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

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.

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 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).

Partnerships

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).

A summary balance sheet for the Uma,Van,and Walter partnership on December 31,2014 is shown below.Partners Uma,Van,and Walter allocate profit and loss in their respective ratios of 4:5:7.The partnership agreed to pay Walter $227,500 for his partnership interest upon his retirement from the partnership on January 1,2015.Any payments exceeding Walter's capital balance are treated as a bonus from partners Uma and Van. Assets Equities Required: Prepare the journal entry to reflect Walter's retirement.

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.

In a limited partnership,a general partner

On February 1,2014,George,Hamm,and Ishmael began a partnership in which George and Ishmael each contributed cash of $25,000; and Hamm contributed property with a fair value of $50,000 and a tax basis $40,000.Hamm receives a 5% bonus of partnership income.George and Ishmael receive salaries of $10,000 each.The partnership agreement of George,Hamm,and Ishmael provides that all partners receive 5% interest on capital,and that profits and losses of the remaining income be distributed to George,Hamm,and Ishmael by a 1:3:1 ratio. Required: Prepare a schedule to distribute $25,000 of partnership net income to the partners.

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. Assets Equities 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?

When a partner dissociates from the partnership,the partnership operation is terminated.

A summary balance sheet for the Sissy,Jody,and Buffy partnership on December 31,2014 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 1,2015.Any payments exceeding Buffy's capital balance are treated as a bonus from partners Sissy and Jody. Assets Equities Required: Prepare the journal entry to reflect Buffy's retirement.

When property is invested in the partnership,it is recorded at fair value.

Which of the following is a reason to use a partnership as the legal form of a business?

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

Drawings

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

In the absence of a partnership agreement,profit sharing is based on partner contribution.

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?

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.

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. -What is the total amount for the allocation of interest,salary,and bonus,and how much over-allocation is present?