Question 1

Brian and Sandy are forming a partnership. Brian will invest a truck with a book value of $10000 and a fair value of $14000. Sandy will invest a building with a book value of $30000 and a fair value of $42000 with a mortgage of $15000. What amount should be recorded in Sandy's capital account?

Accepted Answer

A)  $30000 
B)  $27000 
C)  $42000 
D)  $14000

Question 2

The partnership form of business is

Accepted Answer

A)  restricted to law and medical practices. 
B)  restricted to firms having fewer than 10 partners. 
C)  not restricted to any particular type of business. 
D)  most often used in relatively large companies.

Question 3

Kim Locke and Mary Leigh Coker have capital accounts of $420000 and $480000 respectively. Jeff Doggett and Danny Cambrey are to join the partnership. Doggett invests $425000 in the partnership for which he receives a capital credit of $425000. Cambrey purchases a one-half interest from Locke for $300000 and a one-fourth interest from Coker for $90000.
Instructions
(a) Prepare the journal entries to record the admission of Doggett and Cambrey to the partnership.
(b) Determine the capital balances of the partners after the admission of Doggett and Cambrey.

Accepted Answer

The answer of Kim Locke and Mary Leigh Coker have...

Question 4

The Partners' Capital Statement for TSB Company reported the following information in total: $\begin{array}{llr}
  \text { Capital, January 1 } &\$240,000\
 \text {Additional investment.  } &80,000\
 \text { Drawings. } &160,000\
\text { Net income } &200,000
\end{array}$
 The partnership has three partners: Toub Sauls and Birch with ending capital balances in a ratio 40:20:40. What are the respective ending balances of the three partners?

Accepted Answer

A)  Toub $160000; Sauls $80000; Birch $160000. 
B)  Toub $144000: Sauls $72000; Birch $144000. 
C)  Toub $272000; Sauls $136000; Birch $272000. 
D)  Toub $180000; Sauls $9600000; Birch $180000.

Question 5

In an admission of a partner by investment of assets the total net assets and total capital of the partnership do not change.

Accepted Answer

A) True 
 B)False

Question 6

The Salinas-Milliken partnership is terminated when creditor claims exceed partnership assets by $80000. Salinas is a millionaire and Milliken has no personal assets. Milliken's partnership interest is 75% and Salinas's is 25%. Creditors

Accepted Answer

A)  must collect their claims equally from Milliken and Salinas. 
B)  may collect the entire $80000 from Salinas. 
C)  must collect their claims 75% from Milliken and 25% from Salinas. 
D)  may not require Salinas to use his personal assets to satisfy the $80000 in claims.

Question 7

Once assets have been invested in the partnership they are owned jointly by all partners.

Accepted Answer

A) True 
 B)False

Question 8

If a partner's investment in a partnership consists of Accounts Receivable of $35000 and an Allowance for Doubtful Accounts of $7000 it would not be appropriate for the partnership to record the Allowance for Doubtful Accounts.

Accepted Answer

A) True 
 B)False

Question 9

Match the items below by entering the appropriate code letter in the space provided.

Accepted Answer

The answer of Match the items below by entering the...

Question 10

Which of the following is correct when admitting a new partner into an existing partnership? $\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\quad $$\begin{array}{ccc}
 \underline{\text { Purchase of an Interest}}&
 \underline{\text { Admission by Investment}}
\end{array}$
A)$\begin{array}{ccc}
\text { Total net assets } & \text { unchanged } &&&&&& \text { unchanged } \\end{array}$
B)$\begin{array}{ccc}\text {Total capital } &&& \text { increased } &&&&&& \text { unchanged } \\end{array}$
C)$\begin{array}{ccc}\text {  Total net assets } & \text { unchanged } &&&&&& \text { increased } \\end{array}$
D)$\begin{array}{ccc}\text { Total capital } &&& \text { unchanged } &&&&& \text { unchanged }
\end{array}$

Accepted Answer

The answer of Which of the following is correct when...

Question 11

Ron Marden and Tip Baker operate separate auto repair shops. On January 1 2017 they decide to combine their separate businesses which were operated as proprietorships to form M & B Auto Repair a partnership. Information from their separate balance sheets is presented below: $$\begin{array} { l c c } 
& \text { Marden Auto Repair } & \text { Baker Auto Repair } \
\text { Cash } & \$ 10,000 & \$ 14,000 \
\text { Accounts receivable } & 12,000 & 10,000 \
\text { Allowance for doubtful accounts } & 1,000 & 500 \
\text { Accounts payable } & 5,000 & 6,000 \
\text { Notes payable } & - & 3,000 \
\text { Salaries and wages payable } & 1,000 & 1,500 \
\text { Equipment } & 12,000 & 24,000 \
\text { Accumulated depreciation—equipment } & 2,000 & 4,000
\end{array}$$ It is agreed that the expected realizable value of Marden's accounts receivable is $11000 and Baker's receivables is $7000. The fair value of Marden's equipment is $13000 and the value of Baker's equipment is $20000. It is further agreed that the new partnership will assume all liabilities of the proprietorships with the exception of the notes payable on Baker's balance sheet which he will pay himself.
Instructions
Prepare the journal entries necessary to record the formation of the partnership.

Accepted Answer

The answer of Ron Marden and Tip Baker operate separate...

Question 12

The partnership agreement of Ashford and Cohen provides for salary allowances of $90000 to Ashford and $70000 to Cohen with the remaining income or loss to be divided equally. During the year Ashford and Cohen each withdraw cash equal to 80% of their salary allowances. If partnership net income is $200000 Ashford's equity in the partnership would

Accepted Answer

A)  increase more than Cohen's. 
B)  decrease more than Cohen's. 
C)  increase the same as Cohen's. 
D)  decrease the same as Cohen's.

Question 13

In a partnership mutual agency means

Accepted Answer

A)  each partner acts on his own behalf when engaging in partnership business. 
B)  the act of any partner is binding on all other partners only if partners act within their scope of authority. 
C)  an act by a partner is judged as binding on other partners depending on whether the act appears to be appropriate for the partnership. 
D)  that partners must pay taxes on a mutual or combined basis.

Question 14

The balance sheet of a partnership will

Accepted Answer

A)  report retained earnings below the partnership capital accounts. 
B)  show a separate capital account for each partner. 
C)  show a separate drawing account for each partner. 
D)  show the amount of income that was distributed to each partner.

Question 15

The Gorni Chambers and Hale partnership is terminated when the claims of company creditors exceed partnership assets by $100000. The capital balances for Gorni Chambers and Hale are $70000 $10000 and $0 respectively. The original claims of the creditors were negotiated by Chambers and Hale. Which partner(s) is(are) personally and individually liable for all partnership liabilities?

Accepted Answer

A)  Gorni 
B)  Chambers 
C)  Chambers and Hale 
D)  Gorni Chambers and Hale

Question 16

A bonus to a new partner

Accepted Answer

A)  is prohibited by GAAP. 
B)  results when the new partner's capital credit is less than his or her investment of assets in the firm. 
C)  may occur when recorded book values are lower than market values. 
D)  results when the new partner's capital credit is greater than his or her investment of assets in the firm.

Question 17

Prepare a partners' capital statement for Whatito Company based on the following information. $\begin{array}{lrr}
&\underline{\text { Whatley }}&\underline{ \text { Hito }}\
\text { Beginning capital } & \$ 30,000 & \$ 27,000 \
\text { Drawings during year } & 15,000 & 8,000
\end{array}$ Net income was $45000 and the partners share income 60% to Whatley and 40% to Hito.

Accepted Answer

The answer of Prepare a partners' capital statement for Whatito...

Question 18

In liquidation balances prior to the distribution of cash to the partners are: Cash $900000; Peterson Capital $420000; Laney Capital $390000 and Howell Capital $90000. The income ratio is 6:2:2 respectively. How much cash should be distributed to Peterson?

Accepted Answer

A)  $375000 
B)  $408750 
C)  $420000 
D)  $450000

Question 19

The owners' equity statement for a partnership is called the

Accepted Answer

A)  partners' proportional statement. 
B)  partners' capital statement. 
C)  statement of shareholders' equity. 
D)  capital and drawing statement.

Question 20

The Zhuzer Company at December 31 has cash $50000 noncash assets $250000 liabilities $138000 and the following capital balances: Zhu $112000 and Zerkel $50000. The firm is liquidated and $265000 in cash is received for the noncash assets. Zhu and Zerkel income ratios are 60% and 40% respectively.
Instructions
Prepare the entries to record:
(a) The sale of noncash assets.
(b) The allocation of the gain or loss on liquidation to the partners.
(c) Payment of creditors.
(d) Distribution of cash to the partners.

Accepted Answer

The answer of The Zhuzer Company at December 31 has...

Exam 12: Accounting for Partnerships

Brian and Sandy are forming a partnership. Brian will invest a truck with a book value of $10000 and a fair value of $14000. Sandy will invest a building with a book value of $30000 and a fair value of $42000 with a mortgage of $15000. What amount should be recorded in Sandy's capital account?

The partnership form of business is

In an admission of a partner by investment of assets the total net assets and total capital of the partnership do not change.

The Salinas-Milliken partnership is terminated when creditor claims exceed partnership assets by $80000. Salinas is a millionaire and Milliken has no personal assets. Milliken's partnership interest is 75% and Salinas's is 25%. Creditors

Once assets have been invested in the partnership they are owned jointly by all partners.

If a partner's investment in a partnership consists of Accounts Receivable of $35000 and an Allowance for Doubtful Accounts of $7000 it would not be appropriate for the partnership to record the Allowance for Doubtful Accounts.

Match the items below by entering the appropriate code letter in the space provided.

In a partnership mutual agency means

The balance sheet of a partnership will

A bonus to a new partner

In liquidation balances prior to the distribution of cash to the partners are: Cash $900000; Peterson Capital $420000; Laney Capital $390000 and Howell Capital $90000. The income ratio is 6:2:2 respectively. How much cash should be distributed to Peterson?

The owners' equity statement for a partnership is called the