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Exam 12: Accounting for Partnerships

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Question 21

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Mutual agency means each partner can commit or bind the partnership to any contract within the scope of the partnership business.

A) True
B) False

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Question 22

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Marquis and Bose agree to accept Sherman into their partnership.Sherman will contribute $25,000 in cash.Prepare the journal entry to record this transaction.

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Cash………………………… 25,00...

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Question 23

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The withdrawals account of each partner is:

Paco and Kate 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.

Which of the following statements is true?

Accounting procedures for all items are the same for both C corporations and S corporations in all aspects.

Rice,Hepburn,and DiMarco formed a partnership with Rice contributing $60,000,Hepburn contributing $50,000 and DiMarco 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 DiMarco's capital account?

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from the acts of other partners is a ________________________ partnership.

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a:

A relatively new form of business organization that protects partners with limited liability,allows limited partners to assume an active management role,and is taxed as a partnership is a ______________________________

Armstrong plans to leave the FAP Partnership.The recorded balance in her capital account is $48,000.The remaining partners,Peters and Floyd,agree to pay Armstrong $58,000 cash and Armstrong accepts.The partners share income and loss equally.Prepare the journal entry to record the transaction.

Smith,West,and Krug form a partnership.Smith contributes $180,000,West contributes $150,000,and Krug contributes $270,000.Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally.If the partnership reports income of $174,000 for its first year,what amount of income is credited to West's capital account?

Badger and Fox are forming a partnership.Badger invests a building that has a market value of $350,000; the partnership assumes responsibility for a $125,000 note secured by a mortgage on the property.Fox invests $100,000 in cash and equipment that has a market value of $75,000.For the partnership,the amounts recorded for Badger's Capital account and for Fox's Capital account are:

To buy into an existing partnership,the new partner must contribute cash to the partnership.

Sierra and Jenson formed a partnership.Sierra contributed $25,000 cash and accounts receivable worth $11,000.Jenson's investment included cash,$5,000; inventory,$18,000; and supplies,$1,000.Prepare the journal entries to record each partner's investment in the new partnership.

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

Khalid,Dina,and James 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 Khalid,$50,000 to Dina,and $55,000 to James.An interest allowance of 10% 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.

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

Partner return on equity is calculated as ______________________________.

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