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Exam 12: Accounting for Partnerships

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Question 61

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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?

A) $320,000
B) $362,500
C) $195,000
D) $445,000
E) $357,500

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

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Question 62

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

A) True
B) False

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Question 63

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During the closing process, partner's capital accounts are ________ for their share of net income and ________ for their share of net loss.

Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer 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 Singer's capital account?

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:

The life of a partnership is ________ in duration.

Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer 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 Wheadon's capital account?

In a Limited Partnership, there must be more than one general partner.

When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000. -For the partnership, the amounts recorded for the building and for Fontaine's Capital account are:

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

In a limited partnership the general partner has unlimited liability.

If at the time of partnership liquidation, a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency, then that partner is entitled to share in the final distribution of cash.

In closing the accounts at the end of a period, the partners' capital accounts are credited for their share of the partnership net income or debited for their share of the partnership loss.

A capital deficiency can arise from liquidation losses, excessive withdrawals before liquidation, or recurring losses in prior periods.

Harvey and Quick have decided to form a partnership. Harvey is going to contribute a depreciable asset to the partnership as his equity contribution to the partnership. The following information regarding the asset to be contributed by Harvey is available: $\begin{array}{ll}\text { Historical cost of the asset } & \$ 76,000 \\\text { Accumulated depreciation on the asset } & \$ 40,000 \\\text { Note payable secured by the asset* } & \$ 18,000 \\\text { Agreed-upon market value of the asset } & \$ 45,000\end{array}$ *will be assumed by the partnership Based on this information, Harvey's beginning equity balance in the partnership will be:

Brown invested $200,000 and Freeman invested $150,000 in a partnership. They agreed to an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns $205,000 in income are:

Pat and Nicole formed Here & There as a limited liability company. Unless the member owners elect to be treated otherwise, the Internal Revenue Service will tax the LLC as:

If partners agree on how to share income, but say nothing about losses, then losses are shared ________.

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.