Exam 12: Accounting for Partnerships

Nguyen invested $100,000 and Hansen invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Nguyen and a $40,000 per year salary allowance to Hansen, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns $105,000 in income are:

Jane and Castle are partners and share equally in income or loss. Jane's current capital balance is $140,000 and Castle's is $130,000. Jane and Castle agree to accept Sean with a 30% interest in the partnership. Sean invests $108,000 in the partnership. The balances in Jane's and Castle's capital accounts after admission of the new partner equal:

A partnership agreement:

Assets invested by a partner into a partnership remain the property of the individual partner.

When a partnership is liquidated, its business is ended.

Renee Jackson is a partner in Sports Promoters. Her beginning partnership capital balance for the current year is $55,000, and her ending partnership capital balance for the current year is $62,000. Her share of this year's partnership income was $5,250. What is her partner return on equity?

Alberts and Bartel are partners. On October 1, Alberts' capital balance is $75,000, and Bartel's capital balance is $125,000. With the partnership's approval, Bartel sells ½ of his partnership interest to Camero for $70,000. Prepare the journal entry to record this transaction in the partnership records.

David and Jeannie formed This & That as a limited liability company. Unless the member owners elect to be treated otherwise, the Internal Revenue Service will tax the LLC as:

What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.

Sierra and Jenson formed a partnership. Sierra contributed $25,000 cash and accounts receivable worth $11,000. Jenson's investment included cash, $5,000; inventory, $18,000; and supplies, $1,000. Prepare the journal entries to record each partner's investment in the new partnership.

Kathleen Reilly and Ann Wolf decide to form a partnership on August 1. Reilly invested the following assets and liabilities in the new partnership: The note payable is associated with the building and the partnership will assume responsibility for the loan. Wolf invested $60,000 in cash and $105,000 in equipment in the new partnership. Prepare the journal entries to record the two partners' original investments in the new partnership.

Armstrong plans to leave the FAP Partnership. The recorded value of her capital account is $48,000. The remaining partners Floyd and Peters agree to pay Armstrong $40,000 cash and Armstrong accepts. The partners share income and loss equally. Prepare the general journal entry to record the withdrawal from the partnership.

How are partners' investments in a partnership recorded?

A capital deficiency means that:

The BlueFin Partnership agrees to dissolve. The cash balance after selling all assets and paying all liabilities is $60,000. The final capital account balances are: Smith, $35,000; Nagy, $29,000; and Russ, ($4,000). Russ is unable to pay the capital deficiency. Prepare the journal entries to record the transactions required to dissolve this partnership.

When a partner invests in a partnership, his/her capital account is __________ for the invested amount.

When a partnership is liquidated:

What factors should be considered before establishing a partnership? What were some of the areas that the partners of Kids Konserve focused on before and after forming their partnership?

A partnership is an unincorporated association of two or more people to pursue a business for profit as co-owners.

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