Exam 17: Partnerships

Before a partnership can legally conduct business, it must obtain permission from the state.

Partners J and Q receive an interest allowance of $10,000 and $15,000, respectively, and divide the remaining profits and losses in a 3:1 ratio. If the company sustained a net loss of $11,000 during the year, the entry to close the income or loss into their capital accounts is:

Tom, Dick, and Harry each receive a $10,000 salary, as well as 10 percent interest on their respective average investments of $60,000, $100,000, and $20,000. If they share remaining income and losses in a 2:1:3 ratio, respectively, by how much would Dick's account increase or decrease (indicate a decrease by placing parentheses around the amount), assuming (a) net income of $72,000, (b) net income of $36,000, and (c) net loss of $36,000.

Which of the following partnership characteristics is a disadvantage?

Z has bought B's interest in the A&B Partnership for a $60,000 direct payment to B. The capital balances before the sale were $24,000 and $36,000, respectively. The entry to record the purchase of interest in partnership is:

A partnership agreement should include

A partnership agreement should include the procedure for ending the business.

Partners S, T, and U share income and losses in a 5:3:2 ratio, respectively. S wishes to leave the partnership, so the assets are revalued and are found to be overvalued by $6,000. If each partner had a capital balance of $20,000 prior to S's notification of withdrawal, the entry to record the withdrawal of S's interest from the partnership is:

A partnership is dissolved when a new partner is admitted to the partnership.

A partnership is a legal entity separate and apart from its owners.

Sid and Sally divide partnership income and losses solely on the basis of their average capital balances. Sid had $27,500 invested during all of 2010; Sally had $20,000 invested from January 1 to August 31, and she invested another $7,500 on September 1. If income was $80,000 during 2010, how much should each partner receive?

When salary and interest allocations exceed net income, a net loss has occurred.

Justin and Nicole are forming a partnership. What are some of the factors they should consider in deciding how income might be divided?

Noncash assets invested into a partnership are recorded at

Claim to the partners' personal assets by creditors if the partnership cannot pay its debts refers to

When a new partner is admitted, a new partnership agreement should be in place.

Mary and Dawn form a partnership and invest the following assets and liabilities Assuming that the partners will share income and losses equally, in the journal provided prepare the entry to record the formation of the partnership. (Omit explanation.)

After selling all the assets and paying the liabilities in a liquidation of a partnership, the partners share any remaining cash according to the stated ratios.

Elise, Farrah, and Gina are liquidating their business. They share income and losses in a 2:3:1 ratio, respectively, and currently have capital balances of $30,000, $21,000, and $39,000, respectively. In addition, the partnership has $15,000 in cash, $25,000 in accounts payable, and $100,000 in noncash assets. Elise and Gina are personally solvent, but Farrah is not. Assuming that the noncash assets are sold for $46,000, prepare all liquidation entries in the journal provided. (Omit explanations.)

Ali had a $50,000 capital balance for eight months and a $65,000 balance for four months. Barry had a $38,000 capital balance for five months and a $50,000 balance for seven months. If the net income of the year is $80,000, the entry to show the distribution of income to each partner is: