Exam 12: Accounting for Partnerships

Pat and Nicole formed Here & There as a limited liability company. Unless the member owners elect to be treated otherwise, the Internal Revenue Service will tax the LLC as:

Assets invested by a partner into a partnership become the property of the business.

Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000. -For the partnership, the amounts recorded for the building and for Fontaine's Capital account are:

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:

Brown invested $200,000 and Freeman invested $150,000 in a partnership. They agreed to 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 $205,000 in income are:

Leto and Duncan allow Gunner to purchase a 25% interest in their partnership for $30,000 cash. Gunner has exceptional talents that will enhance the partnership. Leto's and Duncan's capital account balances are $55,000 each. The partners have agreed to share income or loss equally. Prepare the general journal entry to record the admission of Lepley to the partnership.

In a Limited Partnership, there must be more than one general partner.

When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

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

Accounting procedures for both C corporations and S corporations are the same in all aspects.

The life of a partnership is ________ in duration.

If at the time of partnership liquidation, a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency, then that partner is entitled to share in the final distribution of cash.

A capital deficiency can arise from liquidation losses, excessive withdrawals before liquidation, or recurring losses in prior periods.

In closing the accounts at the end of a period, the partners' capital accounts are credited for their share of the partnership net income or debited for their share of the partnership loss.

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

Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $285,000, and Atkins' beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. Barber withdrew $90,000 during the year and Atkins withdrew $100,000. -What is Barber's ending equity?

Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. - If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Wheadon's capital account?

In a limited partnership the general partner has unlimited liability.

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:

Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. -If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Singer's capital account?