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Exam 16: Reporting and Analyzing Partnerships

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Question 31

Multiple Choice

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Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $180,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Smart is investing $120,000 cash. The balance of Maxwell's Capital account will be:

A) $180,000.
B) $124,000.
C) $56,000.
D) $64,000.
E) $60,000.

F) A) and E)
G) C) and D)

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Question 32

Multiple Choice

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Advantages of a partnership include:

A) Limited life.
B) Mutual agency.
C) Unlimited liability.
D) Co-ownership of property.
E) Voluntary association.

F) B) and C)
G) D) and E)

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Question 33

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Salary allowances are reported as salaries expense on a partnership income statement.

Which of the following statements is true?

__________________ implies that each partner in a partnership can be called on to personally pay a partnership's debts.

Fellows and Marshall are partners in an accounting firm and share net income and loss equally. Fellows' beginning partnership capital balance for the current year is $185,000, and Marshall's beginning partnership capital balance for the current year is $260,000. The partnership had net income of $350,000 for the year. Fellows withdrew $80,000 during the year and Marshall withdrew $70,000. What is Marshall's return on equity?

A partnership recorded the following journal entry: This entry reflects:

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

Jakobs, Penn, and Lundt are partners with beginning-of-year capital balances of $400,000, $320,000, and $160,000, respectively. The partners agreed to share income and loss as follows: Salary of $30,000 to Jakobs, $50,000 to Penn, and $36,000 to Lundt. An interest allowance of 8% on beginning-of-year capital balances. Any remaining balance is to be divided equally. If partnership net income for the year is $190,000, determine each partner's share and make the appropriate journal entry to close the Income Summary to the capital accounts.

Darien and Hayden agree to accept Kevin into their partnership. Kevin will contribute $22,000 in cash. Prepare the journal entry to record this transaction.

Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $150,000 for its first year, what amount of income is credited to Cox's capital account?

Partnership accounting does not:

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

Peters and Chong are partners and share equally in income or loss. Peters' current capital balance is $140,000 and Chong's is $130,000. Peters and Chong agree to accept Aaron with a 30% interest in the partnership. Aaron invests $98,000 in the partnership. The balances in Peters's and Chong's capital accounts after admission of the new partner equal:

An unincorporated association of two or more persons to pursue a business for profit as co-owners is a:

Wallace, Simpson, and Prince are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Wallace, $68,000; Simpson, $90,000; and Prince, $42,000. Royal is admitted to the partnership on July 1 with a 20% equity and invests $50,000. The partnership would record the admission of Royal into the partnership as:

When partners invest in a partnership, their capital accounts are debited for the amount invested.

Feldt is a partner in Feldt & Dodson Company. Feldt's share of the partnership income is $18,600 and her average partnership equity is $155,000. Her partner return on equity equals 8.33. Partner Return on Equity = Partnership Income/Average Partnership Equity Partner Return on Equity = $18,600/$155,000 = 0.12 = 12%

The following information is available on TGR Enterprises, a partnership, for the most recent fiscal year: There are three partners in TGR Enterprises: Tracey, Gregory and Rodgers. At the end of the year, the partners' capital accounts were in the ratio of 2:1:2, respectively, based on their proportionate investments and withdrawals. Compute the ending capital balances of the three partners.

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. The journal entry to record the distribution should be: