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Exam 12: Accounting for Partnerships and Limited Liability Companies

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Question 101

Multiple Choice

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Match each statement to the appropriate term (a-h) : -The share of loss on realization is greater than the balance in partner capital

A) Deficiency
B) Realization
C) Proprietorship
D) Partnership
E) Mutual agency
F) Liquidation
G) Income-sharing ratio
H) Statement of partnership equity

I) D) and F)
J) All of the above

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Question 102

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When compared to a corporation, one of the major disadvantages of the partnership is its limited life.

A) True
B) False

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Question 103

Multiple Choice

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Paul and Roger are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000, respectively. The partnership generated net income of $50,000 for the year. What is Paul's capital balance after closing the revenue and expense accounts to the capital accounts?

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.

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?

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.

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?

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

Match each statement to the appropriate term (a-h) : -Where changes in partner capital accounts for a period of time are reported

Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $40,000 and $60,000, respectively. The partnership generated net income of $20,000. What is Saturn's capital balance after closing the revenue and expense accounts to the capital accounts?

When a new partner is admitted to a partnership, there should be a (n)

S. Stephens and J. Perez are partners in Space Designs. Stephens and Perez share income equally. D. Fredericks 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 Fredericks' admission under the following independent situations: (a)Fredericks purchased a 20% interest for $50,000. (b)Fredericks purchased a 30% interest for $125,000.​

Partnership income and losses are usually divided on the basis of interest, salaries, and stated ratios because

If the share of losses on realization of the sale of noncash assets exceed the balance in a partner's capital account, the resulting balance is called a deficiency.

Which of the following is a characteristic of a general partnership?

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.

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 the 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?

Partners Ken and Macki each have a $40,000 capital balance and share income and losses in the 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, Macki's capital account will

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?

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 (a) Journalize the entry to record the admission of Fay, who is to receive a bonus of $15,000. (b) What are the capital balances of each partner after the admission of the new partner?​