Question 1

During the closing process, partner's capital accounts are ________ for their share of net income and ________ for their share of net loss.

Accepted Answer

The answer of During the closing process, partner's capital accounts...

Question 2

Explain the steps involved in the liquidation of a partnership.

Accepted Answer

Four steps are involved in the liquidati

Question 3

Zheng invested $100,000 and Murray invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per year salary allowance to Murray, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns $105,000 in income are:

Accepted Answer

A)  $52,500 to Zheng; $52,500 to Murray. 
B)  $35,000 to Zheng; $70,000 to Murray. 
C)  $57,500 to Zheng; $47,500 to Murray. 
D)  $42,500 to Zheng; $62,500 to Murray. 
E)  $70,000 to Zheng; $60,000 to Murray. 
A)  $52,500 to Zheng; $52,500 to Murray. 
B)  $35,000 to Zheng; $70,000 to Murray. 
C)  $57,500 to Zheng; $47,500 to Murray. 
D)  $42,500 to Zheng; $62,500 to Murray. 
E)  $70,000 to Zheng; $60,000 to Murray.

Question 4

Fallon and Springer formed a partnership on January 1. Fallon contributed $90,000 cash and equipment with a market value of $60,000. Springer's investment consisted of: cash, $30,000; inventory, $20,000; all at market values. Partnership net income for Year 1 and Year 2 was $75,000 and $120,000, respectively.
1. Determine each partner's share of the net income for each year, assuming each of the following independent situations:
(a) Income is divided based on the partners' failure to sign an agreement.
(b) Income is divided based on a 2:1 ratio (Fallon: Springer).
(c) Income is divided based on the ratio of the partners' original capital investments.
(d) Income is divided based on interest allowance of 12% on the original capital investments; salary allowance to Fallon of $30,000 and Springer of $25,000; and the remainder to be divided equally.
2. Prepare the journal entry to record the allocation of the Year 1 income under alternative (d) above.

Accepted Answer

Part 1: Calculation of partners' capital

Question 5

Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $180,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Smart is investing $120,000 cash. The balance of Maxwell's Capital account will be:

Accepted Answer

A)  $180,000. 
B)  $124,000. 
C)  $56,000. 
D)  $64,000. 
E)  $60,000. 
A)  $180,000. 
B)  $124,000. 
C)  $56,000. 
D)  $64,000. 
E)  $60,000.

Question 6

A capital deficiency means that:

Accepted Answer

A)  The partnership has a loss. 
B)  The partnership has more liabilities than assets. 
C)  At least one partner has a debit balance in his/her capital account. 
D)  At least one partner has a credit balance in his/her capital account. 
E)  The partnership has been sold at a loss. 
A)  The partnership has a loss. 
B)  The partnership has more liabilities than assets. 
C)  At least one partner has a debit balance in his/her capital account. 
D)  At least one partner has a credit balance in his/her capital account. 
E)  The partnership has been sold at a loss.

Question 7

Zheng invested $100,000 and Murray invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per year salary allowance to Murray, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Assuming net income for the current year is $105,000, the journal entry to allocate net income is:

Accepted Answer

A)  Debit Income Summary, $105,000; Credit Zheng, Capital, $52,500, Credit Murray, Capital, $52,500. 
B)  Debit Income Summary, $105,000; Credit Zheng, Capital, $35,000, Credit Murray, Capital, $70,000. 
C)  Debit Income Summary, $105,000; Credit Zheng, Capital, $57,500, Credit Murray, Capital, $47,500. 
D)  Debit Income Summary, $105,000; Credit Zheng, Capital, $42,500, Credit Murray, Capital, $62,500. 
E)  Debit Zheng, Capital, $57,500, Debit Murray, Capital, $47,500; Credit Income Summary, $105,000; 
A)  Debit Income Summary, $105,000; Credit Zheng, Capital, $52,500, Credit Murray, Capital, $52,500. 
B)  Debit Income Summary, $105,000; Credit Zheng, Capital, $35,000, Credit Murray, Capital, $70,000. 
C)  Debit Income Summary, $105,000; Credit Zheng, Capital, $57,500, Credit Murray, Capital, $47,500. 
D)  Debit Income Summary, $105,000; Credit Zheng, Capital, $42,500, Credit Murray, Capital, $62,500. 
E)  Debit Zheng, Capital, $57,500, Debit Murray, Capital, $47,500; Credit Income Summary, $105,000;

Question 8

Harvey and Quick have decided to form a partnership. Harvey 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 Harvey 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, Harvey's beginning equity balance in the partnership will be:

Accepted Answer

A)  $76,000 
B)  $36,000 
C)  $18,000 
D)  $27,000 
E)  $45,000 
A)  $76,000 
B)  $36,000 
C)  $18,000 
D)  $27,000 
E)  $45,000

Question 9

When a partner leaves a partnership, the present partnership ends.

Accepted Answer

A) True 
 B)False

Question 10

What factors should be considered before establishing a partnership?

Accepted Answer

Anyone considering forming a partnership

Question 11

Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. Wallace sold one-half of his partnership interest to Prince for $55,000 when his capital balance was $78,000. The partnership would record the admission of Prince into the partnership as:

Accepted Answer

A)  Debit Wallace, Capital $55,000; credit Prince, Capital $55,000. 
B)  Debit Wallace, Capital $39,000; credit Prince, Capital $39,000. 
C)  Debit Prince, Capital $55,000; credit Wallace, Capital $55,000. 
D)  Debit Wallace, Capital $30,000; credit Prince, Capital $30,000. 
E)  Debit Wallace, Capital $39,000; debit Cash $16,000; credit Prince, Capital $55,000. 
A)  Debit Wallace, Capital $55,000; credit Prince, Capital $55,000. 
B)  Debit Wallace, Capital $39,000; credit Prince, Capital $39,000. 
C)  Debit Prince, Capital $55,000; credit Wallace, Capital $55,000. 
D)  Debit Wallace, Capital $30,000; credit Prince, Capital $30,000. 
E)  Debit Wallace, Capital $39,000; debit Cash $16,000; credit Prince, Capital $55,000.

Question 12

Partners are taxed on their withdrawals, not on their share of partnership income.

Accepted Answer

A) True 
 B)False

Question 13

Darien and Hayden agree to accept Kevin into their partnership. Kevin will contribute $22,000 in cash. Prepare the journal entry to record this transaction.

Accepted Answer

Cash 22,00

Question 14

When a partnership is liquidated:

Accepted Answer

A)  Noncash assets are distributed to partners. 
B)  Any gain or loss on liquidation is allocated to the partner with the highest capital account balance. 
C)  Liabilities are paid or settled. 
D)  Any remaining cash is distributed to the partners equally. 
E)  The business may continue to operate. 
A)  Noncash assets are distributed to partners. 
B)  Any gain or loss on liquidation is allocated to the partner with the highest capital account balance. 
C)  Liabilities are paid or settled. 
D)  Any remaining cash is distributed to the partners equally. 
E)  The business may continue to operate.

Question 15

A relatively new form of business organization that protects partners with limited liability, allows limited partners to assume an active management role, and is taxed as a partnership is a ________.

Accepted Answer

limited li

Question 16

The income or loss of a partnership is allocated to the partners according to the partnership agreement, and it is included in determining the taxable income for each partner's tax return.

Accepted Answer

A) True 
 B)False

Question 17

Carter Pearson is a partner in Event Promoters. His beginning partnership capital balance for the current year is $55,000, and his ending partnership capital balance for the current year is $62,000. His share of this year's partnership income was $6,250. What is his partner return on equity?

Accepted Answer

A)  5.34% 
B)  8.93% 
C)  10.08% 
D)  11.36% 
E)  10.68% 
A)  5.34% 
B)  8.93% 
C)  10.08% 
D)  11.36% 
E)  10.68%

Question 18

Identify and discuss the key characteristics of partnerships. Also, identify other organizations that possess partnership characteristics.

Accepted Answer

Partnerships are unincorporated associat

Question 19

Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. The partnership had income of $150,000 for its first year of operation. When the Income Summary is closed, the journal entry to allocate partner income is:

Accepted Answer

A)  Debit Income Summary $150,000; credit Wallace, Capital $75,000; credit Simpson, Capital $75,000. 
B)  Debit Wallace, Capital $75,000; debit Simpson, Capital $75,000; credit Income Summary $150,000. 
C)  Debit Income Summary $150,000; credit Wallace, Capital $90,000; credit Simpson, Capital $60,000. 
D)  Debit Cash $150,000; credit Wallace, Capital $90,000; credit Simpson, Capital $60,000. 
E)  Debit Wallace, Capital $90,000; debit Simpson, Capital $60,000; credit Cash $150,000. 
A)  Debit Income Summary $150,000; credit Wallace, Capital $75,000; credit Simpson, Capital $75,000. 
B)  Debit Wallace, Capital $75,000; debit Simpson, Capital $75,000; credit Income Summary $150,000. 
C)  Debit Income Summary $150,000; credit Wallace, Capital $90,000; credit Simpson, Capital $60,000. 
D)  Debit Cash $150,000; credit Wallace, Capital $90,000; credit Simpson, Capital $60,000. 
E)  Debit Wallace, Capital $90,000; debit Simpson, Capital $60,000; credit Cash $150,000.

Question 20

An unincorporated association of two or more persons to pursue a business for profit as co-owners is a:

Accepted Answer

A)  Partnership. 
B)  Proprietorship. 
C)  Contractual company. 
D)  Mutual agency. 
E)  Voluntary organization. 
A)  Partnership. 
B)  Proprietorship. 
C)  Contractual company. 
D)  Mutual agency. 
E)  Voluntary organization.

During the closing process, partner's capital accounts are for their share of net income and for their share of net loss.

Explain the steps involved in the liquidation of a partnership.

Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $180,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Smart is investing $120,000 cash. The balance of Maxwell's Capital account will be:

A capital deficiency means that:

When a partner leaves a partnership, the present partnership ends.

What factors should be considered before establishing a partnership?

Partners are taxed on their withdrawals, not on their share of partnership income.

Darien and Hayden agree to accept Kevin into their partnership. Kevin will contribute $22,000 in cash. Prepare the journal entry to record this transaction.

When a partnership is liquidated:

A relatively new form of business organization that protects partners with limited liability, allows limited partners to assume an active management role, and is taxed as a partnership is a ________.

The income or loss of a partnership is allocated to the partners according to the partnership agreement, and it is included in determining the taxable income for each partner's tax return.

Carter Pearson is a partner in Event Promoters. His beginning partnership capital balance for the current year is $55,000, and his ending partnership capital balance for the current year is $62,000. His share of this year's partnership income was $6,250. What is his partner return on equity?

Identify and discuss the key characteristics of partnerships. Also, identify other organizations that possess partnership characteristics.

An unincorporated association of two or more persons to pursue a business for profit as co-owners is a:

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Cost Behavior Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Analyzing for Business Transactions

Filters

Exam 16: Partnership Accounting

During the closing process, partner's capital accounts are ________ for their share of net income and ________ for their share of net loss.

Explain the steps involved in the liquidation of a partnership.

Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $180,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Smart is investing $120,000 cash. The balance of Maxwell's Capital account will be:

A capital deficiency means that:

When a partner leaves a partnership, the present partnership ends.

What factors should be considered before establishing a partnership?

Partners are taxed on their withdrawals, not on their share of partnership income.

Darien and Hayden agree to accept Kevin into their partnership. Kevin will contribute $22,000 in cash. Prepare the journal entry to record this transaction.

When a partnership is liquidated:

A relatively new form of business organization that protects partners with limited liability, allows limited partners to assume an active management role, and is taxed as a partnership is a ________.

The income or loss of a partnership is allocated to the partners according to the partnership agreement, and it is included in determining the taxable income for each partner's tax return.

Carter Pearson is a partner in Event Promoters. His beginning partnership capital balance for the current year is $55,000, and his ending partnership capital balance for the current year is $62,000. His share of this year's partnership income was $6,250. What is his partner return on equity?

Identify and discuss the key characteristics of partnerships. Also, identify other organizations that possess partnership characteristics.

An unincorporated association of two or more persons to pursue a business for profit as co-owners is a:

Managerial Accounting Concepts and Principles

Job Order Costing and Analysis

Process Costing and Analysis

Activity Based Costing and Analysis

Cost Behavior Cost-Volume-Profit Analysis

Variable Costing and Analysis

Master Budgets and Performance Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Relevant Costing for Managerial Decisions

Capital Budgeting and Investment Analysis

Reporting Cash Flows

Analysis of Financial Statements

Time Value of Money

Analyzing for Business Transactions

Filters

During the closing process, partner's capital accounts are for their share of net income and for their share of net loss.