Exam 16: Accounting for Partnerships

In closing the accounts at the end of a period, the partners' capital accounts are credited for their share of the partnership loss or debited for their share of the partnership net income.

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.

To buy into an existing partnership, the new partner must contribute cash.

Partners' withdrawals of assets are:

Holden, Phillips, and Rogers are partners with beginning-year capital balances of $120,000, $60,000, and $60,000, respectively.Partnership net income for the year is $84,000.Make the necessary journal entry to close Income Summary to the capital accounts if: a.Partners agree to divide income based on their beginning-year capital balances. b.Partners agree to divide income based on the ratio of 5:3:2 (Holden:Phillips:Rogers), respectively. c.Partnership agreement is silent as to division of income and loss.

Kathleen Reilly and Ann Wolf decide to form a partnership on August 1.Reilly invested the following assets and liabilities in the new partnership: The note payable is associated with the building and the partnership will assume the responsibility for the loan.Wolf invested $60,000 in cash and $105,000 in new equipment in the new partnership.Prepare the journal entries to record the two partner's original investments in the new partnership.

During the closing process, each partner's withdrawals account is closed to __________________.

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.

Accounting procedures for all items are the same for both C corporations and S corporations in all aspects.

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

An unincorporated association of two or more persons to carry on a business for profit as co-owners is a(n):

A partnership agreement:

___________________________ implies that each partner in a partnership can be called on to pay a partnership's debts.

Define the partner return on equity ratio and explain how a specific partner would use this ratio.

If a partner is unable to cover a deficiency and the other partners absorb the deficiency, then the partner with the deficiency is thus relieved of all liability.

A capital deficiency exists when all partners have a credit balance in their capital accounts.

Force and Zabala are partners.Force's capital balance in the partnership is $98,000 and Zabala 's capital balance is $53,000.Force and Zabala have agreed to share equally in income or loss.Force and Zabala agree to accept Burns with a 25% interest.Burns will invest $56,000 in the partnership.The total bonus that is granted to the existing partners equals:

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:

Chen and Wright are forming a partnership.Chen will invest a building that currently is being used by another business owned by Chen.The building has a market value of $90,000.Also, the partnership will assume responsibility for a $30,000 note secured by a mortgage on that building.Wright will invest $50,000 cash.For the partnership, the amounts to be recorded for the building and for Chen's Capital account are: