Exam 14: Partnerships: Formation and Operation

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 balance at the end of 2012?

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 total share of net income for 2012?

Which of the following could be used as a basis to allocate profits among partners who are active in the management of the partnership? 1) allocation of salaries. 2) the number of years with the partnership. 3) the amount of time each partner works. 4) the average capital invested.

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 amount of interest attributed to Wasser for 2013?

How is accounting for a partnership different from accounting for a corporation?

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 second year?

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 Thurman's Capital account at the end of the second year?

Assume the partnership of Dean, Hardin, and Roth has been in existence for a number of years. Dean decides to withdraw from the partnership when the partners' capital balances are as follows: An appraisal of the business and its property estimates the fair value to be $100,000. Dean has agreed to receive $64,000 in exchange for his partnership interest. What are the remaining partners' capital balances after Dean's interest is dissolved, assuming the bonus method is applied?