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Exam 16: Partnership Accounting

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Question 91

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MacArthur, Strong, and Viet form a partnership. MacArthur contributes $190,000 cash and Strong contributes $200,000 in cash. Viet contributes equipment worth $215,000. Prepare the single journal entry to record the formation of this partnership.

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Cash ($190,000 + $200,000) 390...

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Question 92

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Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Singer's capital account?

A) $20,000.
B) $25,000.
C) $30,000.
D) $40,000.
E) $75,000.

F) None of the above
G) A) and D)

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Question 93

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Tower, Knight, and Spears are partners who share income and loss in a 4:2:2 ratio. The partnership's capital balances are as follows: Tower, $292,000; Knight, $114,000; and Spears, $194,000. Damsel is admitted to the partnership on March 1 with a 25% equity. Prepare the journal entries to record Damsel's entry into the partnership under each of the following separate assumptions: Damsel invests (a) $200,000; (b) $180,000; and (c) $240,000.

Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Masters, $15,000; Hardy, $15,000; Rowen, $30,000. After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $54,000 in cash to be distributed. The general journal entry to record the final distribution would be:

During the closing process, each partner's withdrawals account is closed to ________.

Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage, $(5,000) . After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency. What amount of cash will Gage receive upon liquidation?

If the partners agree on a formula to share income and say nothing about losses, then the losses are shared using the same formula.

Lemon and Parks are partners. On October 1, Lemon's capital balance is $75,000, and Parks' capital balance is $125,000. With the partnership's approval, Parks sells ½ of his partnership interest to Tambling for $70,000. Prepare the journal entry to record this transaction in the partnership records.

Montez and Flair formed a partnership. Montez contributed $15,000 cash and accounts receivable worth $11,000. Flair contributed cash of $5,000; inventory valued at $16,000; and supplies valued at $2,000. Prepare the journal entries to record each partner's investment in the new partnership.

In the absence of a partnership agreement, the law says that income of a partnership will be shared equally by the partners.

Bloom and Plant organize a partnership on January 1. Bloom's initial investment consists of $800 cash, $1,700 equipment and a $500 note payable reflecting a bank loan for the new business. Plant's initial investment is cash of $2,000. These amounts are the values agreed on by both partners. The journal entry to record Bloom's investment is:

Kramer and Feldman Company is organized as a partnership. At the prior year-end, Kramer's equity balance was $352,000 and Feldman's was $256,000. For the current year, partnership net income is $137,000 ($77,000 allocated to Kramer and $60,000 allocated to Feldman); withdrawals are $87,000 ($45,000 for Kramer and $42,000 for Feldman). Compute the total partnership return on equity and the individual partner return on equity ratios.

A partnership that has at least two classes of partners, general and limited, allows the limited partners to have no personal liability beyond the amounts they invest in the partnership, and the limited partners have no active role except as specified in the partnership agreement is a ________ partnership.

Palmer withdraws from the FAP Partnership. The remaining partners agree to buy out her share for her capital balance of $65,000. Prepare the journal entry to record the withdrawal from the partnership.

If a partner withdraws from a partnership and the recorded value of his or her equity is overstated, then a bonus goes to ________; if the recorded value of the withdrawing partner's equity is understated, then a bonus goes to ________.

The following information is available on PDC Enterprises, a partnership, for the most recent fiscal year: Total partnership capital at beginning of the year $1,080,000 Partnership net income for the year $1,250,000 Withdrawals by partners during the year $320,000 Additional investments by partners during the year $ 70,000 There are three partners in TGR Enterprises: Pearson, Darling and Cathay. At the end of the year, the partners' capital accounts were in the ratio of 2:2:1, respectively. Compute the ending capital balances of Cathay.

Dalworth and Minor have decided to form a partnership. Minor is going to contribute a depreciable asset to the partnership as her equity contribution to the partnership. The following information regarding the asset to be contributed by Minor is available: Historical cost of the asset $276,000 Accumulated depreciation on the asset $140,000 Note payable secured by the asset and assumed by the partnership $118,000 Agreed-upon market value of the asset $245,000 Based on this information, Minor's beginning equity balance in the partnership will be:

Bloom and Plant organize a partnership on January 1. Bloom's initial investment consists of $800 cash, $1,700 equipment and a $500 note payable reflecting a bank loan for the new business. Plant's initial investment is cash of $2,000. These amounts are the values agreed on by both partners. The journal entry to record Plant's investment is:

Limited liability partnerships are designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.