Exam 12: Accounting for Partnerships and Limited Liability Companies

Match each statement to the appropriate term (a-h). -Without an agreement, the law will stipulate this method of sharing profits and losses

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 Yolanda?

Adriana and Belen are partners who share income in the ratio of 3:2 and have capital balances of $50,000 and $90,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $90,000. How much cash should be distributed to Adriana?

Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000, respectively, at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $130,000. What amount of loss on realization should be allocated to Soledad?

The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is called

Each partner has a separate capital and withdrawal account.

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.​ (a)Journalize the entries to record the admission of Adam to the partnership. (b)Immediately after Adam's admission to the partnership, Leah sells one-fourth of her interest to Denton for $35,000. Journalize the entry to record this transaction.

Each partner may withdraw the assets he or she contributed to the partnership at any time.

Gleason invested $90,000 in the James and Kirk Partnership for ownership equity of $90,000. Prior to the investment, land was revalued to a market value of $425,000 from a book value of $200,000. James and Kirk 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 Gleason.

An advantage of the partnership form of business is that each partner's potential loss is limited to that partner's investment in the partnership.

The chart of accounts for a partnership, with the exception of additional drawing and capital accounts, does not differ from the chart of accounts for a sole proprietorship.

Rodgers and Winter 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; and the remaining net income divided equally. Net income for the current year was $110,000.​ (a)Present the Division of net income section of the income statement for the current year. (b)Assuming that the net income had been $65,000 instead of $110,000, present the Division of net income section of the income statement for the current year.

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?

Many partnerships provide for the admission of new partners or withdrawals of present partners by amending existing partnership agreements, so that the firm may continue to operate without executing a new agreement.

What amount will be recorded to Kelsey's capital account?

Match each statement to the appropriate term (a-h). -The process of going out of business by selling the entity's assets and paying its liabilities

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 in the ratio of capital balances.​

If the net income of a partnership is less than the total of the allowances provided by the partnership agreement, the difference must be divided among the partners in the income-sharing ratio.

Which of the following is not one of the four major forms of business entities that are discussed in this chapter?

Revenue per employee may be used to measure partnership (LLC) efficiency.