Exam 12: Accounting for Partnerships and Limited Liability Companies

When a new partner is admitted to a partnership,

X sells to A one-half of a partnership capital interest that totals $70,000 for $40,000. A's capital account in the partnership should be credited for $40,000.

After discontinuing the ordinary business operations and closing the accounts on May 7, the ledger of the partnership of Anna, Brian, and Cole indicated the following:​ The partners share net income and losses in the ratio of 3:2:1. Between May 7 and May 30, the noncash assets were sold for $150,000, the liabilities were paid, and the remaining cash was distributed to the partners.​ (a)Prepare a statement of partnership liquidation. (b)Assume the same facts as in (a), except that the noncash assets were sold for $45,000 and any partner with a capital deficiency pays the amount of the deficiency to the partnership. Prepare a statement of partnership liquidation.

Match each statement to the appropriate term (a-h): -Used to divide the excess of allowances over loss when net losses occur

Immediately prior to the process of liquidation, partners Micco, Niccum, and Orwell have capital balances of $70,000, $20,000, and $30,000, respectively. There is a cash balance of $10,000, noncash assets total $160,000, and liabilities total $50,000. The partners share net income and losses in the ratio of 2:2:1.Journalize the entries to record the liquidation outlined below, using Assets as the account title for the noncash assets and Liabilities as the account title for all creditors' claims. (a)Sold the noncash assets for $80,000 in cash. (b)Divided the loss on realization. (c)Paid the liabilities. (d)Received cash from the partner with the deficiency. (e)Distributed the cash to the partners.

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 is available for distribution to the partners?

When a limited liability company is formed,

Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and $50,000, respectively. They share income and losses in the ratio of 3:2:1. Revenue accounts for the period total $350,000. Expense accounts for the period total $380,000. The revenue and expense accounts are closed to the capital accounts. Doug withdraws from the partnership. How much cash does he receive upon withdrawal?

Amazon invested $128,000 in the Jungle and River Partnership for ownership equity of $128,000. Prior to the investment, equipment was revalued to a market value of $90,000 from a book value of $72,000. Jungle and River share net income in a 2:1 ratio.​Required (a) Provide the journal entry for the revaluation of equipment. (b) Provide the journal entry to admit Amazon.

Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in the year's net income of $200,000 under each of the following independent assumptions: (a)No agreement concerning division of net income (b)Divided in the ratio of original capital investment (c)Interest at the rate of 15% allowed on original investments and the remainder divided in the ratio of 2:3 (d)Salary allowances of $50,000 and $70,000, respectively, and the balance divided equally (e)Allowance of interest at the rate of 15% on original investments, salary allowances of $50,000 and $70,000, respectively, and the remainder divided equally

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,

Franco and Jason share income and losses in a 2:1 ratio after allowing for salaries of $15,000 and $30,000, respectively. If the partnership suffers a $15,000 loss, by how much would Jason's capital account increase?

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 Xavier?

A limited liability company is a business entity form designed to overcome some of the disadvantages of the partnership form.

The process of winding up the affairs of a partnership is referred to as realization.

When a partner withdraws from the partnership by selling his or her interest back to the partnership, the remaining partners must pay the withdrawing partner a specified amount from their personal assets.

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

Paul and Roger are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000, respectively. The partnership generated net income of $50,000 for the year. What is Roger's capital balance after closing the revenue and expense accounts to the capital accounts?

Emmett and Sierra formed a partnership dividing income as follows:? 1. Annual salary allowance to Emmett of $48,000 2. Interest of 8% on each partner's capital balance on January 1 3. Any remaining net income divided equally?Emmett and Sierra had $25,000 and $140,000, respectively, in their January 1 capital balances. Net income for the year was $200,000.?How much net income should be distributed to Emmett?

When a new partner is admitted to a partnership, all partnership assets should be revised to reflect current values.