Exam 12: Accounting for Partnerships

Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Masters, $15,000; Hardy, $15,000; Rowen, $30,000. After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $54,000 in cash to be distributed. The general journal entry to record the final distribution would be:

A partnership in which all partners have mutual agency and unlimited liability is called:

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.

Mace and Bowen are partners and share equally in income or loss. Mace's current capital balance is $135,000 and Bowen's is $120,000. Mace and Bowen agree to accept Kent with a 30% interest in the partnership. Kent invests $115,000 in the partnership. The balances in Mace's and Bowen's capital accounts after admission of the new partner equal:

Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000. Their partnership agreement calls for the income (loss)division to be based on the ratio of capital investments. The partnership had income of $150,000 for its first year of operation. When the Income Summary is closed, the journal entry to allocate partner income is:

When a new partner is admitted, all parties usually must agree to the admission.

Carter Pearson is a partner in Event Promoters. His beginning partnership capital balance for the current year is $55,000, and his ending partnership capital balance for the current year is $62,000. His share of this year's partnership income was $6,250. What is his partner return on equity?

A bonus may be paid in all of the following situations except:

Assets invested by a partner into a partnership become the property of the business.

The owners of a limited liability company (LLC), who are called members, are protected with the same limited liability feature as owners of corporations.

Partnership accounting does not:

Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss)division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand)would be credited to Wheadon's capital account?

Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000. Their partnership agreement calls for the income (loss)division to be based on the ratio of capital investments. Wallace sold one-half of his partnership interest to Prince for $55,000 when his capital balance was $78,000. The partnership would record the admission of Prince into the partnership as:

T. Andrews contributed $14,000 in to the T & B Partnership. The journal entry to record the transaction for the partnership is:

A partnership may allocate salary allowances to the partners reflecting the relative value of services provided.

Wright, Bell, and Edison are partners and share income in a 2:5:3 ratio. The partnership's capital balances are as follows: Wright, $33,000, Bell $27,000 and Edison $40,000. Edison decides to withdraw from the partnership, and the partners agree not to revalue the assets upon Edison's retirement. The journal entry to record Edison's June 1 withdrawal from the partnership if Edison sells his interest to Whitney for $45,000 after the other two partners approve Whitney as partner is:

Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Caitlin, $120,000; Chris, $80,000; and Molly, $100,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $160,000. The balance in Caitlin's capital account immediately after Paul's admission is:

A partner can withdraw from a partnership by any of the following means except:

Discuss the options for the allocation of income and loss among partners, including with and without a partnership agreement.

Limited liability partnerships are designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.