Exam 12: Partnerships

X,Y,and Z are partners with capital balances of $80,000,$40,000,and $40,000,respectively.Net income for the year is $30,000.Prepare the necessary journal entries to close Income Summary to the capital accounts if: (a)The partners agree to divide income based on their beginning-of-year capital balances. (b)The partners agree to divide income based on the ratio of 5:3:2,respectively. (c)The partnership agreement is silent as to division of income.

A partnership has unlimited life.

When a partner leaves a partnership,the partnership ends,but the business can still continue to operate.

William and Christie form a partnership by investing $60,000 and $40,000 respectively.Their partnership agreement stipulates that William will receive an annual salary allowance of $6,000,and both partners will receive an interest allowance of 10% on their capital investment.Any net income remaining is to be allocated 60% to William,and 40% to Christie.Net income for their first year of operations is $40,000.Prepare the entry to close Income Summary.

When partners invest in a partnership,their capital accounts are credited for the amount invested.

A partnership agreement is:

In the absence of a partnership agreement,the law says that income of a partnership will be shared equally by the partners.

Zilky and Justin formed a partnership on December 31,2013.Zilky contributed $50,000 cash and accounts receivable with a fair market value of $10,000.Justin's investment consisted of: cash,$5,000; inventory,$34,000; and supplies,$1,000-all at fair market values.Net income for 2014 and 2015 was $50,000 and $65,000,respectively. Calculate the allocation of net income for 2014 and 2015,assuming net incomes are divided as follows: (A)The partners have no agreement. (B)Based on a 1:3 ratio. (C)Based on the ratio of the partners' original investments. (D)Interest allowances of 10% on their original investments,salary allowances to Zilky of $14,000 and Justin of $11,000,and the remainder to be divided equally.

A partner can be admitted into a partnership by ____________________ or by _______________________.

Partners' withdrawals of assets are:

When a partner leaves a partnership,the partnership ends.

The partnership agreement gives Tsang 60% and Breck 40% of partnership incomes or losses.The partnership had a net loss of $27,000.Tsang's share of the loss was $16,200.Breck's share was $10,800.

Salary and interest allowances are reported as expenses on a partnership income statement.

Partners' withdrawals are credited to their withdrawals accounts.

Discuss the options for the allocation of income and loss among partners.

The partners of the Blue Tooth Partnership agree to liquidate.After all liabilities of $100,000 are paid,the capital account balances are: Wong,$80,000; Winslow,$70,000; and Peters,($4,000).Peters agrees to pay $4,000 in cash to settle his deficiency.Prepare the journal entries required to end the partnership.

Parker,Smith,and James form a partnership.Parker contributes $60,000 cash and Smith contributes $20,000 in cash.James contributes equipment with a fair value of $25,000.Prepare the journal entry to record the formation of the partnership.

When a partnership is liquidated,the business ends.

If partners devote their time and services to their partnership,their salaries are expenses on the income statement.

The life of a partnership is ____________________.