Exam 12: Accounting for Partnerships

April and Cammy are partners who have agreed to admit Elena,who will invest $30,000 for a 20 percent interest.The previous capital balances were $30,000 and $60,000 for April and Cammy,respectively.April and Cammy had shared profits and losses equally.What amount will be recorded in Elena's Capital account?

A liquidation differs from a dissolution in that in a liquidation

When a withdrawing partner withdraws assets less than his or her capital balance,the excess is treated as a bonus to the remaining partners.

Unlimited liability refers to

Income or loss can be allocated to partners based solely on average capital balances.

Liquidation of a partnership is the process of ending the business.

Shannon,Thomas,and Williman are in a partnership that is being dissolved.The stated ratios of Shannon,Thomas,and William are 3:3:4,respectively.The partnership's assets are sold at a loss of $240,000.Which of the following is correct?

When a newly admitted partner pays a bonus to the existing partners,the new partner's capital account is credited.

Chad invests $20,000 for a one-third interest in a partnership in which the other partners have capital totaling $52,000 before admitting Chad.After distribution of the bonus,what is Chad's capital?

The division of income is one area in which a partnership differs from a corporation.

Admission of a new partner never has an impact on net income.

Justin and Nicole are forming a partnership.What are some of the factors they should consider in deciding how income might be divided?

A partnership is relatively easy to form,but is very complex to dissolve.

Lexi invests $80,000 for a one-fourth interest in a partnership in which the other partners have capital totaling $160,000 before admitting Lexi.After distribution of the bonus,what is Lexi's capital balance?

Chelsea,Jack,and Connor have a partnership.Chelsea wishes to withdraw from the partnership by removing assets that are greater than her current capital balance.Discuss how this transaction is accounted for on the partnership books.

Describe how a dissolution of a partnership is different from a liquidation of a partnership.

Elise,Farrah,and Gina are liquidating their business.They share income and losses in a 2:3:1 ratio,respectively,and currently have capital balances of $60,000,$42,000,and $78,000,respectively.In addition,the partnership has $30,000 in cash,$50,000 in accounts payable,and $200,000 in noncash assets.Elise and Gina are personally solvent,but Farrah is not.Assuming that the noncash assets are sold for $92,000,prepare all liquidation entries in the journal provided.(Omit explanations.)

On December 31,20x5,the R & J Partnership had the following assets,liabilities,and partners' equity: When the partners agreed to liquidate the business,the assets were sold for $180,000 and the liabilities were paid.R and J share profits and losses in a ratio of 2:1,respectively.What is the final cash distribution to each partner after liquidation?

Which of the following will not result in dissolution of a partnership?

When a new partner invests less than the proportionate share he or she receives in the partnership,a bonus is recorded to his or her account.