Exam 16: Accounting for Partnerships

Jimmy Hayes is a partner in Sports Promoters. His beginning partnership capital balance for the current year $65,000 and his ending partnership capital balance for the current year is $62,000. His share of this year's partnership income was $5,250. What were his withdrawals for the period?

Alberts and Bartel are partners. On October 1, Alberts' capital balance is $75,000 and Bartel's capital balance is $125,000. With the partnership's approval, Bartel sells one-half of his partnership interest to Camero for $70,000. Prepare the journal entry to record this transaction in the partnership records.

Identify and discuss the key characteristics of partnerships. Also, identify nonpartnership organizations that possess the positive aspects of both partnerships and corporations.

Partner return on equity can be used by each partner to help decide whether additional investment or withdrawal of resources is best for that partner.

A partnership agreement:

A _________________________ means that at least one partner has a debit balance in his/her capital account at the point of the final distribution of cash.

Armstrong plans to leave the FAP Partnership. The recorded value of her capital account is $48,000. The remaining partners, Floyd and Peters, agree to pay Armstrong $40,000 cash. The partners have agreed to share income and loss equally. Prepare the general journal entry to record the withdrawal from the partnership.

When the current value of a partnership is greater than the recorded amounts of equity, the current partners usually require any new partner to pay a bonus for the privilege of joining.

When a partner is added to a partnership:

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

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

When a partner is unable to pay a capital deficiency:

Elaine Valero is a limited partner in a marketing and design firm. During the previous year her return on partnership equity was 14%. During this time, the beginning and ending balances in her capital account were $210,000 and $230,000 respectively. What was Elaine's partnership net income for this year?

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from the acts of other partners is a ____________________________ partnership.

The BlueFin Partnership agrees to dissolve. The cash balance after selling all assets and paying all liabilities is $56,000. The final capital account balances are: Smith, $33,000; Nagy, $27,000; and Russ, ($4,000). Russ agrees to pay $4,000 cash from personal funds to settle his deficiency. Prepare the journal entries to record the transactions required to dissolve this partnership.

Marquis and Bose agree to accept Sherman into their partnership. Sherman will contribute $25,000 in cash. Prepare the journal entry to record this transaction.

A partnership that has at least two classes of partners, general and limited, that allows the limited partners to have no personal liability beyond the amounts they invest in the partnership, and in which the limited partners have no active role except as specified in the partnership agreement is a ________________________ partnership.

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a:

If partners devote their time and services to their partnership, their salaries are expenses on the income statement.

Groh and Jackson are partners. Groh's capital balance in the partnership is $64,000 and Jackson's capital balance is $61,000. Groh and Jackson have agreed to share equally in income or loss. Groh and Jackson agree to accept Block with a 25% interest. Block will invest $35,000 in the partnership. The capital account balances after admission of Block are: