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Exam 16: Partnership Accounting

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Question 81

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The end of a partnership is referred to as its dissolution.

A) True
B) False

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Question 82

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A ________ is an unincorporated association of two or more people to pursue a business for profit as co-owners.

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Question 83

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Identify and discuss the key characteristics of partnerships.Also,identify other organizations that possess partnership characteristics.

Peters,Chong,and Aaron are dissolving their partnership.Their partnership agreement allocates each partner an equal share of all income and losses.The current period's ending capital account balances are Peters,$54,000; Chong,$42,000; and Aaron,$(2,000) .After all assets are sold and liabilities are paid,there is $94,000 in cash to be distributed.Aaron is unable to pay the deficiency.The journal entry to record the distribution should be:

Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000,respectively.Their partnership agreement calls for Farmer to receive a $70,000 per year salary.The remaining income or loss is to be divided equally. -Assuming net income for the current year is $135,000,the journal entry to allocate net income is:

If a partner is unable to cover a deficiency and the other partners absorb the deficiency,then the partner with the deficiency is thus relieved of all liability.

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.

Which of the following statements is true?

Cinema Products LP is organized as a limited partnership that sells movie props.Information related to capital balances is given below.Compute the partner return on equity for each limited partner.How would each partner evaluate the success of the partnership? What would you recommend the partners do with respect to additional investments or withdrawals? $\begin{array} { l l l l } & \text { Turner } & \text { Kelly } & \text { Total } \\\text { Capital balance, begirning of year } & 8 9 0 , 0 0 0 & 570,000 & 1,460,000 \\\text { Net income for current year } &8 5 , 0 0 0 & 65,000 & 150,000 \\\text { Withdrawals for current year } & 40,000 & 25,000 & 65,000\end{array}$

Discuss the options for the allocation of income and loss among partners,including with and without a partnership agreement.

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?

A capital deficiency means that:

Certain corporations with 100 or fewer stockholders can elect to be treated as a partnership for income tax purposes.These corporations are called Subchapter S or simply S corporations.

Sharon and Nancy formed a partnership by making capital contributions of $130,000 and $195,000 respectively.The annual partnership income of $230,000 is to be allocated assuming a salary allowance of $40,000 to Sharon and $35,000 to Nancy; interest allowances of 12% on their initial capital investments; and the balance shared equally.Prepare the entries to record the initial capital investments,the allocation of net income,and close the partner's withdrawal accounts assuming that Sharon withdrew $50,000 and Nancy withdrew $45,000.

What are the ways that a new partner can be admitted to an existing partnership? Explain how to account for the admission of the new partner under each of these circumstances.

Tower,Knight,and Spears are partners who share income and loss in a 3:2:2 ratio.The partnership's capital balances are as follows: Tower,$332,000; Knight,$124,000; and Spears,$214,000.Spears decides to withdraw from the partnership,and the partners agree not to have the assets revalued upon Spears' retirement.Prepare journal entries to record Spears' withdrawal from the partnership under each of the following separate assumptions: Spears (a)sells his interest to Conner for $200,000 after Tower and Knight approve the entry of Conner as a partner; (b)is paid $214,000 in partnership cash for his equity; (c)is paid $205,000 in partnership cash for his equity; (d)is paid $220,000 in partnership cash for his equity.

Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000.Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. -Wallace sold one-half of his partnership interest to Prince for $55,000 when his capital balance was $78,000.The partnership would record the admission of Prince into the partnership as:

Barber and Atkins are partners in an accounting firm and share net income and loss equally.Barber's beginning partnership capital balance for the current year is $285,000,and Atkins' beginning partnership capital balance for the current year is $370,000.The partnership had net income of $250,000 for the year.Barber withdrew $90,000 during the year and Atkins withdrew $100,000. -What is Barber's return on equity?

Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000,respectively.Their partnership agreement calls for Farmer to receive a $70,000 per year salary.The remaining income or loss is to be divided equally. -If the net income for the current year is $135,000,then Farmer and Taylor's respective shares are:

Partnership accounting is the same as accounting for: