Exam 12: Accounting for Partnerships and Limited Liability Companies

Bobbi and Stuart are partners. The partnership capital of Bobbi is $40,000 and Stuart is $70,000. Bobbi sells his interest in the partnership to John for $50,000. The journal entry to record the admission of John as a new partner would include

Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net loss of $6,000 is allocated to Yolanda?

Immediately prior to the admission of Abbott, the Smith-Jones Partnership assets had been adjusted to current market prices, and the capital balances of Smith and Jones were $40,000 and $60,000 respectively. If the parties agree that the business is worth $120,000, what is the amount of bonus that should be recognized in the accounts at the admission of Abbott?

Use the following information to answer the following questions. Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $7,500 and a fair market value of $20,000. Marta will invest a building with a book value of $40,000 and a fair market value of $58,000. What amount will be recorded to Marta's capital account ?

The statement of members' equity is used for equity reporting of a partnership.

Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income under each of the following assumptions:

What is a partnership? List three advantages and three disadvantages of the partnership form of business organization.

If a new partner is given a 20% interest in the firm then the new partner will receive a 20% interest in earnings.

A partnership requires only an agreement between two or more persons to organize.

If there is no written agreement as to the way income will be divided among partners

When a partnership dissolves, a new partnership is formed and a new partnership agreement should be prepared.

After discontinuing the ordinary business operations and closing the accounts on May 7, the ledger of the partnership of Anna, Brian, and Cole indicated the following: The partners share net income and losses in the ratio of 3:2:1. Between May 7-30, the noncash assets were sold for $150,000, the liabilities were paid, and the remaining cash was distributed to the partners.

Gleason invested $90,000 in the James and Kirk partnership for ownership equity of $90,000. Prior to the investment land was revalued to a market value of $425,000 from a book value of $200,000. James and Kirk share net income in a 1:2 ratio. a. Provide the journal entry for the revaluation of land. b. Provide the journal entry to admit Gleason.

A disadvantage of partnerships is the mutual agency of all partners.

Xavier and Yolonda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net loss of $6,000 is allocated to Xavier?

Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and $50,000 respectively. They share income in the ratio of 3:2:1. Income Summary with a debit balance of $30,000 is closed to the capital accounts. Doug withdraws from the partnership. How much cash does he get upon withdrawal?

Abby and Bailey are partners who share income in the ratio of 2:1 and have capital balances of $60,000 and $30,000 respectively. With the consent of Bailey, Sandra buys one half of Abby's interest for $35,000. For what amount will Abby's capital account be debited to record admission of Sandra to the partnership?

Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in the year's net income of $200,000 under each of the following independent assumptions:

When a partner dies, the capital account balances of the remaining partners