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

Use the following information to answer the question(s)below. Xavier,Young,and Zane operate a partnership with a complex profit and loss sharing agreement.The average capital balance for each partner on December 31,2014 is $300,000 for Xavier,$250,000 for Young,and $325,000 for Zane.An 8% interest allocation is provided to each partner based on the average capital balance on December 31,2014.Xavier and Young receive salary allocations of $10,000 and $15,000,respectively.If partnership net income is above $25,000,after the salary allocations are considered (but before the interest allocations are considered),Zane will receive a bonus of 10% of the original amount of net income.All residual income is allocated in the ratios of 2:3:5 to Xavier,Young,and Zane,respectively. -Required: 1.Prepare a schedule to allocate income to the partners assuming that partnership net income for 2014 is $250,000. 2.Prepare a journal entry to distribute the partnership's income to the partners (assume that an Income Summary account is used by the partnership).

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. -What goodwill will be recorded?

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. -Anna and Bess share partnership profits and losses at 60% and 40%,respectively.The partners agree to admit Cal into the partnership for a 50% interest in capital and earnings.Capital accounts immediately before the admission of Cal are: Required: 1.Prepare the journal entry(s)for the admission of Cal to the partnership assuming Cal invested $400,000 for the ownership interest,and that this is a fair price for that share of the partnership to be acquired.Cal paid the money directly to Anna and to Bess for 50% of each of their respective capital interests.The partnership records goodwill. 2.Prepare the journal entry(s)for the admission of Cal to the partnership assuming Cal invested $500,000 for the ownership interest.Cal paid the money to the partnership for a 50% interest in capital and earnings.Assume the valuation is based on the capital of the current partnership,which is fairly valued.The partnership records goodwill. 3.Prepare the journal entry(s)for the admission of Cal to the partnership assuming Cal invested $700,000 for the ownership interest,and that this is a fair price for that share of the partnership to be acquired.Cal paid the money to the partnership for a 50% interest in capital and earnings.The partnership records goodwill.

The profit and loss sharing agreement for the Jill,Kelly,and Lila partnership provides that each partner receives a bonus of 5% on the original amount of partnership net income if net income is above $25,000.Jill and Kelly receive a salary allowance of $7,500 and $10,500,respectively.Lila has an average capital balance of $260,000,and receives a 10% interest allocation on the amount by which her average capital account balance exceeds $200,000.Residual profits and losses are allocated to Jill,Kelly,and Lila in their respective ratios of 7:5:8. Required: Prepare a schedule to allocate $88,000 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 2014 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. 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. -The profit and loss sharing agreement for the Mason,Nell,and Odell partnership provides for a $15,000 salary allowance to Nell.Residual profits and losses are allocated 5:3:2 to Mason,Nell,and Odell,respectively.In 2013,the partnership recorded $120,000 of net income that was properly allocated to the partners' capital accounts.On January 25,2014,after the books were closed for 2013,Mason discovered that office equipment,purchased for $12,000 on December 29,2013,was recorded as office expense by the company bookkeeper. Required: Prepare the necessary correcting entry(s)for the partnership.

Use the following information to answer the question(s)below. Xavier,Young,and Zane operate a partnership with a complex profit and loss sharing agreement.The average capital balance for each partner on December 31,2014 is $300,000 for Xavier,$250,000 for Young,and $325,000 for Zane.An 8% interest allocation is provided to each partner based on the average capital balance on December 31,2014.Xavier and Young receive salary allocations of $10,000 and $15,000,respectively.If partnership net income is above $25,000,after the salary allocations are considered (but before the interest allocations are considered),Zane will receive a bonus of 10% of the original amount of net income.All residual income is allocated in the ratios of 2:3:5 to Xavier,Young,and Zane,respectively. -Required: 1.Prepare a schedule to allocate income or loss to the partners assuming that the partnership incurs a net loss of $36,000 for 2014. 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).

Daniel,Ethan,and Frank have a retail partnership business selling personal computers.The partners are allowed an interest allocation of 8% on their average capital.Capital account balances on the first day of each month are used in determining weighted average capital,regardless of additional partner investment or withdrawal transactions during any given month.Withdrawals of capital that are debited to the capital account are used in the average calculation.Partner capital activity for the year was: Required: Calculate weighted average capital for each partner,and determine the amount of interest that each partner will be allocated.Round all calculations to the nearest whole dollar.

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. -What partnership capital will Robert have after Quincy retires?

A summary balance sheet for the partnership of Maddy,Nelson and Olsen on December 31,2014 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. 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. -The profit and loss sharing agreement for the Tuttle,Upman,and Veer partnership provides for residual profits and losses to be allocated 2:3:6 to Tuttle,Upman,and Veer,respectively.In 2014,the partnership recorded $11,000 of net income that was properly allocated to the partners' capital accounts.On January 18,2015,after the books were closed for 2014,Tuttle discovered that the $16,500 payment for the partnership's liability and workers compensation insurance for 2015 was recorded as insurance expense when it was paid on December 28,2014. Required: Prepare the necessary correcting entry(s)for the partnership.

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 2014 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. -The XYZ partnership provides a 10% bonus to Partner Y that is based upon partnership income,after deduction of the bonus.If the partnership's income is $140,000,how much is Partner Y's bonus allocation?

A summary balance sheet for the Akerly,Baskin,and Crow partnership on December 31,2014 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 1,2015.The partnership financials on January 1,2015 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.

A summary balance sheet for the partnership of Quail,Rainne and Selma on December 31,2014 is shown below.Partners Quail,Rainne and Selma allocate profit and loss in their respective ratios of 6:3:1. The partners agree to admit Trask for a one-tenth interest.The fair market value for partnership land is $260,000,and the fair market value of the inventory is $370,000. Required: 1.Record the entry to revalue the partnership assets prior to the admission of Trask. 2.Calculate how much Trask will have to invest to acquire a 10% interest. 3.Assume the partnership assets are not revalued.If Trask paid $300,000 to the partnership in exchange for a 10% interest,what would be the bonus that is allocated to each partner's capital account?

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 2014 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 2014?

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 2014 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

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 2014 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 agreement provides a formula for the computation of a bonus to the partners,the bonus would be computed

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. -On July 1,2014,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.

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