Exam 17: Partnerships

When a partner withdraws from a partnership taking assets that represent less than his or her capital balance,

A, B, and C are partners who share profits and losses in a ratio of 3:1:2, respectively. C's Capital account has a $50,000 balance. A and B have agreed to let C take $62,000 of the company's cash when she retires. Prepare an entry in journal form without explanation to record C's exit, including the recognition of a bonus to C.

In a limited partnership

Which of the following methods of distributing income and losses cannot be accomplished (cannot stand alone)?

Jeb and Kelly divide partnership income and losses solely on the basis of their average capital balances. Jeb had $45,000 invested during all of 2010; Kelly had $30,000 invested from January 1 to September 30, and she invested another $20,000 on October 1. If income was $200,000 during 2010, how much should each partner receive?

Admission of a new partner never has an impact on net income.

A partnership is easy to form and to dissolve.

Ownership is easily transferred in a partnership.

An informational tax return must be filed for a partnership.

Income and losses are divided equally among the partners unless the partnership agreement specifies otherwise.

Tracy and Dennis are partners in a business. Tracy's original capital contribution was $40,000, and Dennis's was $60,000. They agreed to share profits and losses as follows: Tracy Dennis As salaries \ 36,000 \ 48,000 As interest on original capital 10\% 10\% Remaining profits or losses 2/3 1/3 Calculate each partner's share of profits and losses, assuming (a) the profit was $100,000, (b) the profit was $70,000, and (c) the loss was $8,000.

Partner A purchases partner B's $3,000 interest from partner B for $5,000. The entry to record the transaction is for $3,000.

The salary, interest, and stated ratio method of allocation cannot be applied when a net loss has occurred.

Total partners' equity will not change when a withdrawing partner

Which of the following is not a characteristic of partnerships?

Kelly invests $40,000 for a 10 percent interest in a partnership that has total capital of $300,000 after admitting Kelly. Which of the following is true?

An advantage of the partnership form of business is that each partner's potential loss is limited to that partner's investment in the partnership.

Liabilities related to assets invested in a partnership by a new partner cannot be transferred to the partnership.

The salary allocation to partners also appears as Salaries Expense on the partnership income statement.

The potential loss of all partners in an ordinary partnership is limited only by personal bankruptcy laws.