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Exam 12: Accounting for Partnerships and Limited Liability Companies

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Question 31

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Jackson and Campbell have capital balances of $100,000 and $300,000, respectively. Jackson devotes full time and Campbell devotes one-half time to the business. Determine the division of $150,000 of net income when there is no reference to division in the partnership agreement.​

A) $75,000 and $75,000
B) $37,500 and $112,500
C) $100,000 and $50,000
D) $112,500 and $37,500

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

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Question 32

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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 in a 3:2 ratio, what will Singer's share of the income (loss) be if the net loss for the year is $10,000?

A) ($12,600)
B) ($14,000)
C) ($6,000)
D) ($10,000)

E) A) and D)
F) B) and C)

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Question 33

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Xavier and Yolanda have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 20%; salary allowances of $27,000 and $18,000, respectively; and the remainder to be divided equally. How much of the net income of $81,000 is allocated to Xavier?

An advantage of the partnership form of business organization is

Barton and Fallows form a partnership by combining the assets of their separate businesses. Barton contributes accounts receivable with a face amount of $50,000 and equipment with a cost of $190,000 and accumulated depreciation of $100,000. The partners agree that the equipment is to be valued at $85,000, that $3,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $1,500 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Fallows contributes cash of $28,500 and merchandise inventory of $55,500. The partners agree that the merchandise inventory is to be valued at $60,000. Journalize the entries to record in the partnership accounts (a) Barton's investment and (b) Fallows's investment.

In a partnership liquidation, if a partner has a debit capital balance in his or her capital account, he or she is responsible for contributing personal assets sufficient to eliminate the deficit.

Reardon and Reese had capital balances of $140,000 and $160,000, respectively, at the beginning of the current fiscal year. The partnership agreement provides for salary allowances of $25,000 and $35,000, respectively; an allowance of interest at 12% on the capital balances at the beginning of the year; and the remaining net income divided equally. Net income for the current year was $120,000. (a)Present the Division of net income statement for the current year. (b)Assuming that the net income had been $76,000 instead of $120,000, present the Division of net income section of the income statement for the current year.​​

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 in a 3:2 ratio, what will Singer's share of the income be if the income for the year is $15,000?

Based on this information, the statement of partners' equity would show what amount as total capital for the partnership on December 31?

When a partnership is formed, assets contributed by the partners should be recorded on the partnership books at their

If the articles of partnership provide for annual salary allowances of $36,000 and $18,000 to X and Y, respectively, and net income is $30,000, X's share of net income is $20,000.

If not enough partnership cash or other assets are available to pay the withdrawing partner, a liability may be created for the amount owed the withdrawing partner.

The Craig-Doran Partnership owns inventory that was purchased for $85,000, has a current replacement cost of $54,500, and is priced to sell for $98,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted?

Seth and Beth have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remainder to be divided equally. How much of the net income of $42,000 is allocated to Seth?

Sadie and Sam share income equally. For the current year, the partnership net income is $40,000. Sadie made withdrawals of $14,000 and Sam made withdrawals of $15,000. At the beginning of the year, the capital account balances were: Sadie, Capital, $42,000; Sam, Capital, $58,000. Sam's capital account balance at the end of the year is

Douglas pays Selena $45,000 for her 30% interest in a partnership with net assets of $125,000. Following this transaction, Douglas's capital account should have a credit balance of

Match each statement to the appropriate term (a-h) : -A step during liquidation when partnership assets are sold

Prior to liquidating their partnership, Porter and Robert had capital account balances of $160,000 and $100,000, respectively. Prior to liquidation, the partnership had no cash assets other than what was realized from the sale of the partnership assets. These partnership assets were sold for $250,000. The partnership had $10,000 of liabilities. Porter and Robert share income and losses equally.​RequiredDetermine the amount received by Porter as a final distribution from liquidation of the partnership.

When a new partner is admitted by making an investment in the partnership, the old partners' capital accounts are always credited.

A partnership is a legal entity separate from its owners.