Exam 28: Accounting for Partnerships

Conley and Liu allow Lepley to purchase a 25% interest in their partnership for $50,000 cash.Conley and Liu both have capital balances of $55,000 each and have agreed to share income and loss equally.Prepare the journal entry to record the admission of Lepley to the partnership.

Paco and Kate invested $99,000 and $126,000,respectively,in a partnership they began one year ago.Assuming the partnership earned $120,000 during the current year,compute the share of the net income each partner should receive under each of these independent assumptions. 1. The partnership contract specifies salary allowances of \ 45,000 to Paco and \ 60,000 to Kate, and any balance shared \&\ equally. 2. The partnership contract specifies salary allowances of \ 45,000 to Paco and \ 60,000 to Kate with interest allowance of 10 \% on the partners' beginning year capital balance and underline underline any remaining balance shared equally.

Partners in a partnership are taxed on _______________________,not on their withdrawals.

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.

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.

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

Miller and Reising formed a partnership.Miller contributed land valued at $90,000 and a building valued at $115,000.Reising contributed $90,000 cash.In addition,the partnership assumed responsibility for Miller's $85,000 mortgage payable associated with the land and building.What are the balances of the partners' capital accounts after these transactions have been recorded?

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.Which of the following statements is correct?

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

Admitting a partner into a partnership by accepting assets is a personal transaction between one or more current partners and the new partner.

Rice,Hepburn and DiMarco formed a partnership with Rice contributing $60,000,Hepburn contributing $50,000,and DiMarco 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 dollar)would be credited to DiMarco's capital account?

Renee Jackson is a partner in Sports Promoters.Her beginning partnership capital balance for the current year is $55,000 and her ending partnership capital balance for the current year is $62,000.Her share of this year's partnership income was $5,250.What is her partner return on equity?

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

A relatively new form of business organization that protects partners with limited liability,allows limited partners to assume an active management role,and is taxed as a partnership is a ______________________________.

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.

A partnership has an unlimited life.

Summers and Winters formed a partnership on January 1,2012.Summers contributed $90,000 cash and equipment with a market value of $60,000.Winters' investment consisted of: cash,$30,000; inventory,$20,000; all at market values.Partnership net income for 2013 and 2012 was $75,000 and $120,000,respectively. Determine each partner's share of the net income for each year,assuming each of the following independent situations: a.Income is divided based on the partners' failure to sign an agreement. b.Income is divided based on a 2:1 ratio (Summers: Winters). c.Income is divided based on the ratio of the partners' original capital investments. d.Income is divided based on partners allowed 12% of the original capital investments,with salaries to Summers of $30,000 and Winters of $25,000 and the remainder to be divided equally. Prepare the journal entry to record the allocation of the 2013 income under alternative (d)above.

Mutual agency means

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

A _________________________ means that at least one partner has a debit balance in his/her capital account at the point of the final distribution of cash.