Exam 12: Accounting for Partnerships

The life of a partnership is ____________________ in duration.

What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.

A bonus may be paid:

Suze and Bess formed the Suzy B Company by making capital contributions of $130,000 and $195,000 respectively.They predict annual partnership income of $230,000 and are considering the following alternative plans of sharing income and loss: (a)in the ratio of their initial capital investments; or (b)salary allowances of $40,000 to Suze and $35,000 to Bess; interest allowances of 12% on their initial capital investments; and the balance shared equally.Assuming that both partners put about the same amount of time into the business,which method of allocating income would be best?

Basketball Products LP is organized as a limited partnership that sells sporting equipment.Information related to the two partner's capital balances is given below.Compute the partner return on equity for each limited partner.How would each partner evaluate the success of the partnership? What would you recommend the partners do with respect to additional investments or withdrawals?

Armstrong withdraws from the FAP Partnership.The remaining partners agree to buy out her share for her capital balance of $35,000.Prepare the journal entry to record the withdrawal from the partnership.

Mack,Harris,and Huss are dissolving their partnership.Their partnership agreement allocates income and losses equally among the partners.The current period's ending capital account balances are Mack,$15,000; Harris,$15,000; Huss,$(2,000).After all the assets are sold and liabilities are paid,but before any contributions to cover any deficiencies,there is $28,000 in cash to be distributed.Huss pays $2,000 to cover the deficiency in his account.The general journal entry to record the final distribution would be:

A capital deficiency exists when all partners have a credit balance in their capital accounts.

What factors should be considered before establishing a partnership? What were some of the areas that the partners of Hunks and Junk focused on before and after forming their partnership?

Suze and Bess formed the Suzy B Company by making capital contributions of $130,000 and $195,000 respectively.The annual partnership income of $230,000 is to be allocated assuming a salary allowance of $40,000 to Suze and $35,000 to Bess; interest allowances of 12% on their initial capital investments; and the balance shared equally.Prepare the entries to record the initial capital investments,the allocation of net income,and close the partner's withdrawal accounts assuming that Suze withdrew $50,000 and Bess withdrew $55,000.

If partners agree on how to share income,but say nothing about losses,then losses are shared ___________________.

Trump and Hawthorne have decided to form a partnership.Trump is going to contribute a depreciable asset to the partnership as his equity contribution to the partnership.The following information regarding the asset to be contributed by Trump is available: Historical cost of the asset ………………… $76,000 Accumulated depreciation on the asset………………… $40,000 Note payable secured by the asset* ………………… $18,000 Agreed-upon market value of the asset ………………… $45,000 *will be assumed by the partnership Based on this information,Trump's beginning equity balance in the partnership will be:

When partners invest in a partnership,their capital accounts are credited for the amount invested.