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Exam 16: Partnership Accounting

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Question 61

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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:

A) Peters $140,000; Chong $130,000.
B) Peters $146,200; Chong $136,200.
C) Peters $145,000; Chong $135,000.
D) Peters $133,800; Chong $123,800.
E) Peters $166,027; Chong $156,027.

F) B) and E)
G) None of the above

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Question 62

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The Redtail Partnership agrees to dissolve. The remaining cash balance after liquidating partnership assets and liabilities is $70,000. The final capital account balances are: Paulson, $35,000; Gray, $25,000; and Chang, $10,000. Prepare the journal entry to distribute the remaining cash to the partners.

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Paulson, Capital …………………………………...

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Question 63

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Assets invested by a partner into a partnership become the property of the business.

Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Caitlin, $120,000; Chris, $80,000; and Molly, $100,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $160,000. The balance in Paul's capital account immediately after his admission is:

Lin and Coral invested $99,000 and $126,000, respectively, in a partnership they began one year ago. Assuming the partnership earned $120,000 during the current year; compute the share of the net income each partner should receive under each of these independent assumptions. 1. The partnership contract specifies salary allowances of $45,000 to Lin and $60,000 to Coral, and any balance shared equally. $\begin{array} { | l | l | l | l | } \hline & \text { Lin } & \text { Coral } & \text { Allocated } \\\hline \text { Net Income } & & & \\\hline \text { Salary allowance } & & & \\\hline \text { Remainder } & & & \\\hline \text { Allocation of remainder } & & & \\\hline \text { Total } & & & \\\hline\end{array}$ 2. The partnership contract specifies salary allowances of $45,000 to Lin and $60,000 to Coral, interest allowance of 10% on the partners' beginning capital balance for the year. $\begin{array} { | l | c | c | c | } \hline & \text { Lin } & \text { Coral } & \text { Allocated } \\\hline \text { Net Income } & & & \\\hline \text { Salary allowance } & & & \\\hline \text { Interest allowance } & & & \\\hline \text { Remainder } & & & \\\hline \text { Allocation of remainder } & & & \\\hline \text { Total } & & & \\\hline\end{array}$

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 ending equity?

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 Atkins's return on equity?

In the absence of a partnership agreement, the law says that income (and loss) should be allocated based on:

When a partner leaves a partnership, the present partnership ends, but the business can still continue to operate.

Olivia Greer is a partner in Made for You. An analysis of Greer's capital account indicates that during the most recent year, she withdrew $30,000 from the partnership. Her share of the partnership's net loss was $16,000 and she made an additional equity contribution of $10,000. Her capital account ended the year at $150,000. What was her capital balance at the beginning of the year?

A partnership agreement:

Partners' withdrawals are debited to their separate withdrawals accounts.

A bonus may be paid in all of the following situations except:

A capital deficiency exists when at least one partner has a debit balance in his or her capital account at the point of final cash distribution during liquidation.

Mace and Bowen are partners and share equally in income or loss. Mace's current capital balance is $135,000 and Bowen's is $120,000. Mace and Bowen agree to accept Kent with a 30% interest in the partnership. Kent invests $115,000 in the partnership. The balances in Mace's and Bowen's capital accounts after admission of the new partner equal:

When a partnership is liquidated, its business is ended.

The partnership agreement for Wilson, Pickett & Nelson, a general partnership, provided that profits be shared between the partners in the ratio of their financial contributions to the partnership. Wilson contributed $100,000, Pickett contributed $50,000 and Nelson contributed $50,000. In the partnership's first year of operation, it incurred a loss of $110,000. What amount of the partnership's loss, rounded to the nearest dollar, should be absorbed by Nelson?

Current partners usually require any new partner to pay a bonus for the privilege of joining when the current value of a partnership is greater than the recorded amounts of equity.

Leto and Duncan allow Gunner to purchase a 25% interest in their partnership for $30,000 cash. Gunner has exceptional talents that will enhance the partnership. Leto's and Duncan's capital account balances are $55,000 each. The partners have agreed to share income or loss equally. Prepare the general journal entry to record the admission of Lepley to the partnership.

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