Exam 12: Accounting for Partnerships

Stuart had a $100,000 capital balance for eight months and a $130,000 balance for four months.Cathy had a $76,000 capital balance for five months and a $100,000 balance for seven months.If the net income of the year is $160,000,and income is distributed based on average capital balances,the entry to show the distribution of income to each partner is:

When M purchases N's $10,000 capital interest for $10,000,the ensuing entry on the books of the partnership would contain a debit to Cash for $10,000.

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.

Which of the following statements is correct regarding partnerships?

Lexi invests $80,000 for a one-fourth interest in a partnership in which the other partners have capital totaling $160,000 before admitting Lexi.After distribution of the bonus,what is Lexi's capital balance?

Disadvantages of a partnership include

One of the benefits of forming a partnership is limited liability.

Chelsea,Jack,and Connor have a partnership.Chelsea wishes to withdraw from the partnership by removing assets that are greater than her current capital balance.Discuss how this transaction is accounted for on the partnership books.

Only not-for-profit organizations form joint ventures.

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

When a partner invests assets other than cash into a partnership,those assets should be listed on the balance sheet at

X,Y,and Z are partners who share profits and losses in a ratio of 1:2:3,respectively.Z's Capital account has a $60,000 balance.X and Y have agreed to let Z take $78,000 of the company's cash when he retires.Prepare an entry in journal form without explanation to record Z's exit,including the recognition of a bonus to Z

There are several types of business organizations that mimic the characteristics of a partnership.Describe two of these business organizations.

It is possible to allocate income or loss to partners based solely on interest.

When a partner invests assets in a partnership,the assets are recorded at their fair market value on the date they are transferred to the partnership.

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 $60,000,$42,000,and $78,000,respectively.In addition,the partnership has $30,000 in cash,$50,000 in accounts payable,and $200,000 in noncash assets.Elise and Gina are personally solvent,but Farrah is not.Assuming that the noncash assets are sold for $92,000,prepare all liquidation entries in the journal provided.(Omit explanations. )

Fred,Kristina,and Nick each receive a $14,000 salary,as well as 15 percent interest on their respective average investments of $40,000,$20,000,and $80,000.If they share remaining income and losses in a 4:3:2 ratio,respectively,by how much would Nick's account increase or decrease (indicate a decrease by placing parentheses around the amount),assuming (a)net income of $81,000, (b)net income of $54,000,and (c)net loss of $63,000.

Joint ventures

Elliot and Jessica are about to liquidate their partnership.They each have $40,000 capital balances,and they share income and losses in a 3:1 ratio,respectively.In addition,the partnership has $50,000 in cash,$90,000 in noncash assets,and $60,000 in accounts payable.Assuming that the noncash assets are sold for $34,000 and that both partners are personally solvent,prepare all the liquidation entries in the journal provided.

Zach has bought Biannca's interest in the A&B Partnership for a $120,000 direct payment to Biannca.Zach and Biannca's capital balances before the sale were $48,000 and $72,000,respectively.The entry to record the purchase of interest in partnership is: