Exam 12: Accounting for Partnerships

A partnership that has at least two classes of partners, general and limited, allows the limited partners to have no personal liability beyond the amounts they invest in the partnership, and the limited partners have no active role except as specified in the partnership agreement is a ________________________ partnership.

Armstrong withdraws from the FAP Partnership. The remaining partners agree to buy out her share for her capital balance of $35,000. Prepare the journal entry to record the withdrawal from the partnership.

Mutual agency means

Summers and Winters formed a partnership on January 1. Summers contributed $90,000 cash and equipment with a market value of $60,000. Winters' investment consisted of: cash, $30,000; inventory, $20,000; all at market values. Partnership net income for year 1 and year 2 was $75,000 and $120,000, respectively. 1. Determine each partner's share of the net income for each year, assuming each of the following independent situations: (a) Income is divided based on the partners' failure to sign an agreement. (b) Income is divided based on a 2:1 ratio (Summers: Winters). (c) Income is divided based on the ratio of the partners' original capital investments. (d) Income is divided based on interest allowance of 12% on the original capital investments; salary allowance to Summers of $30,000 and Winters of $25,000; and the remainder to be divided equally. 2. Prepare the journal entry to record the allocation of the Year 1 income under alternative (d) above. Part 1: Calculation of partners' capital contributions:

When a partner is unable to pay a capital deficiency:

Partners' withdrawals of assets are:

Partnership accounting:

Mutual agency implies that each partner in a partnership is a fully authorized agent of the partnership. Which of the following statements is correct regarding the authority of a partner to bind the partnership in dealings with third parties?

In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance:

___________________________ implies that each partner in a partnership can be called on to pay a partnership's debts.

Admitting a partner by accepting assets is a personal transaction between one or more current partners and the new partner.

During the closing process, each partner's withdrawals account is closed to _______________.

When a partner is added to a partnership:

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

When a partnership is liquidated:

A partner can withdraw from a partnership by:

The partnership agreement for Smith Wesson & Davis, a general partnership, provided that profits be shared between the partners in the ratio of their financial contributions to the partnership. Smith contributed $100,000, Wesson contributed $60,000 and Davis contributed $20,000. In the partnership's first year of operation, it incurred a loss of $210,000. What amount of the partnership's loss, rounded to the nearest dollar, should be absorbed by Smith?

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

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.

When the current value of a partnership is greater than the recorded amounts of equity, the current partners usually require any new partner to pay a bonus for the privilege of joining.