Exam 12: Accounting for Partnerships

In closing the accounts at the end of a period, the partners' capital accounts are credited for their share of the partnership loss or debited for their share of the partnership net income.

Mack, Harris, and Huss are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Mack, $15,000, Harris, $15,000, Huss, $(2,000). After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $28,000 in cash to be distributed. Huss pays $2,000 to cover the deficiency in his account. The general journal entry to record the final distribution would be:

Mutual agency means each partner can commit or bind the partnership to any contract within the scope of the partnership business.

Durango and Verde formed a partnership with capital contributions of $150,000 and $190,000, respectively. Their partnership agreement called for Durango to receive a $50,000 annual salary allowance. They also agreed to allow each partner a share of income equal to 10% of their initial capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $120,000, what are Durango's and Verde's respective shares?

Define the partner return on equity ratio and explain how a specific partner would use this ratio.

Khalid, Dina, and James are partners with beginning-of-year capital balances of $400,000, $320,000, and $160,000, respectively. The partners agreed to share income and loss as follows: Salary of $30,000 to Khalid, $50,000 to Dina, and $55,000 to James. An interest allowance of 10% on beginning-of-year capital balances. Any remaining balance is to be divided equally. If partnership net income for the year is $190,000, determine each partner's share and make the appropriate journal entry to close the Income Summary to the capital accounts.

Regina Harrison is a partner in Pressed for Time. An analysis of Regina Harrison's capital account indicates that during the most recent year, she withdrew $20,000 from the partnership. Her share of the partnership's net loss was $16,000 and she made an additional equity contribution of $10,000. Her capital account ended the year at $150,000. What was her capital balance at the beginning of the year?

A partnership that has two classes of partners, general and limited, where the limited partners have no personal liability beyond the amounts they invest in the partnership, and no active role in the partnership, except as specified in the partnership agreement is a:

When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

Limited liability partnerships are designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.

Partners in a partnership are taxed on the amounts they withdraw from the partnership, not the partnership income.

The following information is available regarding John Smith's capital account in Technology Consulting Group, a general partnership, for a recent year: What is Smith's partner return on equity during the year in question?

Accounting procedures for all items are the same for both C corporations and S corporations in all aspects.

Juanita invested $100,000 and Jacque invested $95,000 in a new partnership. They agreed to a $50,000 annual salary allowance to Juanita and a $40,000 annual salary allowance to Jacque. They also agreed to an annual interest allowance of 10% on the partners' beginning-year capital balance, with the balance to be divided equally. Under this agreement, what are the income or loss shares of the partners if the annual partnership income is $102,000?

A _________________________ means that at least one partner has a debit balance in his/her capital account at the point of the final distribution of cash.

When a partner is unable to pay a capital deficiency:

Web Services is organized as a limited partnership, with David White as one of its partners. David's capital account began the year with a balance of $45,000. During the year, David's share of the partnership income was $7,500, and David received $4,000 in distributions from the partnership. What is David's partner return on equity?

Jane, Castle, and Sean are partners who share income and loss in a 4:2:2 ratio. The partnership's capital balances are as follows: Jane, $292,000; Castle, $114,000; and Sean, $194,000. Conner is admitted to the partnership on March 1 with a 25% equity. Prepare the journal entries to record Conner's entry into the partnership under each of the following separate assumptions: Conner invests (a) $200,000; (b) $180,000; and (c) $240,000.

During the closing process, partner's capital accounts are _______________ for their share of net income and _________________ for their share of net loss.

Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes $150,000, and Krug contributes $270,000. Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $174,000 for its first year, what amount of income is credited to West's capital account?