Exam 10: Partnerships: Formation, Operation, and Changes in Membership

Which of the following observations is true of an S corporation?

When a new partner is admitted into a partnership and the new partner receives a capital credit greater than the tangible assets contributed, which of the following explains the difference? I. The old partners' goodwill is being recognized. II. The new partner's goodwill is being recognized.

When a new partner is admitted into a partnership and the capital of the old partners decreases, which of the following explains the reason for the decrease? I. Undervalued liabilities were written up to their fair values. II. Undervalued assets were written up to their fair values.

RD formed a partnership on February 10, 20X9. R contributed cash of $150,000, while D contributed inventory with a fair value of $120,000. Due to R's expertise in selling, D agreed that R should have 60 percent of the total capital of the partnership. R and D agreed to recognize goodwill. What is the total capital of the RD partnership and the capital balance of R after the goodwill is recognized?

When the old partners receive a bonus upon admission of a new partner into a partnership, the bonus is allocated to: I. all the partners in their profit and loss sharing ratio. II. the existing partners in their profit and loss sharing ratio.

In the AD partnership, Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following questions is independent of the others. -Refer to the information provided above. David invests $50,000 for a one-fifth interest. What amount of goodwill will be recorded?

The partnership of X and Y shares profits and losses in the ratio of 60 percent to X and 40 percent to Y. For the year 20X8, partnership net income was double X's withdrawals. Assume X's beginning capital balance was $80,000, and ending capital balance (after closing) was $140,000. Partnership net income for the year was:

The APB partnership agreement specifies that partnership net income be allocated as follows: Average capital balances for the current year were $50,000 for A, $30,000 for P, and $20,000 for B. -Refer to the information given. Assuming a current year net income of $150,000, what amount should be allocated to each partner?

The APB partnership agreement specifies that partnership net income be allocated as follows: Average capital balances for the current year were $50,000 for A, $30,000 for P, and $20,000 for B. -Refer to the information given. Assuming a current year net income of $50,000, what amount should be allocated to each partner?

Paul and Ray sell musical instruments through their partnership. To bring in additional funds and expertise, they decide to admit Janet to the partnership. Paul's capital is $400,000, Ray's capital is $200,000, and they share income in a ratio of 7:3, respectively. Required Record Janet's admission for each of the following independent situations: a) Janet invests $180,000 for a one-fourth interest. Goodwill is to be recorded. b) Paul and Ray agree that some of the inventory is obsolete. The inventory account is decreased before Janet is admitted. Janet invests $190,000 for a one-fourth interest.

A partnership is a(n): I. accounting entity. II. taxable entity.

The PQ partnership has the following plan for the distribution of partnership net income (loss): Required: Calculate the distribution of partnership net income (loss) for each independent situation below (for each situation, assume the average capital balance of P is $140,000 and of Q is $240,000). 1. Partnership net income is $360,000. 2. Partnership net income is $240,000. 3. Partnership net loss is $40,000.

Which of the following accounts could be found in the general ledger of a partnership?

In the AD partnership, Allen's capital is $140,000 and Daniel's is $40,000 and they share income in a 3:1 ratio, respectively. They decide to admit David to the partnership. Each of the following questions is independent of the others. -Refer to the information provided above. David invests $40,000 for a one-fifth interest in the total capital of $220,000. The journal to record David's admission into the partnership will include:

Jones and Smith formed a partnership with each partner contributing the following items: Assume that for tax purposes Jones and Smith agree to share equally in the liabilities assumed by the Jones and Smith partnership. -Refer to the above information. What is each partner's tax basis in the Jones and Smith partnership?

-Refer to the above information. Which statement below is correct if goodwill of the old partners is recognized upon the contribution of assets into the partnership by a new partner?