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

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.

The death of a partner results in a dissociation and requires a settlement with the estate of the deceased partner.

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. 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. 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. -By how much will the capital accounts of Lemon,Mango,and Nobb increase,respectively,due to the revaluation of the assets and the recognition of goodwill?

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. Permanent withdrawals of capital: Additional investments of capital: -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?

Under a partnership,each partner has mutual agency and limited liability.

Austin contributes his computer equipment to the landscaping partnership he starts with Bentley.At what amount should the computer equipment be credited to Austin's partnership capital?

Partnerships do not pay federal taxes but must submit financial information to the IRS.

Required: 1.Prepare a schedule to allocate income to the partners assuming that partnership net income for 2014 is $330,000. 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).

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).

A limited partnership involves at least one limited partner who is an investor whose risk is limited to his equity investment in the partnership.

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?

The dissolution of a partnership involves selling off the assets,settling liabilities,and distributing the proceeds to the partners.

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?

Dan and Ellie share partnership profits and losses at 70% and 30%,respectively.The partners agree to admit Fran into the partnership for a 50% interest in capital and earnings.Capital accounts immediately before the admission of Fran are: Required: 1.Prepare the journal entry(s)for the admission of Fran to the partnership assuming Fran invested $800,000 for the ownership interest,and that this is a fair price for that share of the partnership to be acquired.Fran paid the money directly to Dan and to Ellie for 50% of each of their respective capital interests.The partnership records goodwill. 2.Prepare the journal entry(s)for the admission of Fran to the partnership assuming Fran invested $1,000,000 for the ownership interest.Fran 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 Fran to the partnership assuming Fran invested $1,400,000 for the ownership interest,and that this is a fair price for that share of the partnership to be acquired.Fran paid the money to the partnership for a 50% interest in capital and earnings.The partnership records goodwill.

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.

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. Assets Equities 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?

When partners withdraw money on a weekly basis it can be referred to a drawing allowance which requires a debit to the drawing 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. Permanent withdrawals of capital: Additional investments of capital: -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?