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Exam 12: Accounting for Partnerships and Limited Liability Companies

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Question 41

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Match each statement to the appropriate term (a-h) . -Agreement that is the contract between partners

A) Partnership
B) Partnership agreement
C) Distribution of remaining cash to partners
D) Mutual agency
E) Equally
F) Death of a partner
G) Liquidation
H) Unlimited liability

I) B) and E)
J) C) and F)

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Question 42

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A new partner may be admitted to a partnership by

A) inheriting a partnership interest
B) contributing assets to the partnership
C) purchasing a specific quantity of assets from the partnership
D) a written approval under the federal law

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

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Question 43

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Match each statement to the appropriate term (a-h) . -When a partnership cannot pay its debts with business assets, the partners must use personal assets to meet the debt

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 10%; salary allowances of $38,000 and $28,000, respectively; and the remainder to be divided equally. How much of the net income of $77,000 is allocated to Xavier?

Easy Sailing, LLC provides repair services for commercially owned boats and yachts. The firm has five members in the LLC, which did not change between the first year and the second year. During Year 2, the business expanded into three new regions of the country. The following revenue and employee information is provided:? $\begin{array}{|l|r|r|}\hline &{\text { Year 1 }} &{\text { Year 2 }} \\\hline \text { Revenues (in thousands) } & \$ 50,625 & \$ 57,750 \\\hline \text { Number of employees } & 125 & 175 \\\hline\end{array}$ Required (a) For Year 1 and Year 2, determine the revenue per employee (excluding members). (b) Interpret the trend between the two years.

In a general partnership, each partner is individually liable to creditors for debts incurred by the partnership, to the extent of the partner's capital balance.

Details of the division of partnership income should normally be disclosed in the financial statements.

Which of the following is not a characteristic of a limited liability company?

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

Patty and Paul are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000, respectively, on January 1. The partnership generated net income of $40,000 for the year. What is Paul's capital balance after closing the revenue and expense accounts to the capital accounts?

Bobbi and Stuart are partners. The partnership capital of Bobbi is $40,000 and that of Stuart is $70,000. Bobbi sells his interest in the partnership to John for $50,000. The journal entry to record the admission of John as a new partner would include a credit to

Prior to liquidating their partnership, Craig and Jenny had capital accounts of $70,000 and $110,000, respectively. The partnership assets were sold for $285,000. The partnership had $25,000 of liabilities. Craig and Jenny share income and losses equally. Determine the amount received by Jenny as a final distribution from liquidation of the partnership.

A ratio of 4:2:1 is the same as

A new partner contributes accounts receivable to a partnership, which appears in the ledger of his sole proprietorship at $20,500, and there was an allowance for doubtful accounts of $750. If $600 of the accounts receivable are completely worthless, the partnership Accounts Receivable should be debited for $19,900.

Benson and Orton are partners who share income in the ratio of 2:3 and have capital balances of $60,000 and $40,000, respectively. Ramsey is admitted to the partnership and is given a 10% interest by investing $20,000. What is Orton's capital balance after admitting Ramsey?

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 $30,000?

Sharp and Townson had capital balances of $60,000 and $120,000, respectively, on January 1 of the current year. On May 8, Sharp invested an additional $10,000 in the partnership. During the year, Sharp and Townson withdrew $25,000 and $45,000, respectively. The revenue account at the end of the year had a balance of $600,000, and the expense account had a balance of $510,000. Sharp and Townson have agreed to split net income on a 2:1 basis. (a)Prepare the statement of partnership equity for the current year. (b)Journalize the entries to close the revenue and expense accounts and the drawing accounts.?

Carla and Eliza share income equally. For the current year, the partnership net income is $40,000. Carla made withdrawals of $12,000, and Eliza made withdrawals of $21,000. At the beginning of the year, the capital account balances were: Carla, Capital, $42,000; Eliza, Capital, $55,000. Eliza's capital account balance at the end of the year is

Harriet, Mickey, and Zack decide to liquidate their partnership. All assets are sold, and the liabilities are paid. Following these transactions, the capital balances and profit and loss percentages are as follows: Harriet, $27,000 and 30%; Mickey, ($12,000) and 40%; Zack, $43,000 and 30%. Mickey is unable to contribute any assets to reduce the deficit. How much cash will Harriet receive as a result of the partnership liquidation?

Tanner and Teresa share income and losses in a 2:1 ratio after allowing for salaries of $42,000 to Tanner and $60,000 to Teresa. Net income of the partnership is $132,000. Income should be divided as follows: