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1.
There
are only four legal structures to form and operate a business.
a. True
b. False
2. In a general partnership, each
partner is individually liable to creditors for debts incurred by the
partnership, to the extent of the
partner's capital balance.
a.
True
b. False
3. A partnership is a legal entity
separate from its owners.
a. True
b. False
4.
A
partnership is subject to federal income taxes.
a. True
b. False
5. A disadvantage of partnerships
is the mutual agency of all partners.
a. True
b. False
6. A partnership requires only an
agreement between two or more persons to organize.
a. True
b. False
7.
Each
partner may withdraw the assets he or she contributed to the partnership at any
time.
a. True
b. False
8. When compared to a corporation,
one of the major disadvantages of the partnership is its limited life.
a. True
b. False
9. When compared to a corporation,
one of the major advantages of a partnership is its relative ease of formation.
a. True
b. False
10.
An
advantage of the partnership form of business is that each partner’s potential
loss is limited to that partner’s investment in the partnership.
a. True
b. False
11. A limited liability company is a
business entity form designed to overcome some of the disadvantages of the partnership form.
a.
True
b. False
12. For tax purposes, a limited
liability company may elect to be treated as a partnership.
a. True
b. False
13. The limited liability company
may elect to be manager managed rather than member managed which means that only authorized members may legally bind
the corporation.
a.
True
b. False
14. Each partner has a separate
capital and withdrawal account.
a. True
b. False
15. When a partner invests noncash
assets in a partnership, the assets are recorded at the partner's book value.
a. True
b. False
16. A new partner contributes
accounts receivable to a partnership which appear in the ledger of his sole
proprietorship at $20,500 and there
was an allowance for doubtful accounts of $750.
If $600 of the accounts receivables is
completely worthless, the partnership accounts receivable should be
debited for $19,900.
a.
True
b. False
17. One reason that distributions of
income and loss are prepared is to obtain the information to record a closing
entry.
a. True
b. False
18. If the partnership agreement
does not otherwise state, partnership income is divided in proportion to the
individual partner's capital balance.
a.
True
b. False
19. The salary allocation to
partners used in dividing net income would also appear as salary expense on the
partnership income statement.
a.
True
b. False
20. If the articles of partnership
provide for annual salary allowances of $36,000 and $18,000 to X and Y respectively and net income is $30,000, X's share of net
income is $20,000.
a.
True
b. False
21. If the net income of a
partnership is less than the total of the allowances provided by the
partnership agreement, the difference
must be divided among the partners in the income-sharing ratio.
a.
True
b. False
22.
The
amount that a partner withdraws as a monthly salary allowance does not affect
the division of net income.
a. True
b. False
23. Partner A devotes full time and
partner B devotes one-half time to their partnership. If the partnership agreement is silent concerning the division of net
income, Partner A will receive a $20,000 share of a net income of $30,000.
a.
True
b. False
24. In the distribution of income,
the net income is less than the salary and interest allowances granted; the
remaining balance will be a negative
amount that must be divided among the partners as though it were a loss.
a.
True
b. False
25.
Details
of the division of partnership income should normally be disclosed in the
financial statements.
a. True
b. False
26. Many partnerships provide for
the admission of new partners or withdrawals of present partners by amending existing partnership agreements, so that
the firm may continue to operate without executing a new agreement.
a.
True
b. False
27. A partnership's asset accounts
should be changed from cost to fair market value when a new partner is admitted
to a firm or an existing partner
withdraws or dies.
a.
True
b. False
28. In admitting a new partner who
purchases an interest, the capital interest of the new partner is obtained from
the current partners and both the
total assets and total capital are increased.
a.
True
b. False
29. When a new partner purchases the
entire interest of an old partner, the new partner's capital account should be credited for the amount he or she paid to
the old partner.
a.
True
b. False
c. True
d. False
30. When a new partner is admitted
by making an investment in the partnership, the old partners' capital accounts
are always credited.
a.
True
b. False
31. When a new partner is admitted
by making an investment of assets in the partnership and the new partner has to pay a premium for admission, a bonus is
divided among the old partners' capital accounts.
a.
True
b. False
32. Sarno has a capital balance of
$42,000 after adjusting the assets to fair market value. Minton contributes $22,000 to receive a 30% interest in the new
partnership. The bonus paid by Minton is $2,800.
a.
True
b. False
33.
When
a partner withdraws from the partnership, the partnership dissolves.
a. True
b. False
34. If not enough partnership cash or
other assets are available to pay the withdrawing partner, a liability may be created for the amount owed the withdrawing
partner.
a.
True
b. False
35. When a partner withdraws from
the partnership by selling his or her interest back to the partnership, the
remaining partners must pay the withdrawing
partner a specified amount from their personal assets.
a.
True
b. False
36. X sells to A one-half of a
partnership capital interest that totals $70,000 for $40,000. A's capital account in the partnership should be credited for $40,000.
a.
True
b. False
37. When a new partner is admitted
to a partnership, all partnership assets should be revised to reflect current
values.
a. True
b. False
38. If a new partner is to be
admitted to a partnership and a bonus is attributed to the old partnership, the
bonus should be divided between the
capital accounts of the original partners according to their capital balances.
a.
True
b. False
39. When a new partner is admitted
to a partnership, bonuses attributable to either the old partnership or to the incoming partner may be recognized in accordance
with the agreement among the partners.
a.
True
b. False
40. Dissolution is the term which
solely means to liquidate the partnership.
a. True
b. False
41. In partnership liquidation,
gains and losses on the sale of partnership assets are divided among the
partners' capital accounts on the
basis of their capital balances.
a.
True
b. False
42. If the share of losses on
realization of the sale of noncash assets exceeds the balance in a partner's
capital account, the resulting balance
is called a deficiency.
a.
True
b. False
43. In partnership liquidation, if a
partner has a debit capital balance in his or her capital account, he or she is responsible for contributing personal
assets sufficient to eliminate the deficit.
a.
True
b. False
44. The process of winding up the
affairs of a partnership is referred to as realization.
a. True
b. False
45. The distribution of cash, as the
final process in winding up the affairs of a partnership, is based on the
income-sharing ratio.
a.
True
b. False
46. If a partner's capital balance
is a debit after it has absorbed its share of the loss on realization, the
balance is referred to as a
deficiency.
a.
True
b. False
47. In the liquidating process, any
uncollected cash becomes a loss to the partnership and is divided among the remaining partners' capital balances based
on their income-sharing ratio.
a.
True
b. False
48.
After
all noncash assets have been converted to cash and all liabilities paid, A, B,
and C have capital balances of $10,000 (debit), $5,000 (debit), and $25,000
(credit). The cash available for
distribution to the partners is $10,000.
a. True
b. False
49. The statement of members’ equity
is used for equity reporting of a partnership.
a. True
b. False
50. The partner capital accounts may
change due to capital additions, net income, or withdrawals.
a. True
b. False
51. The equity reporting for a limited
liability company is similar to that of a partnership but the changes in
capital are shown on a statement of
members' equity.
a.
True
b. False
52.
The
chart of accounts for a partnership, with the exception of additional drawing
and capital accounts, does not differ from the chart of accounts for
a sole proprietorship.
a. True
b. False
53. Revenue per employee may be used
to measure partnership (LLC) efficiency.
a. True
b. False
54.
Which
of the following is a characteristic of a general partnership?
a. The partners have co-ownership
of partnership property.
b. The partnership is subject to
federal income tax.
c. The partnership has an unlimited
life.
d. The partners have limited
liability.
55.
Which
of the following is not a characteristic of a general partnership?
a. the partnership is created by a
contract
b. mutual agency
c. partners share equally in net
income or net losses unless an agreement states differently
d. dissolution occurs only when all
partners agree
56. Which of the following is an
advantage of a general partnership when compared to a corporation?
a. A partnership is more likely to
have a positive net income.
b. The partnership is relatively
inexpensive to organize.
c. Creditors to a partnership
cannot attach personal assets of partners.
d. The partnership usually hires
professional managers.
57.
Which
of the following is a disadvantage of a partnership when compared to a
corporation?
a. The partnership is more likely
to have a net loss.
b. The partnership is easier to
organize.
c. The partnership is less
expensive to organize.
d. The partnership has limited life.
58. An advantage of the partnership
form of business organization is
a. unlimited liability
b. mutual agency
c. ease of formation
d. limited life
59. The characteristic of a
partnership that gives the authority to any partner to legally bind the
partnership and all other partners to business
contracts is called
a. unlimited liability
b. ease of formation
c. mutual agency
d. dissolution
60. When a limited liability company
is formed
a. the partnership activities are
limited
b. all partners have limited
liability
c. some of the partners have limited
liability
d. none of the partners have
limited liability
61. Which of the following below is not one
of the four major forms of business entities that are discussed in this chapter?
a. sole proprietorship
b. corporation
c. partnership
d. subchapter S corporation
62.
Which
of the following below is not a characteristic of a limited
liability company?
a. unlimited life
b. limited legal liability
c. taxable
d. moderate ability to raise
capital
63. When a partnership is formed,
assets contributed by the partners should be recorded on the partnership books
at their
a. book values on the partners'
books prior to their being contributed to the partnership
b. fair market value at the time of
the contribution
c. original costs to the partner
contributing them
d. assessed values for property tax
purposes
64. As part of the initial
investment, Ray Blake contributes equipment that had originally cost $125,000
and on which accumulated depreciation
of $100,000 has been recorded. If
similar equipment would cost $150,000 to replace and the partners agree on a valuation of $29,000 for the contributed
equipment, what amount should be debited to the equipment account?
a. $29,000
b. $150,000
c. $125,000
d. $100,000
ANSWER: a
65. Luke and John share income and
losses in a 2:1 ratio after allowing for salaries to Luke of $48,000 and
$60,000 to John. Net income for the
partnership is $93,000. Income should be
divided as
a. Luke, $46,500; John, $46,500
b. Luke, $55,000; John, $38,000
c. Luke, $65,000; John, $28,000
d. Luke, $38,000; John, $55,000
66. As part of the initial
investment, Jackson contributes accounts receivable that had a balance of
$22,500 in the accounts of a sole
proprietorship. Of this amount, $3,000
is deemed completely worthless. For the
remaining accounts, the partnership
will establish a provision for possible future uncollectible accounts of
$1,500. The amount debited to Accounts Receivable for the new
partnership is
a. $18,000
b. $22,500
c. $21,000
d. $19,500
67. Jordon and Heidi share income
equally. For the current year, the partnership net income is $40,000. Jordon
made withdrawals of $14,000, and Heidi
made withdrawals of $15,000. At the beginning of the year, the capital account balances were: Jordon, capital, $40,000;
Heidi, capital, $58,000. Jordon’s capital account balance at the end of the year is
a. $68,000
b. $54,000
c. $74,000
d. $46,000
68. Sadie and Sam share income
equally. For the current year, the
partnership net income is $40,000. Sadie
made withdrawals of $14,000, and Sam
made withdrawals of $15,000. At the
beginning of the year, the capital account balances
were Sadie, capital, $42,000; Sam capital, $58,000. Sam’s capital account balance at the end of
the year is
a. $78,000
b. $43,000
c. $63,000
d. $93,000
69. Partnership income and losses
are usually divided on the basis of interest, salaries, and stated ratios
because
a. partners seldom contribute time
and resources equally
b. this method reflects the amount
of time devoted to the partnership by the partners
c. it is simpler than following the
legal rules
d. it prevents arguments among the
partners
70. A ratio of 4:2:1 is the same as
a. 40%:20%:10%
b. 4/7:2/7:1/7
c. 4/10:2/10:1/20
d. 7/4:7/2:7/1
71. Carrie and Callie form a
partnership in which Carrie contributes $85,000 in assets and agrees to devote
half time to the partnership. Callie contributed $50,000 in assets and
agrees to devote full time to the partnership.
If no additional information is
available, how will Carrie and Callie share in the division of income?
a. 5:8.5
b. 1:2
c. 1:1
d. 2:1
72. Seth and Rachel have original
investments of $50,000 and $100,000 respectively in a partnership. The articles
of partnership include the following
provisions regarding the division of net income: interest on original
investments at 15%; salary allowances
of $24,000 and $20,000, respectively; and the remainder to be divided equally.
How much of the net income of $90,000
is allocated to Seth?
a. $42,750
b. $47,750
c. $45,000
d. $43,250
73. Seth and Beth have original
investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the
division of net income: interest on original investment at 10%; salary allowances of $27,000 and
$18,000, respectively; and the remainder to be divided equally. How much of
the net income of $42,000 is allocated to Seth?
a. $20,000
b. $23,000
c. $32,000
d. $0
74. Seth and Rachel have original
investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division
of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and
the remainder divided equally. How much
of the net loss of $16,000 is
allocated to Seth?
a. $8,000
b. $6,000
c. $4,000
d. $16,000
75.
If
there is no written agreement as to the way income will be divided among
partners
a. they will share income and
losses equally
b. they will share income and
losses according to their capital balances
c. they will share income and
losses according to the time devoted to the business.
d. there really is no partnership
agreement
76. Jefferson has a capital balance
of $65,000 and devotes full time to the partnership. Washington has a capital balance of $45,000 and devotes half time to
the partnership. If no other information
is available regarding distributions,
in what ratio is net income to be divided?
a. 6.5:4.5
b. 1:1
c. 4.5:6.5
d. 1:2
77. Details of the division of net
income for a partnership should be disclosed
a. in the assets section of the
balance sheet
b. in the partners’ subsidiary
ledger
c. in the statement of cash flows
d. in the partnership income
statement
78.
Rex
and Kelsey are partners who share income in the ratio of 3:2. Their capital balances are $95,000 and $140,000,
respectively. Income Summary has a
credit balance of $40,000 after the second closing entry. What is Pia’s capital balance after closing
Income Summary to the capital accounts?
a. $71,000
b. $119,000
c. $146,000
d. $111,000
79. Patty and Paul are partners who
share income in the ratio of 3:2. Their
capital balances are $90,000 and $130,000, respectively. Income Summary has a credit balance of
$40,000 after the second closing entry.
What is Paul’s capital balance
after closing Income Summary to the capital accounts?
a. $120,000
b. $146,000
c. $164,000
d. $160,000
Use the information
below to answer the questions that follow.
Isis and Kelsey are forming a partnership. Isis will invest a piece of equipment with a
book value of $7,500 and a fair market
value of $18,000. Kelsey will invest a building
with a book value of $40,000 and a fair market value of $44,000.
80. What amount will be recorded to
the building account?
a. $24,000
b. $14,000
c. $40,000
d. $44,000
81.
What
amount will be recorded to Isis’s capital account?
a. $18,000
b. $7,500
c. $25,500
d. $10,500
82.
What
amount will be recorded to Kelsey’s capital account?
a. $14,000
b. $24,000
c. $40,000
d. $44,000
83. Hannah Johnson contributed
equipment, inventory, and $53,000 cash to the partnership. The equipment had a
book value of $25,000 and a market
value of $28,000. The inventory had a book value of $50,000, but only had a
market value of $15,000 due to
obsolescence. The partnership also assumed a $12,000 note payable owed by
Hannah that was originally used to
purchase the equipment.
What amount should be recorded to Hannah’s capital account?
a. $96,000
b. $84,000
c. $108,000
d. $116,000
84. Henry Jones contributed
equipment, inventory, and $44,000 cash to the partnership. The equipment had a book value of $35,000 and market value of $28,000. The inventory had a book value of $25,000,
but only had a market value of $12,000
due to obsolescence. The partnership
also assumed a $15,000 note payable owed by Henry that was originally used to purchase the equipment.
What amount should be recorded to Henry’s capital account?
a. $104,000
b. $89,000
c. $69,000
d. $84,000
85. Tanner and Teresa share income
and losses in a 2:1 ratio after allowing for salaries to Tanner of $42,000 and $60,000
to Teresa. Net income for the partnership is $132,000. Income should be divided
as follows:
a. Tanner, $57,000; Teresa,
$75,000
b. Tanner, $58,000; Teresa,
$74,000
c. Tanner, $75,000; Teresa,
$57,000
d. Tanner, $62,000; Teresa,
$70,000
86. Carla and Eliza share income
equally. For the current year, the partnership
net income is $40,000. Carla made withdrawals of $12,000 and Eliza made
withdrawals of $21,000. At the beginning
of the year, the capital account balances
were: Carla capital, $42,000; Eliza capital, $55,000. Eliza’s capital account balance at the end of
the year is
a. $34,000
b. $54,000
c. $78,000
d. $75,000
87. Xavier and Yolanda have original
investments of $50,000 and $100,000, respectively, in a partnership. The
articles of partnership include the
following provisions regarding the division of net income: interest on original
investment at 20%; salary allowances
of $27,000 and $18,000, respectively; and the remainder to be divided equally.
How much of the net income of $81,000 is allocated to Xavier?
a. $37,000
b. $40,000
c. $42,000
d. $42,500
88. Xavier and Yolanda have original
investments of $50,000 and $100,000, respectively, in a partnership. The articles
of partnership include the following provisions regarding the division
of net income: interest on original investment at 20%; salary allowances of $34,000 and $26,000, respectively; and
the remainder to be divided equally. How
much of the net income of $120,000 is
allocated to Yolanda?
a. $46,000
b. $61,000
c. $60,000
d. $66,000
89. Xavier and Yolanda have original
investments of $50,000 and $100,000, respectively, in a partnership. The articles
of partnership include the following provisions regarding the division
of net income: interest on original investment at 20%; salary allowances of $34,000 and $26,000, respectively; and
the remainder to be divided equally. How
much of the net income of $120,000 is
allocated to Xavier?
a. $59,000
b. $61,000
c. $49,000
d. $44,000
90. Xavier and Yolanda have original
investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following
provisions regarding the division of net income: interest on original
investment at 10%; salary allowances
of $38,000 and $28,000, respectively; and the remainder to be divided equally.
How much of the net income of $77,000 is allocated to Yolanda?
a. $77,000
b. $38,000
c. $36,000
d. $44,000
91. Xavier and Yolanda have original
investments of $50,000 and $100,000, respectively, in a partnership. The
articles of partnership include the
following provisions regarding the division of net income: interest on original
investment at 10; salary allowances of
$38,000 and $28,000, respectively; and the remainder to be divided equally. How
much of the net income of $77,000 is
allocated to Xavier?
a. $66,000
b. $41,000
c. $36,000
d. $43,000
92. Xavier and Yolanda have original
investments of $50,000 and $100,000 respectively in a partnership. The articles
of partnership include the following provisions regarding the division
of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and
the remainder equally. How much of the
net loss of $6,000 is allocated to
Yolanda?
a. $1,000
b. $3,000
c. $5,000
d. $0
93. Tucker and Titus are partners
who share income in the ratio of 3:1.
Their capital balances are $40,000 and $60,000, respectively. Income Summary has a credit balance of
$40,000 after the second closing entry.
What is Tucker’s capital balance after closing Income Summary to the
capital accounts?
a. $40,000
b. $70,000
c. $10,000
d. $80,000
94. Tomas and Saturn are partners
who share income in the ratio of 3:1.
Their capital balances are $80,000 and $120,000, respectively. Income Summary has a credit balance of
$30,000. What is Tomas’s capital balance
after closing Income Summary to the capital accounts?
a. $102,500
b. $22,500
c. $57,500
d. $127,500
95. Tomas and Saturn are partners
who share income in the ratio of 3:1.
Their capital balances are $80,000 and $120,000, respectively. Income summary has a credit balance of
$30,000 after the second closing entry.
What is Saturn’s capital balance after closing income summary to the
capital accounts?
a. $102,500
b. $120,000
c. $112,500
d. $127,500
96. Tomas and Saturn are partners
who share income in the ratio of 3:1.
Their capital balances are $40,000 and $60,000 respectively. Income summary has a credit balance of
$20,000. What is Saturn’s capital
balance after closing income summary to capital?
a. $55,000
b. $75,000
c. $45,000
d. $65,000
97. Franco and Jason share income
and losses in a 2:1 ratio after allowing for salaries of $15,000 and $30,000.
If the partnership suffers a $15,000 loss, by how much would Jason’s capital
account increase?
a. $10,000
b. $20,000
c. $40,000
d. $25,000
98. Lambert invests $20,000 for a
1/3 interest in a partnership in which the other partners have capital totaling
$34,000 before admitting Lambert. After
distribution of the bonus, what is Lambert’s capital?
a. $18,000
b. $20,000
c. $6,667
d. $11,333
99.
Douglas
pays Selena $45,000 for her 30% interest in a partnership with total net assets
of $125,000. Following this transaction,
Douglas’ capital account should have a credit balance of
a. $37,500
b. $45,000
c. $13,500
d. more than $45,000
100. Nick is admitted to an existing partnership
by investing cash. Nick agrees to pay a
bonus for his ownership interest because of the past success of the
partnership. When Nick’s investment in
the partnership is recorded
a.
his
capital account will be credited for more than the cash he invested
b.
his
capital account will be credited for the amount of cash he invested
c.
a
bonus will be credited for the amount of cash he invested
d.
a
bonus will be distributed to the old partners' capital accounts
101. Bobbi and Stuart are
partners. The partnership capital of
Bobbi is $40,000 and Stuart is $70,000.
Bobbi sells his interest in the
partnership to John for $50,000. The
journal entry to record the admission of John as a new partner would include
a.
a
credit to John’s capital account for $40,000
b.
a
credit to Stuart’s capital account for $10,000
c.
a
credit to John’s capital account for $50,000
d.
a
credit to John’s capital account for $40,000 and a credit to Stuart’s capital
account for $10,000
102.
When
a partner dies, the capital account balances of the remaining partners
a. will increase
b. will decrease
c. will remain the same
d. may increase, decrease, or
remain the same
103. A partner withdraws from a
partnership by selling her interest to another person who currently is not associated with the firm. As a results of this transaction, the capital
account balance of the other partners in the partnership
a. will increase
b. will decrease
c. will remain the same
d. may increase, decrease, or
remain the same
104. Samuel and Darci are
partners. The partnership capital for
Samuel is $50,000 and for Darci is $60,000.
Josh is admitted as a new
partner by investing $50,000 cash. Josh
is given a 20% interest in return for his investment. The amount
of the bonus to the old partners is
a. $0
b. $18,000
c. $8,000
d. $10,000
105. Abby and Bailey are partners who
share income in the ratio of 2:1 and have capital balances of $60,000 and $30,000,
respectively. With the consent of
Bailey, Sandra buys one-half of Abby's interest for $35,000. For what amount
will Abby's capital account be debited to record admission of Sandra to the
partnership?
a. $40,000
b. $15,000
c. $35,000
d. $30,000
106. A new partner may be admitted to
a partnership by
a.
inheriting
a partnership interest
b.
contributing
assets to the partnership
c.
purchasing
a specific quantity of assets from the partnership
d.
a
written approval under the federal law
107. A change in the ownership of a
partnership results in the
a.
consolidating
of the partnership
b.
liquidating
of the partnership
c.
realization
of the partnership
d.
dissolution
of the partnership
108.
When
a new partner is admitted to a partnership, there should be a(n)
a. revaluation of assets
b. realization of assets
c. allocation of assets
d. return of assets
109. When a new partner is admitted
to a partnership, there should be a(n)
a. increase in the total assets of
the partnership
b. new capital account added to the
ledger for the new partner
c. increase in the total owner's
equity of the partnership
d. debit amount to the partner’s
capital account for the cash received by the current partner
110. When an additional partner is
admitted to a partnership by contribution of assets to the partnership
a. the total assets of the
partnership do not change
b. no liabilities can be
contributed at the same time
c. the amount of the cash
contribution is the same as the amount of the debit to the new partner's
capital account
d. the total of the owner's equity
accounts increases
111.
When
a new partner is admitted to a partnership
a. a bonus may be attributable to
the old partner
b. a bonus may only result from
more cash being given by the new partner than the value of the assets being purchased
c. a bonus agreed upon by the
partners is recorded as an asset so long as the amount is within the range set
by the SEC
d. a bonus is not recorded
112. The Calvin-Dogwood Partnership
owns inventory that was purchased for $90,000, has a current replacement cost of $85,900, and is priced to sell for
$125,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be
admitted?
a. $129,100
b. $85,900
c. $90,000
d. $125,000
113. Immediately prior to the
admission of Abbott, the Smith-Jones Partnership assets had been adjusted to
current market prices, and the capital
balances of Smith and Jones were $40,000 and $60,000, respectively. If the parties agree that the business is worth $120,000, what is the amount of
bonus that should be recognized in the accounts at the admission of Abbott?
a. $60,000
b. $80,000
c. $40,000
d. $20,000
114. Benson and Orton are partners
who share income in the ratio of 2:3 and have capital balances of $60,000 and $40,000,
respectively. Ramsey is admitted to the
partnership and is given a 40% interest by investing $20,000. What is Benson’s capital balance after
admitting Ramsey?
a. $20,000
b. $24,000
c. $48,800
d. $71,200
115.
Benson
and Orton are partners who share income in the ratio of 2:3 and have capital
balances of $60,000 and $40,000, respectively.
Ramsey is admitted to the partnership and is given a 10% interest by
investing $20,000. What is Orton’s
capital balance after admitting Ramsey?
a. $44,800
b. $35,200
c. $20,000
d. $16,000
116. Benton and Orton are partners
who share income in the ratio of 1:3 and have capital balances of $70,000 and $30,000,
respectively. Ramsey is admitted to the
partnership and is given a 40% interest by investing $20,000. What is Benton’s capital balance after
admitting Ramsey?
a. $20,000
b. $7,000
c. $70,000
d. $63,000
117.
Benson
and Orton are partners who share income in the ratio of 1:3 and have capital
balances of $70,000 and $30,000, respectively.
Ramsey is admitted to the partnership and is given a 40% interest by
investing $20,000. What is Orton’s
capital balance after admitting Ramsey?
a. $20,000
b. $9,000
c. $70,000
d. $63,000
118. Singer and McMann are partners
in a business. Singer’s original capital
was $40,000 and McMann’s was $60,000.
They agree to salaries of $12,000 and $18,000 for Singer and McMann,
respectively, and 10% interest on original
capital. If they agree to share
remaining profits and losses on a 3:2 ratio, what will Singer’s share of the income be if the income for the year is
$50,000?
a. $24,000
b. $22,000
c. $16,000
d. $23,400
119. Singer and McMann are partners
in a business. Singer’s original capital
was $40,000 and McMann’s was $60,000. They agree to salaries of $12,000 and
$18,000 for Singer and McMann, respectively, and 10% interest on original capital. If they agree to share
remaining profits and losses on a 3:2 ratio, what will McMann‘s share of the income be if the income for the year is
$30,000?
a. $20,000
b. $18,000
c. $18,600
d. $17,400
120. Singer and McMann are partners
in a business. Singer’s original capital
was $40,000 and McMann’s was $60,000.
They agree to salaries of $12,000 and $18,000 for Singer and McMann,
respectively, and 10% interest on original
capital. If they agree to share
remaining profits and losses on a 3:2 ratio, what will Singer’s share of the income (loss) be if the net loss for the
year is $10,000?
a. $(12,600)
b. $(14,000)
c. $(6,000)
d. $(10,000)
121. Singer and McMann are partners
in a business. Singer’s original capital
was $40,000 and McMann’s was $60,000.
They agree to salaries of $12,000 and $18,000 for Singer and McMann,
respectively, and 10% interest on original
capital. If they agree to share
remaining profits and losses on a 3:2 ratio, what will Singer’s share of the income be if the income for the year is
$15,000?
a. $9,000
b. $2,400
c. $1,000
d. $5,600
122. Immediately prior to the
admission of Allen, the Sanson-Jeremy Partnership assets had been adjusted to
current market prices, and the capital
balances of Sanson and Jeremy were $80,000 and $120,000 respectively. If the parties
agree that the business is worth $240,000, what is the amount of bonus that
should be recognized in the accounts
at the admission of Allen?
a. $60,000
b. $80,000
c. $40,000
d. $100,000
123. The Craig-Doran Partnership owns
inventory that was purchased for $85,000, has a current replacement cost of $54,500,
and is priced to sell for $98,000. At
what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be
admitted?
a. $98,000
b. $54,500
c. $85,000
d. $79,167
124. Paul and Roger are partners who
share income in the ratio of 3:2. Their
capital balances are $90,000 and $130,000, respectively. Income Summary has a credit balance of
$50,000 after the second closing entry.
What is Roger’s capital balance
after closing Income Summary to the capital accounts?
a. $155,000
b. $150,000
c. $110,000
d. $115,000
125. Paul and Roger are partners who
share income in the ratio of 3:2. Their capital
balances are $90,000 and $130,000, respectively. Income Summary has a credit balance of
$50,000 after the second closing entry.
What is Paul’s capital balance
after closing Income Summary to the capital accounts?
a. $108,000
b. $120,000
c. $115,000
d. $180,000
126. Jackson and Campbell have
capital balances of $100,000 and $300,000, respectively. Jackson devotes full time and Campbell one-half time to the
business. Determine the division of
$150,000 of net income when there is no reference
to division in partnership agreement.
a. $75,000 and $75,000 b. $37,500 and $112,500
c. $100,000 and $50,000 d. $112,500 and $37,500
127. Jackson and Campbell have
capital balances of $100,000 and $300,000, respectively. Jackson devotes full time and Campbell one-half time to the
business. Determine the division of
$150,000 of net income in ratio of time devoted to business.
a. $75,000 and $75,000 b. $37,500 and $112,500
c. $100,000 and $50,000 d. $112,500 and $37,500
128. Jackson and Campbell have
capital balances of $100,000 and $300,000, respectively. Jackson devotes full time and Campbell one-half time to the
business. Determine the division of
$150,000 of net income in ratio of capital balances.
a. $75,000 and $75,000 b. $37,500 and $112,500
c. $100,000 and $50,000 d. $50,000 and $100,000
129. Singer and McMann are partners
in a business. Singer’s original capital
was $40,000 and McMann’s was $60,000. They agree to salaries of $12,000 and
$18,000 for Singer and McMann, respectively, and 10% interest on original capital. If they agree to share
remaining profits and losses on a 3:2 ratio, what will McMann’s share of the income be if the income for the year is
$15,000?
a. $6,000
b. $9,400
c. $12,600
d. $14,000
130. Alpha and Beta are partners who
share income in the ratio of 1:2 and have capital balances of $40,000 and
$70,000 at the time they decide to
terminate the partnership. After all
noncash assets are sold and all liabilities are paid, there is a cash balance of $50,000. What amount of loss on realization should be
allocated to Alpha?
a. $60,000
b. $20,000
c. $30,000
d. $50,000
131. Teri, Doug, and Brian are
partners with capital balances of $20,000, $30,000, and $50,000,
respectively. They share income and losses in the ratio of
3:2:1. Income Summary with a debit
balance of $30,000 is closed to the capital accounts. Doug withdraws from the partnership. How much cash does he get upon withdrawal?
a. $30,000
b. $20,000
c. $40,000
d. $24,000
132. A partnership liquidation occurs
when
a.
a
new partner is admitted
b.
a
partner dies
c.
the
ownership interest of one partner is sold to a new partner
d.
the
assets are sold, liabilities paid, and business operations terminated
133.
The
balance sheet of Morgan and Rockwell was as follows immediately prior to the
partnership's liquidation: cash, $20,000;
other assets, $160,000; liabilities, $40,000; Morgan, capital, $60,000;
Rockwell, capital, $80,000. The other assets were sold for $139,000. Morgan and Rockwell share profits and losses
in a 2:1 ratio. As a final cash distribution from the liquidation, Morgan
will receive cash totaling
a. $46,000
b. $51,000
c. $60,000
d. $49,500
134. Harriet, Mickey, and Zack decide
to liquidate their partnership. All
assets are sold and the liabilities are paid.
Following these transactions, the capital balances and profit and loss
percentages are as follows: Harriet, $27,000 and 30%; Mickey, $(12,000) and
40%; Zack, $43,000 and 30%. Mickey is
unable to contribute any assets to
reduce the deficit. How much cash will
Harriet receive as a result of the partnership liquidation?
a. $27,000
b. $21,000
c. $23,400
d. $15,000
135. The remaining cash of a
partnership (after creditors have been paid) upon liquidation is divided among
partners according to their
a.
capital
balances
b.
contribution
of assets
c.
drawing
balances
d.
income
sharing ratio
136. A gain or loss on realization is
divided among partners according to their
a.
income
sharing ratio
b.
capital
balances
c.
drawing
balances
d.
contribution
of assets
137. Adriana and Belen are partners
who share income in the ratio of 3:2 and have capital balances of $50,000 and $90,000
at the time they decide to terminate the partnership. After all noncash assets are sold and all
liabilities are paid, there is a cash
balance of $90,000. How much cash should
be distributed to Adriana?
a. $50,000
b. $20,000
c. $30,000
d. $45,000
138. Everett, Miguel, and Ramona are
partners, sharing income 1:2:3. After
selling all of the assets for cash, dividing losses
on realization, and paying liabilities, the balances in the capital accounts
are as follows: Everett, $50,000 Cr.; Miguel,
$40,000 Dr.; and Ramona, $30,000 Cr. How
much cash is available for distribution to the partners?
a. $120,000
b. $30,000
c. $40,000
d. $90,000
139. Everett, Miguel, and Ramona are
partners, sharing income 1:2:3. After
selling all of the assets for cash, dividing losses
on realization, and paying liabilities, the balances in the capital accounts
are as follows: Everett, $50,000 Cr.; Miguel,
$40,000 Dr.; and Ramona, $30,000 Cr. How
much cash should be distributed to Everett assuming that Miguel pays the deficiency?
a. $50,000
b. $20,000
c. $30,000
d. $40,000
140. Antonio and Barbara are partners
who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000
at the time they decide to terminate the partnership. After all noncash assets are sold and all
liabilities are paid, there is a cash
balance of $80,000. What amount of loss
on realization should be allocated to Barbara?
a. $80,000
b. $10,000
c. $20,000
d. $30,000
141. Soledad and Winston are partners
who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000
at the time they decide to terminate the partnership. After all noncash assets are sold and all
liabilities are paid, there is a cash
balance of $130,000. What amount of loss
on realization should be allocated to Soledad?
a. $60,000
b. $27,500
c. $92,500
d. $32,500
142. Soledad and Winston are partners
who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000
at the time they decide to terminate the partnership. After all noncash assets are sold and all
liabilities are paid, there is a cash
balance of $130,000. What amount of loss
on realization should be allocated to Winston?
a. $110,000
b. $97,500
c. $42,500
d. $82,500
143. Partners Ken and Macki each have
a $40,000 capital balance and share income and losses in a ratio of 3:2. Cash equals
$20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $80,000,
the Macki’s capital account will
a. decrease by $16,000
b. decrease by $24,000
c. increase by $24,000
d. decrease by $40,000
144. Partners Ken and Macki each have
a $40,000 capital balance and share income and losses in a ratio of 3:2. Cash equals
$20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $50,000,
and each partner is personally insolvent, Partner Macki will eventually receive
cash of
a. $0
b. $10,000
c. $12,000
d. $20,000
145. Partners Ken and Macki each have
a $40,000 capital balance and share income and losses in a 3:2. Cash equals $20,000, noncash assets equal
$120,000, and liabilities equal $60,000.
If the noncash assets are sold for $60,000, and both partners agree to make up any capital deficits with
personal cash contributions, Partner Macki will eventually receive cash of
a. $0
b. $4,000
c. $16,000
d. $24,000
The capital accounts of Harrison and Marti have balances of
$160,000 and $110,000, respectively, on January 1, the beginning of the current fiscal year. On April 10, Harrison
invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000,
respectively, and net income for the year was $264,000. The articles of partnership make no reference to the
division of net income.
146. Based on this information, the
statement of partners’ equity would show what amount in the capital account for
Marti on December 31?
a. $216,000
b. $164,000
c. $380,000
d. $52,000
147. Based on this information, the
statement of partners’ equity would show what amount in the capital account for
Harrison on December 31?
a. $216,000
b. $164,000
c. $380,000
d. $52,000
148. Based on this information, the
statement of partners’ equity would show what amount as total capital for the partnership
on December 31?
a. $216,000
b. $164,000
c. $308,000
d. $52,000
The capital accounts of Hawk and Martin have balances of
$160,000 and $140,000, respectively, on January 1, the beginning of the current fiscal year. On April 10, Hawk invested
an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income
for the year was $258,000. The articles of partnership
make no reference to the division of net income.
149. Based on this information, the
statement of partners’ equity would show what amount in the capital account for
Martin on December 31?
a. $173,000
b. $211,000
c. $201,000
d. $232,000
150. Based on this information, the
statement of partners’ equity would show what amount in the capital account for
Hawk on December 31?
a. $211,600
b. $213,000
c. $201,000
d. $203,000
151. Based on this information, the
statement of partners’ equity would show what amount as total capital for the partnership
on December 31?
a. $384,600
b. $412,600
c. $404,000
d. $414,000
152. What is a partnership? List three advantages and three disadvantages
of the partnership form of business organization.
153. Jesse and Tim form a partnership
by combining the assets of their separate businesses. Jesse contributes accounts receivable with a face amount of $50,000
and equipment with a cost of $180,000 and accumulated depreciation of $100,000. The partners agree that the equipment is to
be valued at $58,000, that $3,500 of the accounts receivable are completely worthless and are not to be
accepted by the partnership, and that $2,000 is a reasonable allowance for the uncollectibility of the remaining
accounts receivable. Tim contributes cash of $21,000 and merchandise inventory of $44,500. The partners agree that the merchandise
inventory is to be valued at $48,000.
Journalize the entries to
record in the partnership accounts (a) Jesse’s investment and (b) Tim’s
investment.
154. Barton and Fallows form a
partnership by combining the assets of their separate businesses. Barton contributes accounts receivable with a face amount of $50,000 and equipment
with a cost of $190,000 and accumulated depreciation
of $100,000. The partners agree that the
equipment is to be valued at $85,000, that $3,500 of the accounts receivable are completely worthless and are not to be
accepted by the partnership, and that $1,500 is a reasonable allowance for the uncollectibility of the remaining
accounts receivable. Fallows contributes cash of $28,500 and merchandise
inventory of $55,500. The partners agree
that the merchandise inventory is to be valued
at $60,000. Journalize the
entries to record in the partnership accounts (a) Barton’s investment and (b)
Fallows’s investment.
155. Trevor Smith contributed
equipment, inventory, and $54,000 cash to a partnership. The equipment had a book value of $30,000 and a market value of
$36,000. The inventory had a book value
of $60,000, but only had a market value of
$20,000, due to obsolescence. The
partnership also assumed a $17,000 note payable owed by Smith that was used originally to purchase the equipment.
Provide the journal entry for Smith’s contribution to the
partnership.
156.
Emmett
and Sierra formed a partnership dividing income as follows:
1. Annual salary
allowance to Emmett of $48,000
2. Interest of 8% on
each partner’s capital balance on January 1
3. Any remaining net
income divided equally
Emmett and Sierra had $25,000 and $140,000, respectively, in
their January 1 capital balances.
Net income for the year
was $200,000.
How much net income should be distributed to Emmett?
157. Emerson and Dakota formed a
partnership dividing income as follows:
1. Annual salary
allowance to Emerson of $58,000
2. Interest of 8% on
each partner’s capital balance on January 1
3. Any remaining net
income divided equally
Emerson and Dakota had $25,000 and $140,000 respectively in
their January 1 capital balances.
Net income for the
year was $220,000.
How much net income should be distributed to Dakota?
158. Gavin invested $45,000 in the
Jason and Kelly partnership for ownership equity of $45,000. Prior to the
investment land was revalued to a
market value of $320,000 from a book value of $200,000. Jason and Kelly share net income in a 1:2 ratio.
a. Provide the journal entry for
the revaluation of land.
b.
Provide
the journal entry to admit Gavin.
159. Malcolm has a capital balance of
$90,000 after adjusting to fair market value.
Celeste contributes $45,000 to receive
a 25% interest in a new partnership with Malcolm.
Determine the amount and recipient of the partner bonus.
160. The capital accounts of Heidi
and Moss have balances of $90,000 and $65,000, respectively on January 1, the beginning of the current fiscal year. On April 10, Heidi invested an additional
$8,000. During the year, Heidi and Moss withdrew $40,000 and $32,000, respectively,
and net income for the year was $120,000.
The articles of partnership
make no reference to the division of net income.
Required:
(1)
Journalize
the entries to:
(a)
Close
the income summary account.
(b)
Close
the drawing accounts.
(2)
Prepare
a statement of partners’ equity for the partnership of Heidi and Moss.
161. After the tangible assets have
been adjusted to current market prices, the capital accounts of Harper and
Kahlil have balances of $60,000 and $90,000,
respectively. Fay is to be admitted to
the partnership, contributing $45,000 cash,
for which she is to receive an ownership equity of $60,000. All partners share
equally in income.
Required:
(1)
Journalize
the entry to record the admission of Fay, who is to receive a bonus of $15,000.
(2)
What
are the capital balances of each partner after the admission of the new
partner?
162. The partnership of Miner Company
began operations on January 1, with contributions as follows:
|
Waverley
|
$35,000
|
|
Marquez
|
40,000
|
The following additional partner transactions took place
during the year:
(1)
In
early January, Houston is admitted to the partnership by contributing $25,000
cash for a 25% interest.
(2)
Net
income of $160,000 was earned. In
addition, Waverley received a salary allowance
of $30,000 for the year. The
three partners agree to an income-sharing ratio equal to their capital balances after admitting Houston.
(3)
The
partners’ withdrawals are equal to half of their respective distributions of
income after salary (i.e., half their respective portions of the $130,000).
Required:
Prepare a statement of partnership equity for the year ended
December 31.
163. The capital accounts of Hope and
Indiana have balances of $115,000 and $95,000, respectively. Clint and Casey are to be admitted to the partnership. Clint buys onefifth of Hope’s interest for
$30,000 and onefourth of Indiana’s
interest for $20,000. Casey contributes
$45,000 cash to the partnership, for which he is to receive ownership equity of
$45,000.
Required:
(1)
Journalize
the entries to record the admission of (a) Clint and (b) Casey.
(2)
What
are the capital balances of each partner after the admission of the new
partners?
164.
Holly
and Luke formed a partnership, investing $240,000 and $80,000,
respectively. Determine their
participation in the year’s net income of $200,000 under each of the following
independent assumptions:
(a)
No
agreement concerning division of net income
(b)
Divided
in the ratio of original capital investment
(c)
Interest
at the rate of 15% allowed on original investments and the remainder divided in the ratio of 2:3
(d)
Salary
allowances of $50,000 and $70,000, respectively, and the balance divided
equally
(e)
Allowance
of interest at the rate of 15% on original investments, salary allowances of
$50,000 and $70,000,
respectively, and the remainder divided equally
165.
Holly
and Luke formed a partnership, investing $240,000 and $80,000,
respectively. Determine their
participation in the year’s net income of $380,000 under each of the following
independent assumptions:
(a)
No
agreement concerning division of net income
(b)
Divided
in the ratio of original capital investment
(c)
Interest
at the rate of 15% allowed on original investments and the remainder divided in the ratio of 2:3
(d)
Salary
allowances of $50,000 and $70,000, respectively, and the balance divided
equally
(e)
Allowance
of interest at the rate of 15% on original investments, salary allowances of
$50,000 and $70,000, respectively, and the remainder divided
equally
166. Gleason invested $90,000 in the
James and Kirk partnership for ownership equity of $90,000. Prior to the
investment, land was revalued to a market value of $425,000 from a book
value of $200,000. James and Kirk share net income in a 1:2 ratio.
a. Provide the journal entry for
the revaluation of land.
b.
Provide
the journal entry to admit Gleason.
167.
Gentry,
sole proprietor of a hardware business, decides to form a partnership with
Noel. Gentry’s accounts are as follows:
|
|
Book
Value
|
Market
Value
|
|
Cash
|
$ 25,000
|
$ 25,000
|
|
Accounts Receivable (net)
|
52,000
|
45,000
|
|
Inventory
|
112,000
|
125,000
|
|
Land
|
40,000
|
100,000
|
|
Building (net)
|
300,000
|
340,000
|
|
Accounts Payable
|
25,000
|
25,000
|
|
Mortgage Payable
|
145,000
|
145,000
|
Noel agrees to contribute $80,000 for a 20% interest. Journalize the entries to record (a) Gentry’s
investment and
(b) Noel’s investment.
168. Benson contributed land, inventory,
and $22,000 cash to a partnership. The
land had a book value of $65,000 and a market
value of $111,000. The inventory had a
book value of $60,000 and a market value of $58,000. The partnership
also assumed a $52,000 note payable owned by Benson that was used originally to
purchase the land.
Required:
Provide the journal entry for Benson’s contribution to the
partnership.
169.
Brad
Simmons, sole proprietor of a hardware business, decides to form a partnership
with Rich Winter. Brad’s accounts are as
follows:
|
|
Book Value
|
Market Value
|
|
Cash
|
$ 30,000
|
$ 30,000
|
|
Accounts Receivable (net)
|
55,000
|
45,000
|
|
Inventory
|
112,000
|
135,000
|
|
Land
|
40,000
|
100,000
|
|
Building (net)
|
500,000
|
540,000
|
|
Accounts Payable
|
25,000
|
25,000
|
|
Mortgage Payable
|
125,000
|
125,000
|
Rich agrees to contribute $170,000 for a 20% interest. Journalize the entries to record (a) Brad’s
investment and (b) Rich’s investment.
170. Rodgers and Winter had capital
balances of $60,000 and $90,000, respectively, at the beginning of the current
fiscal year. The articles of
partnership provide for salary allowances of $25,000 and $30,000, respectively,
an allowance of interest at 12% on the
capital balances at the beginning of the year; and with the remaining net
income divided equally. Net income for
the current year was $110,000.
(a)
Present
the income division section of the income statement for the current year.
(b)
Assuming
that the net income had been $65,000 instead of $110,000, present the income division section of the income
statement for the current year.
171. Sharp and Townson had capital
balances of $60,000 and $120,000, respectively, on January 1 of the current year.
On May 8, Sharp invested an additional $10,000 in the partnership. During the year, Sharp and Townson withdrew
$25,000 and $45,000, respectively. After
closing all expense and revenue accounts at the end of the year, Income Summary has a credit balance of
$90,000, which Sharp and Townson have agreed to split on a 2:1 basis.
(a)
Journalize
the entries to close the income summary account and the drawing accounts.
(b)
Prepare
the statement of partnership equity for the current year.
172. Reardon and Reese had capital
balances of $140,000 and $160,000, respectively, at the beginning of the
current fiscal year. The partnership
agreement provides for salary allowances of $25,000 and $35,000, respectively,
an allowance of interest at 12% on the
capital balances at the beginning of the year, and the remaining net income divided equally. Net income for the current
year was $120,000.
(a)
Present
the income division section of the income statement for the current year.
(b)
Assuming
that the net income had been $76,000 instead of $120,000, present the income division section of the income
statement for the current year.
173. Jackson and Campbell have
capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the
business. Determine the division of
$150,000 of net income under each of the following
assumptions:
(a)
No
agreement as to division of net income
(b)
In
ratio of capital balances
(c)
In
ratio of time devoted to business
174. Jackson and Campbell have
capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the
business. Determine the division of
$120,000 of net income under each of the following
assumptions:
(a)
No
agreement as to division of net income
(b)
In
ratio of capital balances
(c)
In
ratio of time devoted to business
(d)
Interest
of 10% on capital balances and the remainder divided equally
(e)
Interest
of 10% on capital balances, salaries of $40,000 to Jackson and $20,000 to Campbell, and the remainder divided equally
175. Derek and Hailey, partners
sharing net income in the ratio of 2:1, admit Ben to the partnership in
accordance with the following
agreement:
(1)
Merchandise
inventory recorded in the partnership accounts at $62,500 is to be revalued at its current replacement price of $68,500.
(2)
Ben
is to invest $48,000 in cash for a 30% interest in the partnership, which has
total net assets (assets minus
liabilities) of $130,000 after the inventory is revalued.
(3)
The
income-sharing ratio of Derek, Hailey, and Ben is to be 2:1:1.
Required:
(a)
Journalize
the entries to record the revaluation of merchandise inventory, and the
admission of Ben to the partnership.
(b)
A
few years later, the capital balances of Derek, Hailey, and Ben were $150,000,
$90,000, and $55,000,
respectively. At this time, Kacy is
admitted to the partnership by the purchase of
onehalf of Derek’s interest for $80,000.
Journalize the entry to record the admission of Kacy to the partnership.
176. Kala and Leah, partners in Best
Designs, have capital balances of $40,000 and $60,000 respectively. Adam joins the
partnership by buying onehalf of Kala’s interest for $30,000. In addition, because of Adam’s outstanding
sales skills, the partners agree to
increase his interest to 40% if he invests another $10,000. The income-sharing ratio of Kala, Leah, and Adam is 4:3:1.
(a)
Journalize
the entries to record the admission of Adam to the partnership.
(b)
Immediately
after Adam’s admission to the partnership, Leah sells onefourth of her interest
to Denton for $35,000. Journalize the
entry to record this transaction.
177. Amazon invested $128,000 in the
Jungle and River partnership for ownership equity of $128,000. Prior to the investment, equipment was revalued to a
market value of $90,000 from a book value of $72,000. Jungle and River share net income in a 2:1 ratio.
Required:
a. Provide the journal entry for
the revaluation of equipment.
b.
Provide
the journal entry to admit Amazon.
178. Watson purchased onehalf of
Dalton’s interest in the Patton and Dalton partnership for $45,000. Prior to
the investment, land was revalued to a
market value of $135,000 from a book value of $93,000. Patton and Dalton share net income equally. Dalton had a
capital balance of $35,000 prior to these transactions.
Required:
a. Provide the journal entry for
the revaluation of land.
b. Provide the journal entry to
admit Watson.
179. Wonder purchased onehalf of
Darwins' interest in the Todd and Darwin’s partnership for $50,000. Prior to the investment, land was revalued to a market
value of $175,000 from a book value of $100,000. Todd and Darwin share net income equally. Darwin had a
capital balance of $40,000 prior to these transactions.
Required:
a. Provide the journal entry for
the revaluation of land.
b. Provide the journal entry to
admit Wonder.
180. S. Stephens and J. Perez are
partners in Space Designs. Stephens and Perez share income equally. D.
Fredricks will be admitted to the
partnership. Prior to the admission, equipment was revalued downward by $8,000.
The capital balances of each partner
are $100,000 and $139,000, respectively, prior to the revaluation.
Required:
(1)
Provide
the journal entry for the asset revaluation.
(2)
Provide
the journal entry for Fredricks’
admission under the following independent situations:
a.
Fredricks
purchased a 20% interest for $50,000.
b.
Fredricks
purchased a 30% interest for $125,000.
Supporting calculations for the bonus:
Equity of S. Stephens $ 96,000
Equity of J. Perez 135,000
Contribution by D. Fredricks 125,000
Total equity after admitting D.
Fredricks $356,000
Harris’s equity interest after admission × 30%
Harris’s equity after admission $106,800
Contribution by D. Fredricks $125,000
Harris’s equity after admission
106,800
Bonus paid to S. Stephens and J.
Perez $ 18,200
181. Prior to liquidating their
partnership, Samuel and Brian had capital accounts of $60,000 and $240,000,
respectively. The partnership assets
were sold for $120,000. The partnership had no liabilities. Samuel and Brian
share income and losses equally.
Required:
a. Determine the amount of Samuel’s
deficiency.
b. Determine the amount distributed to Brian, assuming
Samuel is unable to satisfy the deficiency.
182.
Prior
to liquidating their partnership, Craig and Jenny had capital accounts of
$70,000 and $110,000, respectively. The
partnership assets were sold for $285,000.
The partnership had $25,000 of liabilities. Craig and Jenny
share income and losses equally.
Determine the amount received by Jenny as a final distribution from liquidation of the partnership.
183. Prior to liquidating their
partnership, Porter and Robert had capital account balances of $160,000 and
$100,000, respectively. Prior to liquidation, the partnership had no
cash assets other than what was realized from the sale of the partnership assets. These partnership
assets were sold for $250,000. The
partnership had $10,000 of liabilities. Porter
and Robert share income and losses equally.
Required:
Determine the amount received by Porter as a final
distribution from liquidation of the partnership.
184. Immediately prior to the process
of liquidation, partners Micco, Niccum, and Orwell have capital balances of $70,000,
$20,000, and $30,000, respectively.
There is a cash balance of $10,000, noncash assets total $160,000, and liabilities total $50,000. The partners share net income and losses in
the ratio of 2:2:1.
Journalize the entries to record the liquidation outlined
below, using Assets as the account title for the noncash assets and Liabilities as the account title for all creditors'
claims.
(a)
Sold
the noncash assets for $80,000 in cash.
(b)
Divided
the loss on realization.
(c)
Paid
the liabilities.
(d)
Received
cash from the partner with the deficiency.
(e)
Distributed
the cash to the partners.
185. Hamir, Darci, and Pete are
partners sharing income 3:2:1, respectively. After the firm’s loss from
liquidation is distributed, the
capital account balances were: Hamir, $45,000 Dr.; Darci, $90,000 Cr., and
Pete, $64,000 Cr. If Hamir is personally bankrupt and unable to
pay any of the $45,000, what will be the amount of cash received by Darci and Pete upon liquidation? Show your work.
186. After discontinuing the ordinary
business operations and closing the accounts on May 7, the ledger of the partnership of Anna, Brian, and Cole
indicated the following:
|
Cash
|
$ 7,500
|
|
|
Noncash Assets
|
105,000
|
|
|
Liabilities
|
|
$ 27,500
|
|
Anna, Capital
|
|
45,000
|
|
Brian, Capital
|
|
15,000
|
|
Cole, Capital
|
|
25,000
|
|
|
$112,500
|
$112,500
|
The partners share net income and losses in the ratio of 3:2:1. Between May 7-30, the noncash assets were
sold for $150,000, the liabilities
were paid, and the remaining cash was distributed to the partners.
(a)
Prepare
a statement of partnership liquidation.
(b)
Assume
the same facts as in (a), except that the noncash assets were sold for $45,000 and any partner with a capital deficiency
pays the amount of the deficiency to the partnership. Prepare a statement of partnership
liquidation.
187. Top Dog, LLC provides repair
services for oil rigs. The firm has 5 members in the LLC, which did not change between the first year and the second year.
During Year 2, the business expanded into three new regions of the country. The following revenue and employee
information is provided:
|
|
Year 1
|
Year 2
|
|
Revenues (in thousands)
|
$60,525
|
$58,500
|
|
Number of employees
|
120
|
160
|
Required:
a.
For
Year 1 and Year 2, determine the revenue per employee (excluding members).
b. Interpret the trend between the
two years.
188. Easy Sailing, LLC provides
repair services for commercially-owned boats and yachts. The firm has 5 members
in the LLC, which did not change
between the first year and the second year. During Year 2, the business
expanded into three new regions of the
country. The following revenue and employee information is provided:
|
|
Year
1
|
Year
2
|
|
Revenues
(in thousands)
|
$50,625
|
$57,750
|
|
Number
of employees
|
125
|
175
|
Required:
a.
For
Year 1 and Year 2, determine the revenue per employee (excluding members).
b. Interpret the trend between the
two years.
Match each
statement to the appropriate term (a-h):
a. deficiency
b. realization
c. proprietorship
d. partnership
e. mutual agency
f.
liquidation
g. income sharing ratio
h. statement of partnership equity
189. Where changes in partner capital
accounts for a period of time are reported
190. The share of loss on realization
is greater than the balance in partner capital
191. Each partner may act on behalf
of the entire partnership so that the liabilities created by one partner become
the liabilities of all partners
192. An association of two or more
persons to own and manage a business for profit
193. Business owned by a single
individual
194. A step during liquidation when
partnership assets are sold
195. Used to divide the excess of
allowances over loss when net losses occur
196. The winding-up process of a
partnership
Match each statement to the appropriate term (a-h).
a. partnership
b. partnership agreement
c. distribution of remaining cash
to partners
d. mutual agency
e. equally
f.
death
of a partner
g. liquidation
h. unlimited liability
197. When a partnership cannot pay
its debts with business assets, the partners must use personal assets to meet
the debt
198. Agreement that is the contract
between partners
199. A voluntary association of two
or more persons who co-own a business for profit
200. Every partner can bind the
business to a contract within the scope of the partnership’s regular business
operations
201. The process of going out of
business by selling the entity’s assets and paying its liabilities
202. Without an agreement, the law
will stipulate this method of sharing profits and losses
203. The final step in the
liquidation of a partnership
204. Causes the closing of accounts
and settling with a partner's estate
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