Exam 19: Accounting for Partnerships

The cost of merchandise withdrawn by a partner for personal use is recorded as a debit to the partner's drawing account and a credit to the Purchases account.

Catherine Vollick and Danica Hubbard are partners. To expand the expertise of their business, they have agreed to admit Kyle Simon to the partnership on January 1, 2013. The capital account balances on January 1, 2013, after revaluation of assets, are Vollick, $80,000, and Hubbard, $60,000. Net income or net loss is shared equally. On page 8 of a general journal, record the admission of Simon to the partnership on January 1, 2013, assuming that Vollick sells one-half of her interest to Simon for $50,000 in cash. Omit the description.

A partnership has a(n) ____________________ life because it ends with the death or withdrawal of any partner.

Net income for Costmore Sales for the year ended December 31, 2013, was $32,000.The partners, Johnson and Lindstrom, share profits in the ratio of 60 and 40 percent, respectively. The balance in Johnson's capital account is $60,000. The balance in Lindstrom's capital account is $60,000. 1. How much of the net income will be allocated to Johnson? 2. How much of the net income will be allocated to Lindstrom?

Which of the following statements is correct?

Mavis and Roxanne are partners who share profits and losses equally. The partnership agreement provides that Mavis will be paid an annual salary of $54,000 and Roxanne will be paid an annual salary of $36,000. The salaries were paid to the partners during 2013 and were charged to the partners' drawing accounts. The Income Summary account has a debit balance of $10,000 after revenue and expense accounts are closed at the end of the year. 1. What amount of net income or loss will be allocated to Mavis? 2. What amount of net income or loss will be allocated to Roxanne?

Amounts withdrawn by partners to pay personal living expenses are recorded in their ____________________ accounts.

If a partnership's net income is in excess of the salary and interest allowances, the entry to close Income Summary after the allowances are recorded will include a(n) ____________________ to Income Summary.

Robert Ballard, a sole proprietor, entered into partnership with another individual. Ballard's investment in the partnership included equipment that cost $64,000 when it was purchased. The equipment has a book value of $26,000 and a net agreed-on value of $32,000. In the financial records of the partnership, this equipment and its accumulated depreciation should be recorded at

Net income for the Gifts Galore for the year ended December 31, 2013, was $18,000. The partners, Chang and Jennings, share profits in the ratio of 70 and 30 percent, respectively. 1. How much of the net income will be allocated to Chang? 2. How much of the net income will be allocated to Jennings?

Partnership net income of $33,000 is to be divided between two partners, Elan Chan and Roy Anderson, according to the following arrangement: There will be salary allowances of $20,000 for Chan and $10,000 for Anderson, with the remainder divided equally. How much of the net income will be distributed to Chan and Anderson, respectively?

The salary and interest allowances in a partnership profit-sharing agreement can best be described as

Spalding, Dane, and Manson are partners, sharing profits and losses in the ratio of 30, 40, and 30 percent respectively. Their partnership agreement provides that if one of them withdraws from the partnership, the assets and liabilities are to be revalued, the gain or loss allocated to the partners, and the retiring partner paid the balance of his account. Manson withdraws from the partnership on December 31, 2013. The capital account balances before recording revaluation are Spalding, $230,000; Dane, $250,000; and Manson, $220,000. The effect of the revaluation is to increase Merchandise Inventory by $21,000 and the Building account balance by $41,000. How much cash will be paid to Manson?

Partnership net income of $132,000 is to be divided between two partners, Jessie Folk and Jessica Stephens, according to the following arrangement: There will be salary allowances of $80,000 for Folk and $40,000 for Stephens, with the remainder divided equally. How much of the net income will be distributed to Folk and Stephens, respectively?

Which of the following statements is correct?

Each general partner has ____________________ liability for the debts of a partnership.

A partnership ____________________ occurs when the partnership's assets are sold, debts are paid off, and the remaining cash is distributed to the partners.

The statement of partners' equities summarizes the changes in the partners'_________________ accounts in an accounting period.

When dividing partnership net income, the consideration given to the amount of time a partner devotes to the business is called a salary ___________________.

Janice Miller operates a sole proprietorship business that sells camping equipment. On January 1, 2013, Miller has agreed to transfer her assets and liabilities to a partnership that will operate The Camping Company. Miller will own a two-thirds interest in the capital of the partnership. The agreed upon values of assets and liabilities to be transferred follow. Accounts receivable of $50,000 (of which approximately $2,000 is uncollectible) Merchandise inventory, $90,000 Furniture and fixtures, $60,000 Accounts payable, $32,000 Record the receipt of the assets and liabilities by the partnership on page 1 of a general journal. Omit the description.