Exam 16: Partnerships - Formation,operations,and Changes in Ownership Interests

On July 1,2011,Joe,Kline,and Lama began a partnership in which Joe and Kline each contributed cash of $200,000;and Lama contributed property with a fair value of $100,000 and a tax basis $150,000.Joe receives a 10% bonus of partnership income.Kline and Lama receive salaries of $40,000 each.The partnership agreement of Joe,Kline,and Lama provides that all partners receive 5% interest on capital and that profits and losses of the remaining income be distributed to Joe,Kline,and Lama by a 1:1:3 ratio. Required: Prepare a schedule to distribute $225,000 of partnership net income to the partners.

Use the following information to answer the question(s)below. Alfred and Barne share profits and losses in a ratio of 2:3,respectively,after salary allowances,interest allowances and bonus allocations.Alfred and Barne receive salary allowances of $30,000 and $60,000,respectively,and both partners receive 10% interest based upon the balance in their capital accounts on January 1.Partners' drawings are not used in determining the average capital balances.Total net income for 2011 is $180,000.If net income after deducting the interest and salary allocations is more than $60,000,Barne receives a bonus of 5% of the original amount of net income. -What is the total amount for the allocation of interest,salary,and bonus,and how much over-allocation is present?

A summary balance sheet for the Sissy,Jody,and Buffy partnership on December 31,2011 is shown below.Partners Sissy,Jody,and Buffy allocate profit and loss in their respective ratios of 3:4:6.The partnership agreed to pay Buffy $360,000 for her partnership interest upon her retirement from the partnership on January 1,2012.Any payments exceeding Buffy's capital balance are treated as a bonus from partners Sissy and Jody. Required: Prepare the journal entry to reflect Buffy's retirement.

A summary balance sheet for the partnership of Maddy,Nelson and Olsen on December 31,2011 is shown below.Partners Maddy,Nelson and Olsen allocate profit and loss in their respective ratios of 9:6:10. The partners agree to admit Poosh for a one-tenth interest.The fair market value for partnership land is $180,000,and the fair market value of the inventory is $150,000. Required: 1.Record the entry to revalue the partnership assets prior to the admission of Poosh. 2.Calculate how much Poosh will have to invest to acquire a 10% interest. 3.Assume the partnership assets are not revalued.If Poosh paid $200,000 to the partnership in exchange for a 10% interest,what is the bonus that is allocated to each partner's capital account?

Use the following information to answer the question(s)below. Adam,Bella,and Chris operate a partnership with a complex profit and loss sharing agreement.The average capital balance for Adam,Bella and Chris on December 31,2011 is $120,000,$270,000,and $340,000,respectively.A 6% interest allocation is provided to each partner based on the average capital balance on December 31,2011.Adam and Bella receive salary allocations of $40,000 and $50,000,respectively.If partnership net income is above $160,000,after the salary allocations are considered (but before the interest allocations are considered),Chris will receive a bonus of 10% of the income (pre-salary and interest,but net of the bonus).All residual income is allocated in the ratios of 2:2:6 to Adam,Bella,and Chris,respectively. -Required: 1.Prepare a schedule to allocate income or loss to the partners assuming that the partnership incurs a net loss of $26,200 for 2011. 2.Prepare a journal entry to distribute the partnership's loss to the partners (assume that an Income Summary account is used by the partnership).

The Leo,Mark and Natalie Partnership had the following capital balances and profit/loss sharing percentages: Newsome is going to buy into the partnership by paying $200,000 for a 20% ownership in the partnership. Required: 1.If Newsome pays the partnership directly,what are the four partner capital balances immediately following Newsome's admission to the partnership using the bonus method? Assume the partnership assets are not revalued. 2.If Newsome pays the partnership directly,what are the four partner capital balances immediately following Newsome's admission to the partnership using the goodwill method? Assume the partnership assets are revalued.The $200,000 amount paid by Newsome is fair value for a 20% share of the partnership.

Partnerships

A summary balance sheet for the Akerly,Baskin,and Crow partnership on December 31,2011 is shown below.Partners Akerly,Baskin,and Crow allocate profit and loss in their respective ratios of 3:2:1.The partnership agreed to pay partner Baskin $500,000 for his partnership interest upon his retirement from the partnership on January 1,2012.The partnership financials on January 1,2012 are: Required: Prepare the journal entry to reflect Baskin's retirement from the partnership: 1.Assuming a bonus to Baskin. 2.Assuming a revaluation of total partnership capital based on excess payment. 3.Assuming goodwill equal to the excess payment is recorded.

Under the Uniform Partnership Act,loans made by a partner to the partnership are treated as

A partner assigned his partnership interest to a third party.Which statement best describes the legal ramifications to the assignee?

Use the following information to answer the question(s)below. Alfred and Barne share profits and losses in a ratio of 2:3,respectively,after salary allowances,interest allowances and bonus allocations.Alfred and Barne receive salary allowances of $30,000 and $60,000,respectively,and both partners receive 10% interest based upon the balance in their capital accounts on January 1.Partners' drawings are not used in determining the average capital balances.Total net income for 2011 is $180,000.If net income after deducting the interest and salary allocations is more than $60,000,Barne receives a bonus of 5% of the original amount of net income. -If the partnership experiences a net loss of $60,000 for the year,what will be the final net amount of profit or (loss)closed to each partner's capital account?

Use the following information to answer the question(s)below. A summary balance sheet for the Lemon,Mango,and Nobb partnership appears below.Lemon,Mango,and Nobb share profits and losses in a ratio of 2:3:5,respectively. The partners agree to admit Oran for a one-fifth interest.The fair market value of partnership land is appraised at $200,000 and the fair market value of inventory is $175,000.The assets are to be revalued prior to the admission of Oran and there is $30,000 of goodwill that attaches to the old partnership. -What will the profit and loss sharing ratios be after Oran's investment?

Use the following information to answer the question(s)below. Bertram and Ernest share profits and losses equally after salary and interest allowances.Bertram and Ernest receive salary allowances of $40,000 and $60,000,respectively,and both partners receive 10% interest on their average capital balances.Average capital balances are calculated at the beginning of each month,regardless of when additional capital contributions or permanent withdrawals are made subsequently within the month.Partners' drawings of $3,000 per month are not used in determining the average capital balances.Total net income for 2011 is $240,000. -If the average capital for Bertram and Ernest from the above information is $224,000 and $238,000,respectively,what will be the total amount of profit allocated to salary and interest distributions?

Use the following information to answer the question(s)below. A summary balance sheet for the Lemon,Mango,and Nobb partnership appears below.Lemon,Mango,and Nobb share profits and losses in a ratio of 2:3:5,respectively. The partners agree to admit Oran for a one-fifth interest.The fair market value of partnership land is appraised at $200,000 and the fair market value of inventory is $175,000.The assets are to be revalued prior to the admission of Oran and there is $30,000 of goodwill that attaches to the old partnership. -How much cash must Oran invest to acquire a one-fifth interest?

Use the following information to answer the question(s)below. Quincy has decided to retire from the partnership of Quincy,Robert,and Sam.The partnership will pay Quincy $400,000.Total partnership capital should be revalued based on the excess payment to Quincy.(Assume the book values of the assets listed below equals fair values. )A summary balance sheet for the Quincy,Robert,and Sam partnership appears below.Quincy,Robert,and Sam share profits and losses in a ratio of 1:1:3,respectively. -In a limited partnership,a general partner

In the Uniform Partnership Act,partners have I.mutual agency. II)unlimited liability.

Use the following information to answer the question(s)below. Bertram and Ernest share profits and losses equally after salary and interest allowances.Bertram and Ernest receive salary allowances of $40,000 and $60,000,respectively,and both partners receive 10% interest on their average capital balances.Average capital balances are calculated at the beginning of each month,regardless of when additional capital contributions or permanent withdrawals are made subsequently within the month.Partners' drawings of $3,000 per month are not used in determining the average capital balances.Total net income for 2011 is $240,000. -If the average capital balances for Bertram and Ernest are $200,000 and $240,000,what will the total partnership profit allocations be for Bertram and Ernest in 2011?

Use the following information to answer the question(s)below. Bertram and Ernest share profits and losses equally after salary and interest allowances.Bertram and Ernest receive salary allowances of $40,000 and $60,000,respectively,and both partners receive 10% interest on their average capital balances.Average capital balances are calculated at the beginning of each month,regardless of when additional capital contributions or permanent withdrawals are made subsequently within the month.Partners' drawings of $3,000 per month are not used in determining the average capital balances.Total net income for 2011 is $240,000. -What is the weighted-average capital for Bertram and Ernest in 2011?

Use the following information to answer the question(s)below. Alfred and Barne share profits and losses in a ratio of 2:3,respectively,after salary allowances,interest allowances and bonus allocations.Alfred and Barne receive salary allowances of $30,000 and $60,000,respectively,and both partners receive 10% interest based upon the balance in their capital accounts on January 1.Partners' drawings are not used in determining the average capital balances.Total net income for 2011 is $180,000.If net income after deducting the interest and salary allocations is more than $60,000,Barne receives a bonus of 5% of the original amount of net income. -Drawings