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Exam 12: Accounting for Partnerships and Limited Liability Companies

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Question 51

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Luke and John share income and losses in a 2:1 ratio after allowing for salaries of $48,000 to Luke and $60,000 to John. Net income for the partnership is $93,000. Income should be divided as

A) Luke, $46,500; John, $46,500
B) Luke, $55,000; John, $38,000
C) Luke, $65,000; John, $28,000
D) Luke, $38,000; John, $55,000

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

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Question 52

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Which of the following is an advantage of a general partnership when compared to a corporation?

A) A partnership is more likely to have a positive net income.
B) The partnership is relatively inexpensive to organize.
C) Creditors to a partnership cannot attach personal assets of partners.
D) The partnership usually hires professional managers.

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

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Question 53

Multiple Choice

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Match each statement to the appropriate term (a-h) : -An association of two or more persons to own and manage a business for profit

Tucker and Titus 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 $40,000 for the year. What is Tucker's capital balance after closing the revenue and expense accounts to the capital accounts?

Partner A devotes full time and partner B devotes one-half time to their partnership. If the partnership agreement is silent concerning the division of net income, Partner A will receive a $20,000 share of a net income of $30,000.

The amount that a partner withdraws as a monthly salary allowance does not affect the division of net income.

Match each statement to the appropriate term (a-h) . -Every partner can bind the business to a contract within the scope of the partnership's regular business operations

When a new partner is admitted to a partnership, bonuses attributable to either the old partnership or to the incoming partner may be recognized in accordance with the agreement among the partners.

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 $60,000, and both partners agree to make up any capital deficits with personal cash contributions, Partner Macki will eventually receive cash of

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 $50,000, and each partner is personally insolvent, Partner Macki will eventually receive cash of

A gain or loss on realization is divided among partners according to their

When a partner withdraws from the partnership, the partnership dissolves.

Trevor Smith contributed equipment, inventory, and $54,000 cash to a partnership. The equipment had a book value of $30,000 and a market value of $36,000. The inventory had a book value of $60,000, but only had a market value of $20,000, due to obsolescence. The partnership also assumed a $17,000 note payable owed by Smith that was used originally to purchase the equipment.​Provide the journal entry for Smith's contribution to the partnership.

Jesse and Tim form a partnership by combining the assets of their separate businesses. Jesse contributes accounts receivable with a face amount of $50,000 and equipment with a cost of $180,000 and accumulated depreciation of $100,000. The partners agree that the equipment is to be valued at $58,000, that $3,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $2,000 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Tim contributes cash of $21,000 and merchandise inventory of $44,500. The partners agree that the merchandise inventory is to be valued at $48,000. Journalize the entries to record in the partnership accounts (a) Jesse's investment and (b) Tim's investment.

One reason that distributions of income and loss are prepared is to obtain the information to record a closing entry.

When an additional partner is admitted to a partnership by contribution of assets to the partnership,

Based on this information, the statement of partners' equity would show what amount in the capital account for Martin on December 31?

A partnership's asset accounts should be changed from cost to fair market value when a new partner is admitted to a firm or an existing partner withdraws or dies.

Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income under each of the following assumptions: (a)No agreement as to division of net income (b)In ratio of capital balances (c)In ratio of time devoted to business

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 $34,000 and $26,000, respectively; and the remainder to be divided equally. How much of the net income of $120,000 is allocated to Yolanda?