Exam 12: Accounting for Partnerships

When the existing partners pay a bonus to a newly admitted partner,the existing partners' accounts are debited.

Chelsea,Harold,and Ryan are liquidating their business.They share income and losses in a 1:2:3 ratio,respectively,and currently have capital balances of $30,000,$26,000,and $24,000,respectively.In addition,the partnership has $10,000 in cash,$30,000 in accounts payable,and $100,000 in noncash assets.Chelsea and Harold are personally solvent,but Ryan is not.Assuming that the noncash assets are sold for $40,000,prepare all liquidation entries in the journal provided without explanation.

Discuss how each of the following would be recorded in the partner's capital account and why: a.Trevor invests into the partnership land that he paid $40,000 for 3 years ago.Today,the fair market value of the land is $65,000. b.Marcela invests into the partnership a building that she paid $24,000 for 2 years ago.The building has a $10,000 mortgage and its fair market value is $18,000.The partnership assumes the mortgage. c.Courtney invests into the partnership equipment she paid $12,000 for earlier in the year by signing a note payable that the partnership is not assuming.The equipment has a fair market value of $15,000.

A __________ is an association of two or more entities for the purpose of achieving a specific goal,such as the manufacture of a product in a new market.

A partnership agreement need not be in writing.

Partnership liquidation is not the same as partnership dissolution.

Jordan,Kyle,and Noah have equities in a partnership of $100,000,$160,000,and $140,000,respectively,and share income and losses in a ratio of 5:3:2,respectively.The partners have agreed to admit Billy to the partnership.Prepare entries in journal form without explanations to record the admission of Billy to the partnership under each of the following assumptions: a.Billy invests $80,000 for a 25 percent interest,and a bonus is recorded for Billy. b.Billy invests $160,000 for a one-fifth interest,and a bonus is recorded for the old partners.

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

Warren and Spencer are partners in a drilling operation.Warren purchased a drilling rig to be used in the partnership's operations.Is this purchase binding on Spencer even though he was not involved in it? Explain your answer.

Disadvantages of a partnership include

X,Y,and Z are partners who share profits and losses in a ratio of 1:2:3,respectively.Z's Capital account has a $60,000 balance.X and Y have agreed to let Z take $78,000 of the company's cash when he retires.Prepare an entry in journal form without explanation to record Z's exit,including the recognition of a bonus to Z

The salary,interest,and stated ratio method of allocation can still be applied when a net loss has occurred.

Which of the following describes a special-purpose entity?

Delta and Chen form a partnership and invest the following assets and liabilities In the journal provided prepare the entry to record the formation of the partnership.(Omit explanation.)

Which of the following is a characteristic of partnerships?

A partner's inability to meet his or her obligations at the time of liquidation does not relieve that individual of his or her liabilities to the other partners.

A partnership need not obtain permission from the state before it legally conducts business.

Partner X purchases Partner Y's $25,000 interest from Partner Y for $30,000.The entry to record the transaction is for $30,000.

Which of the following describes a limited liability company?

Total partners' equity will not change when a withdrawing partner