Exam 12: Accounting for Partnerships

The division of partnership profits on the basis of salaries,interest,and a stated ratio is usually necessary because

Leah,Cameron,and Ryan each receive a $20,000 salary,as well as 10 percent interest on their respective average investments of $120,000,$200,000,and $40,000.If they share remaining income and losses in a 2:1:3 ratio,respectively,by how much would Cameron's account increase or decrease (indicate a decrease by placing parentheses around the amount),assuming (a)net income of $144,000,(b)net income of $72,000,and (c)net loss of $72,000.

A partnership agreement most likely will stipulate that assets be reappraised when

Income and losses are divided equally among the partners unless the partnership agreement specifies otherwise.

When a partner withdraws from a partnership,an audit might be performed and the assets reappraised.

In a limited partnership,the general partner's liability is unlimited.

When a partner invests assets in a partnership,the assets are recorded at their fair market value on the date they are transferred to the partnership.

Partner A purchases partner B's $3,000 interest from partner B for $5,000.The entry to record the transaction is for $3,000.

An informational tax return must be filed for a partnership.

In some liquidations,a partner's share of the loss is greater than his or her capital balance.In such a situation,

Which of the following statements is correct regarding partnerships?

A limited partnership normally has one or more general partners whose liability is unlimited.

Partnership income or loss can be divided solely on the basis of salaries or interest.

When salary and interest allocations exceed net income,a net loss has occurred.