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Exam 12: Accounting for Partnerships and Limited Liability Companies

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Question 41

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Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and Ramona, $30,000 Cr. How much cash should be distributed to Everett assuming that Miguel pays the deficiency?

A) $50,000
B) $20,000
C) $30,000
D) $40,000

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

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Question 42

Multiple Choice

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A partnership liquidation occurs when

A) a new partner is admitted
B) a partner dies
C) the ownership interest of one partner is sold to a new partner
D) the assets are sold, liabilities paid, and business operations terminated

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

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Question 43

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Match each statement to the item listed below.

When a new partner is admitted to a partnership, there should be a(n)

Abby and Bailey are partners who share income in the ratio of 2:1 and have capital balances of $60,000 and $30,000 respectively. With the consent of Bailey, Sandra buys one half of Abby's interest for $35,000. For what amount will Abby's capital account be debited to record admission of Sandra to the partnership?

Partnership income and losses are usually divided on the basis of interest, salaries, and stated ratios because

Benson contributed land, inventory, and $22,000 cash to a partnership. The land had a book value of $65,000 and a market value of $111,000. The inventory had a book value of $60,000 and a market value of $58,000. The partnership also assumed a $52,000 note payable owned by Benson that was used originally to purchase the land. Required: Provide the journal entry for Benson's contribution to the partnership.

Partner A has a capital balance of $40,000 and devotes full time to the partnership. Partner B has a capital balance of $50,000 and devotes half time to the partnership. If no other information is available regarding distributions, in what ratio is net income to be divided?

Wonder purchased one-half of Darwin's interest in the Todd and Darwin's partnership for $50,000. Prior to the investment, land was revalued to a market value of $175,000 from a book value of $100,000. Todd and Darwin share net income equally. Darwin had a capital balance of $40,000 prior to these transactions. Required: a. Provide the journal entry for the revaluation of land. b. Provide the journal entry to admit Wonder.

When a limited partnership is formed

Accounts receivable contributed to the partnership are recorded at their face value.

Kala and Leah, partners in Best Designs, have capital balances of $40,000 and $60,000 respectively. Adam joins the partnership by buying one-half of Kala's interest for $30,000. In addition, because of Adam's outstanding sales skills, the partners agree to increase his interest to 40% if he invests another $10,000. The income-sharing ratio of Kala, Leah, and Adam is 4:3:1.

Gavin invested $45,000 in the Jason and Kelly partnership for ownership equity of $45,000. Prior to the investment land was revalued to a market value of $320,000 from a book value of $200,000. Jason and Kelly share net income in a 1:2 ratio. a. Provide the journal entry for the revaluation of land. b. Provide the journal entry to admit Gavin.

Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in the year's net income of $380,000 under each of the following independent assumptions:

Describe the items which should be covered in a partnership agreement.

Benton and Orton are partners who share income in the ratio of 1:3 and have capital balances of $70,000 and $30,000 respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Benton's capital balance after admitting Ramsey?

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 $27,000 and $18,000 respectively, and the remainder equally. How much of the net loss of $6,000 is allocated to Yolanda?

Nick is admitted to an existing partnership by investing cash. Nick agrees to pay a bonus for his ownership interest because of the past success of the partnership. When Nick's investment in the partnership is recorded

Partners Ken and Macki each have a $40,000 capital balance and share income and losses in a 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 an capital deficits with personal cash contributions, Partner Macki will eventually receive cash of

Sharp and Townson had capital balances of $60,000 and $90,000 respectively at the beginning of the current fiscal year. The articles of partnership provide for salary allowances of $25,000 and $30,000 respectively, an allowance of interest at 12% on the capital balances at the beginning of the year, with the remaining net income divided equally. Net income for the current year was $110,000.