Exam 14: Partnerships: Formation and Operation

Why are the terms of the Articles of Partnership important to partners?

Which of the following is not a characteristic of a partnership?

P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest. If C is to contribute an amount equal to his book value share of the new partnership, how much should C contribute?

Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was the remainder portion of net income allocated to Nolan for 2013?

Peter, Roberts, and Dana have the following capital balances; $80,000, $100,000 and $60,000, respectively. The partners share profits and losses 20%, 40%, and 40% respectively. What is the total partnership capital after Roberts retires receiving $160,000 and using the goodwill method?

Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Cleary's capital account balance at the end of 2013?

Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively. The partners share profits and losses 20%, 40%, and 40% respectively. What is the total partnership capital after Anne retires receiving $80,000 and using the bonus method?

The appropriate format of the December 31, 2012 closing entry for John & Hope Limited Liability Partnership, whose two partners had withdrawn their salaries from the partnership during the year is:

The partnership contract for Hanes and Jones LLP provides that Hanes is to receive a bonus of 20% of net income (after the bonus) and that the remaining net income is to be divided equally. If the partnership income before the bonus for the year is $57,600, Hanes' share of this pre-bonus income is:

P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest. If C contributes $40,000 to the partnership and the goodwill method is used, what amount will be debited for goodwill?

A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman. Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year. The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively. Each partner withdrew $13,000 per year. Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year. What was the balance in Young's Capital account at the end of the first year?

Jipsom and Klark were partners with capital account balances of $80,000 and $100,000, respectively. Looney directly paid $32,000 to Jipsom and $40,000 to Klark for 30% of their interests in the partnership. Jipsom and Klark shared income in the ratio of 2:3. They believed that revaluation of the partnership was appropriate when a new partner was admitted. Required: Prepare the journal entries to record the admission of Looney to the partnership.

Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was the total capital balance for the partnership at December 31, 2012?

Peter, Roberts, and Dana have the following capital balances; $80,000, $100,000 and $60,000, respectively. The partners share profits and losses 20%, 40%, and 40% respectively. Roberts retires and is paid $160,000 based on an independent appraisal of the business. If the goodwill method is used, what is the capital balance of Peter?

The ABCD Partnership has the following balance sheet at January 1, 2012, prior to the admission of new partner, Eden. Eden contributed $124,000 in cash to the business to receive a 20% interest in the partnership. Goodwill was to be recorded. The four original partners shared all profits and losses equally. After Eden made his investment, what were the individual capital balances?

The ABCD Partnership has the following balance sheet at January 1, 2012, prior to the admission of new partner, Eden. Eden acquired a 20% interest in the partnership by contributing a total of $71,500 directly to the other four partners. Goodwill is to be recorded. Profits and losses have previously been split according to the following percentages: Adams, 15%; Barnes, 35%; Cordas, 30%; and Davis, 20%. After Eden made his investment, what were the individual capital balances?

Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Wasser's capital balance at the end of 2012?

Norr and Caylor established a partnership on January 1, 2012. Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000. For both partners, the beginning capital balance was to equal the initial investment. Norr and Caylor agreed to the following procedure for sharing profits and losses: - 12% interest on the yearly beginning capital balance - $10 per hour of work that can be billed to the partnership's clients - the remainder divided in a 3:2 ratio The Articles of Partnership specified that each partner should withdraw no more than $1,000 per month. For 2012, the partnership's income was $70,000. Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours. In 2013, the partnership's income was $24,000, and Norr and Caylor worked 800 and 1,200 billable hours respectively. Each partner withdrew $1,000 per month throughout 2012 and 2013. Determine the balance in both capital accounts at the end of 2013 to the nearest dollar.

The capital account balances for Donald & Hanes LLP on January 1, 2013, were as follows: Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized. What is the new total balance of the partnership accounts?

Partnerships have alternative legal forms including all of the following except: