Exam 12: Accounting for Partnerships

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 thousand) would be credited to DiMarco's capital account?

Jane, Castle, and Sean are dissolving their partnership. Their partnership agreement allocates each partner an equal share of all income and losses. The current period's ending capital account balances are Jane, $54,000; Castle, $42,000; and Sean, $(6,000). After all assets are sold and liabilities are paid, there is $90,000 in cash to be distributed. Sean is unable to pay the deficiency. The journal entry to record the distribution should be:

Explain the steps involved in the liquidation of a partnership.

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

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 _____________________________.

Partners' withdrawals of assets are:

In the absence of a partnership agreement, the law says that income (and loss) should be allocated based on:

When a partner is added to a partnership:

Sam and Dave's company is organized as a partnership. At the prior year-end, Sam's equity balance was $258,000 and Dave's was $212,000. For the current year, partnership net income is $125,000 ($75,000 allocated to Sam and $50,000 allocated to Dave); withdrawals are $77,000 ($40,000 for Sam and $37,000 for Dave). Compute the total partnership return on equity and the individual partner return on equity ratios.

Partners can invest both assets and liabilities into a partnership.

A bonus may be paid:

In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance:

Nee High and Low Jack are partners in an accounting firm and share net income and loss equally. High's beginning partnership capital balance for the current year is $285,000, and Jack's beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. High withdrew $90,000 during the year and Jack withdrew $100,000. What is High's return on equity?

When partners invest in a partnership, their capital accounts are credited for the amount invested.

Collins and Farina are forming a partnership. Collins is investing a building that has a market value of $80,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Farina is investing $20,000 cash. The balance of Collins' Capital account will be:

If partners devote their time and services to their partnership, their salaries are expenses on the income statement.

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.

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

In a limited partnership the general partner has unlimited liability.

The following information is available on Stewart Enterprises, a partnership, for the most recent fiscal year: There are three partners in Stewart Enterprises: Stewart, Tedder and Armstrong. At the end of the year, the partners' capital accounts were in the ratio of 2:1:2, respectively. Compute the ending capital balances of the three partners.