Exam 16: Accounting for Partnerships

McCartney, Harris, and Hussin are dissolving their partnership.Their partnership agreement allocates income and losses equally among the partners.The current period's ending capital account balances are McCartney, $15,000, Harris, $15,000, Hussin, $(2,000).After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $28,000 in cash to be distributed.Hussin pays $2,000 to cover the deficiency in his account.The general journal entry to record the final distribution would be:

When a partner leaves a partnership, the present partnership ends, but the business can still continue to operate.

During 2013, Schmidt invested $75,000 and Baldwin invested $90,000 in a partnership.They agreed that Baldwin would get a salary allowance of $30,000 and they would share any remaining income or loss equally.During 2013 the partnership earned net income of $300,000 and they each withdrew $12,000 from the partnership.Which of the following statements is correct?

When a partner is unable to pay a capital deficiency:

Partners in a partnership are taxed on the amounts they withdraw from the partnership, not the partnership income.

S.Reising contributed $48,000 in cash plus equipment valued at $73,000 to the Reising Construction Partnership.The equipment had a book value of $65,000.The journal entry to record the transaction for the partnership would include a:

Web Services is organized as a limited partnership, with Wren Littlefeather as one of its partners.Wren's capital account began the year with a balance of $87,000.During the year, Wren's share of the partnership income was $60,000 and she received $25,000 in distributions from the partnership.What is Wren's partner return on equity?

Benson is a partner in B&D Company.Benson's share of the partnership income is $18,600 and her average partnership equity is $155,000.Her partner return on equity equals 8.33.

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.

During 2013, Carpenter invested $75,000 and DiAngelo invested $90,000 in a partnership.They agreed to share income and loss by allowing a $40,000 per year salary allowance to Carpenter and a $42,000 per year salary allowance to DiAngelo, plus an interest allowance on the partners' beginning-year capital investments at 8%, with the balance to be shared equally.Under this agreement, if the partnership earns net income of $300,000 during 2013 the income allocated to each partner is: A.$40,000 to Carpenter; $42,000 to DiAngelo. B.$148,400 to Carpenter; $151,600 to DiAngelo. C.$43,200 to Carpenter; $45,360 to DiAngelo. D.$150,000 to Carpenter; $150,000 to DiAngelo. E.$105,720 to Carpenter; $105,720 to DiAngelo.

Rodriguez, Sate, and Melton are dissolving their partnership.Their partnership agreement allocates income and losses equally among the partners.The current period's ending capital account balances are Rodriguez, $32,000; Sate, $28,000; and Melton, $(4,000).After all the assets are sold and liabilities are paid, but before any contributions are considered to cover any deficiencies, there is $56,000 in cash to be distributed.Melton pays $2,000 to cover the deficiency in her account.The final distribution of cash would be as follows: A.Rodriquez $30,000 and State $26,000. B.Rodriquez $32,000 and State $26,000. C.Rodriquez $30,000 and State $28,000. D.Rodriquez $30,000 and State $27,000. E.Rodriquez $31,000 and State $27,000.

Rodriguez, Sate, and Melton are dissolving their partnership.Their partnership agreement allocates income and losses equally among the partners.The current period's ending capital account balances are Rodriguez, $30,000; Sate, $30,000; and Melton, $(4,000).After all the assets are sold and liabilities are paid, but before any contributions are considered to cover any deficiencies, there is $56,000 in cash to be distributed.Melton pays $4,000 to cover the deficiency in her account.The general journal entry to record the final distribution would be:

The equity section of the balance sheet of a partnership can report the separate capital account balances of each partner.

Conley and Liu allow Lepley to purchase a 25% interest in their partnership for $35,000 cash.Lepley has exceptional talents that will enhance the partnership.Conley's and Liu's capital account balances are $55,000 each.The partners have agreed to share income or loss equally.Prepare the general journal entry to record the admission of Lepley to the partnership.

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

When a partner leaves a partnership, the present partnership ends.

Sierra and Jenson formed a partnership.Sierra contributed $25,000 cash and accounts receivable worth $11,000.Jenson's investment included cash, $5,000; inventory, $18,000; and supplies, $1,000.Prepare the journal entries to record each partner's investment in the new partnership.

Blaser, Lukins, and Franko formed a partnership with Blaser contributing $160,000, Lukins contributing $520,000, and Franko contributing $240,000.Their partnership agreement called for the income (loss)division to be based on the ratio of capital investments.If the partnership had income of $275,000 for its first year of operation, what amount of income (rounded to the nearest dollar)would be credited to Franko's capital account?

Active Sports LP is organized as a limited partnership consisting of two partners: Basketball Products LP and Hockey Products LP.Each of the partners sell sporting equipment for their respective sports.Compute the partner return on equity for each limited partnership and for the total limited partnership for the year ended September 30, 2013, using the following data:

A partnership is an unincorporated association of two or more people to pursue a business for profit as co-owners.