Exam 12: Accounting for Partnerships

Nee High and Low Jack are partners in an accounting firm and share net income and loss equally. High's beginning partnership capital balance for the current year is $285,000, and Jack's beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. High withdrew $90,000 during the year and Jack withdrew $100,000. What is High's return on equity?

Marquis and Bose agree to accept Sherman into their partnership. Sherman will contribute $25,000 in cash. Prepare the journal entry to record this transaction.

Rice, Hepburn, and DiMarco formed a partnership with Rice contributing $60,000, Hepburn contributing $50,000 and DiMarco contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to DiMarco's capital account?

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

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.

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 present partnership ends.

If at the time of partnership liquidation, a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency, then that partner is entitled to share in the final distribution of cash.

Conley and Liu allow Lepley to purchase a 25% interest in their partnership for $35,000 cash. Lepley has exceptional talents that will enhance the partnership. Conley's and Liu's capital account balances are $55,000 each. The partners have agreed to share income or loss equally. Prepare the general journal entry to record the admission of Lepley to the partnership.

The statement of changes in partners' equity shows the beginning balance in retained earnings, plus investments, less withdrawals, the income or loss and the ending balance in retained earnings.

If a partner is unable to cover a deficiency and the other partners absorb the deficiency, then the partner with the deficiency is thus relieved of all liability.

A partnership agreement:

B. Tanner contributed $14,000 in cash plus office equipment valued at $7,000 to the JT Partnership. The journal entry to record the transaction for the partnership is:

A partnership has an unlimited life.

If partners agree on how to share income, but say nothing about losses, then losses are shared ________________.

A capital deficiency can arise from liquidation losses, excessive withdrawals before liquidation, or recurring losses in prior periods.

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:

Partnership accounting:

Brit, Franc, and Scot who share income and loss in a 2:2:1 ratio, plan to liquidate their partnership. At liquidation, their balance sheet appears as follows. Prepare journal entries for (a) the sale of land and equipment sold as a package for $500,000, (b) the allocation of the gain or loss, (c) the payment of the liabilities, and (d) the distribution of cash to the individual partners.

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 the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $175,000 for its first year, what amount of income is credited to Krug's capital account?