hum, Pippy, and Collis with ending capital balances in a ratio 40:20:40. What are the respective ending balances of the three partners?

Limited partnerships

A partnership agreement generally contains all of the following EXCEPT

A profit allocation in a partnership may be allocated in a different ratio than a loss allocation.