Question 1

If the partners agree on a formula to share income and say nothing about losses, then the losses are shared using the same formula.

Accepted Answer

A) True 
 B)False

Question 2

When a partnership is liquidated:

Accepted Answer

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

Question 3

The statement of changes in partners' equity shows the beginning balance in retained earnings, plus investments, less withdrawals, plus the income (or less the loss) and the ending balance in retained earnings.

Accepted Answer

A) True 
 B)False

Question 4

__________implies that each partner in a partnership can be called on to personally pay a partnership's debts.

Accepted Answer

The answer of  __________implies that each partner in a...

Question 5

How are partners' investments in a partnership recorded?

Accepted Answer

When partners invest in a partnership, t

Question 6

The Redtail Partnership agrees to dissolve. The remaining cash balance after liquidating partnership assets and liabilities is $70,000. The final capital account balances are: Paulson,
$35,000; Gray, $25,000; and Chang, $10,000. Prepare the journal entry to distribute the remaining cash to the partners.

Accepted Answer

None

Question 7

Partner net income divided by average partner equity equals __________ .

Accepted Answer

Partner re

Question 8

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

(a) Since there is no agreement in place

Question 9

The following information is available on PDC Enterprises, a partnership, for the most recent fiscal year: $\begin{array}{llr}
  \text {Total partnership capital at beginning of the year  } &\$1,080,000\
 \text { Partnership net income for the year  } &\$1,250,000\
 \text {Withdrawals by partners during the year  } &\$320,000\
 \text { Additional investments by partners during the year } &\$70,000\
\end{array}$

There are three partners in TGR Enterprises: Pearson, Darling and Cathay. At the end of the year, the partners' capital accounts were in the ratio of 2:2:1, respectively. Compute the ending capital balances of Cathay.

Accepted Answer

A)  $544,000. 
B)  $416,000. 
C)  $402,000. 
D)  $466,000. 
E)  $388,000. 
A)  $544,000. 
B)  $416,000. 
C)  $402,000. 
D)  $466,000. 
E)  $388,000.

Question 10

Mesner's and Sanchez's company is organized as a partnership. At the prior year-end, Mesner's equity balance was $258,000 and Sanchez's was $212,000. For the current year, partnership net income is $125,000 ($75,000 allocated to Mesner and $50,000 allocated to Sanchez); withdrawals are $77,000 ($40,000 for Mesner and $37,000 for Sanchez). Compute the total partnership return on equity and the individual partner return on equity ratios.

Accepted Answer

Total partnership return on equity = Net

Question 11

Mutual agency means

Accepted Answer

A)  Partners are taxed on partnership withdrawals. 
B)  All partners must agree before the partnership can act. 
C)  A partner can commit or bind the partnership in any contract within the scope of the partnership business. 
D)  The partnership has a limited life. 
E)  Creditors can apply their claims to partners' personal assets. 
A)  Partners are taxed on partnership withdrawals. 
B)  All partners must agree before the partnership can act. 
C)  A partner can commit or bind the partnership in any contract within the scope of the partnership business. 
D)  The partnership has a limited life. 
E)  Creditors can apply their claims to partners' personal assets.

Question 12

Mace and Bowen are partners and share equally in income or loss. Mace's current capital balance is $135,000 and Bowen's is $120,000. Mace and Bowen agree to accept Kent with a 30% interest in the partnership. Kent invests $115,000 in the partnership.
- The amount credited to Kent's capital account is:

Accepted Answer

A)  $115,000. 
B)  $92,500. 
C)  $120,000. 
D)  $111,000. 
E)  $119,000. 
A)  $115,000. 
B)  $92,500. 
C)  $120,000. 
D)  $111,000. 
E)  $119,000.

Question 13

Kramer and Feldman Company is organized as a partnership. At the prior year-end, Kramer's equity balance was $352,000 and Feldman's was $256,000. For the current year, partnership net income is $137,000 ($77,000 allocated to Kramer and $60,000 allocated to Feldman); withdrawals are $87,000 ($45,000 for Kramer and $42,000 for Feldman). Compute the total partnership return on equity and the individual partner return on equity ratios.

Accepted Answer

Total partnership return on equity= Net

Question 14

Sharon and Nancy formed a partnership 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 Sharon and $35,000 to Nancy; 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?

Accepted Answer

@#IMG-DLM&Plan (b) would be the better d

Question 15

The following information is available on TGR Enterprises, a partnership, for the most recent fiscal year: Total partnership capital at beginning of the year $180,000 Partnership net income for the year $150,000
Withdrawals by partners during the year $120,000 Additional investments by partners during the year $ 60,000
There are three partners in TGR Enterprises: Tracey, Gregory and Rodgers. At the end of the year, the partners' capital accounts were in the ratio of 2:1:2, respectively. Compute the ending capital balances of the three partners.

Accepted Answer

A)  Tracey = $84,000; Gregory = $102,000; Rodgers = $84,000. 
B)  Tracey = $204,000; Gregory = $102,000; Rodgers = $204,000. 
C)  Tracey = $60,000; Gregory = $30,000; Rodgers = $60,000. 
D)  Tracey = $90,000; Gregory = $90,000; Rodgers = $90,000. 
E)  Tracey = $108,000; Gregory = $54,000; Rodgers = $108,000. 
A)  Tracey = $84,000; Gregory = $102,000; Rodgers = $84,000. 
B)  Tracey = $204,000; Gregory = $102,000; Rodgers = $204,000. 
C)  Tracey = $60,000; Gregory = $30,000; Rodgers = $60,000. 
D)  Tracey = $90,000; Gregory = $90,000; Rodgers = $90,000. 
E)  Tracey = $108,000; Gregory = $54,000; Rodgers = $108,000.

Question 16

Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage, $(5,000). After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency.
- The journal entry to record the distribution should be:

Accepted Answer

A)  Debit Cash $77,000, debit Gage, Capital $5,000, credit Henry, Capital $45,000, credit Luther, Capital $37,000. 
B)  Debit Cash $77,000; credit Henry, Capital $25,667; credit Luther, Capital $25,667; credit Gage, Capital $25,666. 
C)  Debit Henry, Capital $42,500; debit Luther, Capital $34,500; credit Cash $77,000. 
D)  Debit Henry, Capital $25,667; debit Luther, Capital $25,667; debit Gage, Capital $25,666; credit Cash $77,000. 
E)  Debit Henry, Capital $45,000; debit Luther, Capital $37,000; credit Gage, Capital $5,000; credit Cash $77,000. 
A)  Debit Cash $77,000, debit Gage, Capital $5,000, credit Henry, Capital $45,000, credit Luther, Capital $37,000. 
B)  Debit Cash $77,000; credit Henry, Capital $25,667; credit Luther, Capital $25,667; credit Gage, Capital $25,666. 
C)  Debit Henry, Capital $42,500; debit Luther, Capital $34,500; credit Cash $77,000. 
D)  Debit Henry, Capital $25,667; debit Luther, Capital $25,667; debit Gage, Capital $25,666; credit Cash $77,000. 
E)  Debit Henry, Capital $45,000; debit Luther, Capital $37,000; credit Gage, Capital $5,000; credit Cash $77,000.

Question 17

During the closing process, each partner's withdrawals account is closed to ________.

Accepted Answer

that partn

Question 18

Kramer and Jones allow Sanders to purchase a 25% interest in their partnership for $50,000 cash. Kramer and Jones both have capital balances of $55,000 each, and have agreed to share income and loss equally. Prepare the journal entry to record the admission of Sanders to the partnership.

Accepted Answer

None

Question 19

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a(n):

Accepted Answer

A)  Limited liability partnership. 
B)  Limited partnership. 
C)  General partnership. 
D)  Partnership. 
E)  Unlimited liability company. 
A)  Limited liability partnership. 
B)  Limited partnership. 
C)  General partnership. 
D)  Partnership. 
E)  Unlimited liability company.

Question 20

In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance:

Accepted Answer

A)  Is ignored when earnings are not sufficient to pay interest. 
B)  Can make up for unequal capital contributions. 
C)  Must be paid because the partnership contract has unlimited life. 
D)  Legally becomes a liability of the general partner. 
E)  Is an expense of the business. 
A)  Is ignored when earnings are not sufficient to pay interest. 
B)  Can make up for unequal capital contributions. 
C)  Must be paid because the partnership contract has unlimited life. 
D)  Legally becomes a liability of the general partner. 
E)  Is an expense of the business.

If the partners agree on a formula to share income and say nothing about losses, then the losses are shared using the same formula.

When a partnership is liquidated:

The statement of changes in partners' equity shows the beginning balance in retained earnings, plus investments, less withdrawals, plus the income (or less the loss) and the ending balance in retained earnings.

__________implies that each partner in a partnership can be called on to personally pay a partnership's debts.

How are partners' investments in a partnership recorded?

Partner net income divided by average partner equity equals __________ .

Mutual agency means

During the closing process, each partner's withdrawals account is closed to ________.

Kramer and Jones allow Sanders to purchase a 25% interest in their partnership for $50,000 cash. Kramer and Jones both have capital balances of $55,000 each, and have agreed to share income and loss equally. Prepare the journal entry to record the admission of Sanders to the partnership.

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a(n):

In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

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Exam 12: Accounting for Partnerships

If the partners agree on a formula to share income and say nothing about losses, then the losses are shared using the same formula.

When a partnership is liquidated:

The statement of changes in partners' equity shows the beginning balance in retained earnings, plus investments, less withdrawals, plus the income (or less the loss) and the ending balance in retained earnings.

__________implies that each partner in a partnership can be called on to personally pay a partnership's debts.

How are partners' investments in a partnership recorded?

Partner net income divided by average partner equity equals __________ .

Mutual agency means

During the closing process, each partner's withdrawals account is closed to ________.

Kramer and Jones allow Sanders to purchase a 25% interest in their partnership for $50,000 cash. Kramer and Jones both have capital balances of $55,000 each, and have agreed to share income and loss equally. Prepare the journal entry to record the admission of Sanders to the partnership.

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a(n):

In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance:

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets Natural Resoures and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Corporations

Long-Term Liabilities

Investments

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Present and Future Values in Accounting

Activity-Based Costing

Filters