Exam 28: Accounting for Partnerships

Collins and Farina are forming a partnership.Collins is investing a building that has a market value of $80,000 and a book value of $65,000.However,the building carries a $56,000 mortgage that will be assumed by the partnership.Farina is investing $20,000 cash.Total capital in the partnership will be:

Salary allowances are reported as salaries expense on a partnership income statement.

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

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:

When a partner invests in a partnership,his/her capital account is __________ for the invested amount.

Groh and Jackson are partners.Groh's capital balance in the partnership is $64,000 and Jackson's capital balance is $61,000.Groh and Jackson have agreed to share equally in income or loss.Groh and Jackson agree to accept Block with a 20% interest.Block will invest $35,000 in the partnership.The bonus that is granted to Groh and Jackson equals:

If at the time of partnership liquidation,a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency,then that partner is entitled to share in the final distribution of cash.

Assume that the S & B partnership agreement gave Steely 60% and Breck 40% of partnership income and losses.The partnership recorded a loss of $27,000 in the current period.Steely's share of the loss equals $16,200 and Breck's share equals $10,800.

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

In a limited partnership the general partner has unlimited liability.

Assets invested by a partner into a partnership remain the property of the individual partner.

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

The BlueFin Partnership agrees to dissolve.The cash balance after selling all assets and paying all liabilities is $60,000.The final capital account balances are: Smith,$35,000; Nagy,$29,000; and Russ,($4,000).Russ is unable to pay the capital 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.

If partners agree on how to share income,but say nothing about losses,then losses are shared ___________________.

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:

In the absence of a partnership agreement,the law says that income of a partnership will be shared equally by the partners.

A capital deficiency means that:

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.

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.