Exam 12: Accounting for Partnerships

A partner may receive interest on their partnership account.

The departing partner may have to pay a bonus to the partnership if the remaining partners are anxious to remove the partner.

The profit of the Busch and Ford partnership is $45,000. The partnership agreement specifies that profits and losses will be shared equally after salary allowances of $25,000 (Busch) and $10,000 (Ford) have been allocated. At the beginning of the year, Busch's Capital account had a balance of $50,000 and Ford's Capital account had a balance of $65,000. What is the balance of Ford's Capital account at the end of the year after profits and losses have been distributed?

Connie Knox and Andrea Cardoza have capital accounts of $360,000 and $280,000, respectively. Bob Lee and Mike McClure are to join the partnership. Lee invests $55,000 in the partnership for which he receives a capital credit of $55,000. McClure purchases a one-half interest from Knox for $230,000 and a one-fourth interest from Cardoza for $100,000. Instructions a. Prepare the journal entries to record the admission of Lee and McClure to the partnership. b. Determine the capital balances of the partners after the admission of Lee and McClure.

The RAD Partnership is to be liquidated when the ledger shows the following: Reed, Ales, and Dent's profit ratios are 6:3:1 respectively. Instructions Prepare separate entries to record the liquidation of the partnership assuming that the noncash assets are sold for $50,000 in cash.

On the financial statement of a partnership, a separate statement of the division of partnership profit or loss is prepared.

Travis, Jennifer, and Henry have partnership capital account balances of $150,000, $300,000 and $70,000, respectively. The profit sharing ratio is Travis, 50%; Jennifer, 40%; and Henry, 10%. Travis wishes to withdraw from the partnership and it is agreed that partnership assets of $120,000 will be used to pay Travis for her partnership interest. The balances of Jennifer's and Henry's Capital accounts after Travis's withdrawal would be

When profit is allocated in a 2:1 ratio, it means that one partner will get 2/3 of the profit.

Max Baer and Jimmy Choo are two proprietors who decide to merge their businesses into a partnership on January 1, 2014. The assets each contributed to the partnership are as follows: During the year ended December 31, 2014, the business, Bear-Chew Pet Services, had revenues of $180,000, rent expenses of $12,000, depreciation expense of $2,500, and other operating expenses of $8,400. Other than depreciation expense, all revenues and expenses incurred by the business were for cash. As well, cash of $7,500 was collected on the accounts receivable, with the remainder of the accounts receivable written off. The partnership agreement specifies that Max and Jimmy will share the partnership profit equally. During the year, Max withdrew $40,000 for personal use, and Jimmy withdrew $28,000. Instructions a. Prepare the journal entry to record the two partners' contributions on January 1, 2014. b. Prepare the partnership's income statement, statement of partners' equity, and balance sheet at December 31, 2014.

Barbara Elliott is one of the partners in Elliott & Wan. Her drawings during the year were $10,000. She made an additional capital investment of $5,000 and her share of the loss for the year was $2,000. Her ending capital balance was $40,000. What was Barbara's beginning capital balance?

Donna Karr, Alice Wright, and Nancy Shaffer have capital balances of $100,000, $70,000, and $50,000, respectively, and they share profit on a 4:3:3 basis. Instructions Journalize the withdrawal of Wright from the partnership under each of the following circumstances: a. Wright is paid $70,000 in cash from partnership assets. b. Wright is paid $77,000 in cash from partnership assets. c. Wright is paid $49,000 in cash from partnership assets.

The ABC Partnership is to be liquidated and you have been hired to prepare a Schedule of Cash Payments for the partnership. Partners A, B, and C share profit and losses in the ratio of 6:2:2 respectively. Assume the following: 1. Equipment was sold for $80,000. 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, calculate the following: a. Cash available to be distributed to all partners. b. Any gain or loss on sale of noncash assets. c. The amount of cash to be received by each partner upon liquidation.

Kelly Chaytor started the year with a capital balance of $28,000. During the year, her share of partnership profit was $16,000 and she withdrew $4,000 from the partnership for personal use. She made an additional capital contribution of $5,000 during the year. The amount of Kelly Chaytor's capital balance that will be reported on the year-end balance sheet will be