Deck 14: Partnerships: Formation and Operation

Question 1

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was Young's share of income or loss for the first year?

A)$3,900 loss.
B)$11,700 loss.
C)$10,400 loss.
D)$24,700 loss.
E)$9,100 loss.

Answer 1

B

Question 2

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What is Cleary's capital account balance at the end of 2008?

A)$163,420.
B)$151,420.
C)$139,420.
D)$100,000.
E)$142,000.

Answer 2

C

Question 3

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What was Wasser's share of income for 2007?

A)$63,000.
B)$53,000.
C)$58,000.
D)$29,000.
E)$51,000.

Answer 3

A

Question 4

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What was Cleary's capital balance at the end of 2007?

A)$100,000.
B)$117,000.
C)$119,000.
D)$129,000.
E)$153,000.

Question 5

The advantages of the partnership form of business organization,compared to corporations,include

A)single taxation.
B)ease of raising capital.
C)mutual agency.
D)Limited liability.
E)difficulty of formation.

Question 6

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What was Wasser's share of income for 2008?

A)$34,420.
B)$75,540.
C)$65,540.
D)$70,040.
E)$61,420.

Question 7

Cherryhill and Hace had been partners for several years,and they decided to admit Quincy to the partnership.The accountant for the partnership believed that the dissolved partnership and the newly formed partnership were two separate entities.What method would the accountant have used for recording the admission of Quincy to the partnership?

A)the bonus method.
B)the equity method.
C)the goodwill method.
D)the proportionate method.
E)the cost method.

Question 8

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What was Cleary's share of income for 2008?

A)$34,420.
B)$75,540.
C)$65,540.
D)$70,040.
E)$61,420.

Question 9

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What was Cleary's share of income for 2007?

A)$63,000.
B)$53,000.
C)$58,000.
D)$29,000.
E)$51,000.

Question 10

When the hybrid method is used to record the withdrawal of a partner,the partnership

A)revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner.
B)revalues liabilities but not assets,and no goodwill is recorded.
C)can recognize goodwill but does not revalue assets and liabilities.
D)revalues assets but not liabilities,and records goodwill to the continuing partner but not to the withdrawing partner.
E)revalues assets and liabilities but does not record goodwill.

Question 11

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What was Nolan's capital balance at the end of 2007?

A)$200,000.
B)$224,000.
C)$238,000.
D)$246,000.
E)$254,000.

Question 12

The partnership of Clapton,Seidel,and Thomas was insolvent and will be unable to pay $30,000 in liabilities currently due.What recourse was available to the partnership's creditors?

A)they must present equal claims to the three partners as individuals.
B)they must try obtain a payment from the partner with the largest capital account balance.
C)they cannot seek remuneration from the partners as individuals.
D)they may seek remuneration from any partner they choose.
E)they must present their claims to the three partners in the order of the partners' capital account balances.

Question 13

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
Jell and Dell were partners with capital balances of $600 and $800 and an income sharing ratio of 2:3.They admitted Zell to a 30% interest in the partnership,and the total amount of goodwill credited to the original partners was $700.What amount did Zell contribute to the business?

A)$560.
B)$570.
C)$600.
D)$590.
E)$630.

Question 14

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What was Wasser's capital balance at the end of 2008?

A)$201,000.
B)$263,520.
C)$264,540.
D)$304,040.
E)$313,780.

Question 15

The disadvantages of the partnership form of business organization,compared to corporations,include

A)the legal requirements for formation.
B)unlimited liability for the partners.
C)the requirement for the partnership to pay income taxes.
D)the extent of governmental regulation.
E)the complexity of operations.

Question 16

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What was Nolan's capital balance at the end of 2008?

A)$139,420.
B)$246,000.
C)$276,540.
D)$279,440.
E)$304,040.

Question 17

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What was Wasser's capital balance at the end of 2007?

A)$150,000.
B)$160,000.
C)$165,000.
D)$213,000.
E)$201,000.

Question 18

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What was Nolan's share of income for 2008?

A)$34,420.
B)$75,540.
C)$65,540.
D)$70,040.
E)$61,420.

Question 19

The dissolution of a partnership occurs

A)only when the partnership sells its assets and permanently closes its books.
B)only when a partner leaves the partnership.
C)at the end of each year,when income is allocated to the partners.
D)only when a new partner is admitted to the partnership.
E)when there is any change in the individuals who make up the partnership.

Question 20

REFERENCE: Ref.14_01
Cleary,Wasser,and Nolan formed a partnership on January 1,2007,with investments of $100,000,$150,000,and $200,000,respectively.For division of income,they agreed to (1)interest of 10% of the beginning capital balance each year, (2)annual compensation of $10,000 to Wasser,and (3)sharing the remainder of the income or loss in a ratio of 20% for Cleary,and 40% each for Wasser and Nolan.Net income was $150,000 in 2007 and $180,000 in 2008.Each partner withdrew $1,000 for personal use every month during 2007 and 2008.
What was Nolan's share of income for 2007?

A)$63,000.
B)$53,000.
C)$58,000.
D)$29,000.
E)$51,000.

Question 21

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was the balance in Thurman's Capital account at the end of the first year?

A)$120,900.
B)$118,300.
C)$126,100.
D)$80,600.
E)$111,500.

Question 22

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was Thurman's share of income or loss for the first year?

A)$3,900 loss.
B)$11,700 loss.
C)$10,400 loss.
D)$24,700 loss.
E)$9,100 loss.

Question 23

Which of the following type of organization is classified as a partnership,or similar to a partnership,for tax purposes?
(I) )Limited Liability Company
(II) )Limited Liability Partnership
(III. )Subchapter S Corporation

A)II only.
B)II and III.
C)I and II.
D)I and III.
E)I,II,and III.

Question 24

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was the balance in Eaton's Capital account at the end of the second year?

A)$133,380.
B)$84,760.
C)$105,690.
D)$132,860.
E)$71,760.

Question 25

Which of the following is not a characteristic of a partnership?

A)The partnership itself pays no income taxes.
B)It is easy to form a partnership.
C)Any partner can be held personally liable for all debts of the business.
D)A partnership requires written Articles of Partnership.
E)Each partner has the power to obligate the partnership for liabilities.

Question 26

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was the balance in Young's Capital account at the end of the first year?

A)$120,900.
B)$118,300.
C)$126,100.
D)$80,600.
E)$111,500.

Question 27

The appropriate format of the January 31,2008 closing entry for John & Hope Limited Liability Partnership,whose two partners had withdrawn their salaries from the partnership during January is

A)A Above.
B)B Above.
C)C Above.
D)D Above.

Question 28

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was Young's share of income or loss for the second year?

A)$17,160 income.
B)$4,160 income.
C)$19,760 income.
D)$17,290 income.
E)$28,080 income.

Question 29

When Danny withdrew from John,Daniel,Harry,and Danny LLP,he was paid $80,000,although his capital account balance was only $60,000.The four partners shared net income and losses equally.The journal entry of the partnership to record Danny's withdrawal preferably should include :

A)$6,667 debit to John,Capital.
B)$6,667 credit to John,Capital.
C)$6,667 debit to John,Drawing.
D)$5,000 debit to John,Capital.
E)$5,000 credit to John,Capital.

Question 30

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was the balance in Eaton's Capital account at the end of the first year?

A)$120,900.
B)$118,300.
C)$126,100.
D)$80,600.
E)$111,500.

Question 31

Partnerships have alternative legal forms including all of the following except:

A)Partnership.
B)Limited Partnership.
C)Subchapter S Corporation.
D)Limited Liability Partnership.
E)Limited Liability Company.

Question 32

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was Eaton's share of income or loss for the first year?

A)$3,900 loss.
B)$11,700 loss.
C)$10,400 loss.
D)$24,700 loss.
E)$9,100 loss.

Question 33

Which of the following statements is correct regarding the admission of a new partner?

A)A new partner must purchase a partnership interest directly from the business.
B)The right of co-ownership in the business property can be transferred to a new partner without the consent of other existing partners.
C)The right to participate in management of the business can be conveyed without the consent of other existing partners.
D)The right to share in profits and losses can be sold to a new partner without the consent of other existing partners.
E)A new partner always pays book value.

Question 34

The partnership contract for Hanes and Jones LLP provides that Hanes is to receive a bonus of 20% of net income (after the bonus)and that the remaining net income is to be divided equally.If the partnership income before the bonus for the year is $57,600,Hanes' share of this pre-bonus income is:

A)$28,800.
B)$33,600.
C)$34,560.
D)$43,200.
E)$57,600.

Question 35

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was the balance in Thurman's Capital account at the end of the second year?

A)$133,380.
B)$84,760.
C)$105,690.
D)$132,860.
E)$71,760.

Question 36

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was Eaton's share of income or loss for the second year?

A)$17,160 income.
B)$4,160 income.
C)$19,760 income.
D)$17,290 income.
E)$28,080 income.

Question 37

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was Thurman's share of income or loss for the second year?

A)$17,160 income.
B)$4,160 income.
C)$19,760 income.
D)$17,290 income.
E)$28,080 income.

Question 38

Withdrawals from the partnership accounts are typically not used

A)to record compensation for work performed in the business.
B)to reduce the partners' capital account balances at the end of an accounting period.
C)to record interest earned on a partner's capital balance.
D)to reduce the basic investment that has been made in the business.to record a reward for ownership in the partnership.

Question 39

The partners of Apple,Bere,and Carroll LLP share net income and losses in a 5:3:2 ratio,respectively.The capital account balances on January 1,2008,were as follows:
The carrying amounts of the assets and liabilities of the partnership are the same as their current fair values.Dorr will be admitted to the partnership with a 20% capital interest and a 20% share of net income and losses in exchange for a cash investment.The amount of cash that Dorr should invest in the partnership is:

A)$25,000.
B)$30,000.
C)$37,500.
D)$75,000.
E)$90,000.

Question 40

REFERENCE: Ref.14_02
A partnership began its first year of operations with the following capital balances:
Young,Capital: $143,000
Eaton,Capital: $104,000
Thurman,Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis,respectively.
Each partner was allowed to withdraw up to $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.Assume further that each partner withdrew the maximum amount from the business each year.
What was the balance in Young's Capital account at the end of the second year?

A)$133,380.
B)$84,760.
C)$105,690.
D)$132,860.
E)$71,760.

Question 41

What events cause the dissolution of a partnership?

Question 42

REFERENCE: Ref.14_03
The capital account balances for Donald & Hanes LLP on January 1,2008,were as follows: Donald and Hanes shared net income and losses in the ratio of 3:2,respectively.The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income.May invested $100,000 cash,and no goodwill was recognized.
What is the balance of Hane's capital account after the new partnership is created?

A)$84,000.
B)$100,000.
C)$140,000.
D)$176,000.
E)$200,000.

Question 43

What is the dissolution of a partnership?

Question 44

REFERENCE: Ref.14_05
Donald,Anne,and Todd have the following capital balances;$40,000,$50,000 and $30,000 respectively.The partners share profits and losses 20%,40%,and 40% respectively.
What is the total partnership capital after Anne retires receiving $80,000 and using the bonus method?

A)$20,000.
B)$40,000.
C)$60,000.
D)$80,000.
E)$100,000.

Question 45

REFERENCE: Ref.14_03
The capital account balances for Donald & Hanes LLP on January 1,2008,were as follows: Donald and Hanes shared net income and losses in the ratio of 3:2,respectively.The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income.May invested $100,000 cash,and no goodwill was recognized.
What is the balance of May's capital account after the new partnership is created?

A)$84,000.
B)$100,000.
C)$140,000.
D)$176,000.
E)$200,000.

Question 46

Max,Jones and Waters shared profits and losses 20%,40%,and 40% respectively and their partnership capital balance is $10,000,$30,000 and $50,000 respectively.Max has decided to withdraw from the partnership.An appraisal of the business and its property estimates the fair value to be $ 200,000.Land with a book value of $30,000 has a fair value of $45,000.Max has agreed to receive $20,000 in exchange for her partnership interest.What amount should land be recorded on the partnership books?

A)$20,000.
B)$30,000.
C)$45,000.
D)$50,000.
E)$200,000.

Question 47

REFERENCE: Ref.14_03
The capital account balances for Donald & Hanes LLP on January 1,2008,were as follows: Donald and Hanes shared net income and losses in the ratio of 3:2,respectively.The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income.May invested $100,000 cash,and no goodwill was recognized.
Which of the following could be used as a basis to allocate profits among partners who are active in the management of the partnership?
1)allocation of salaries.
2)the number of years with the partnership.
3)the amount of time each partner works.
4)the average capital invested.

A)1 and 2.
B)1 and 3.
C)1,2,and 3.
D)1,3,and 4.
E)1,2,3,and 4.

Question 48

REFERENCE: Ref.14_05
Donald,Anne,and Todd have the following capital balances;$40,000,$50,000 and $30,000 respectively.The partners share profits and losses 20%,40%,and 40% respectively.
Anne retires and is paid $80,000 based on the terms of the original partnership agreement.If the bonus method is used,what is the capital of the remaining partners?

A)Donald,$40,000;Todd,$30,000
B)Donald,$30,000;Todd,$10,000
C)Donald,$50,000;Todd,$50,000
D)Donald,$80,000;Todd,$70,000

Question 49

REFERENCE: Ref.14_05
Donald,Anne,and Todd have the following capital balances;$40,000,$50,000 and $30,000 respectively.The partners share profits and losses 20%,40%,and 40% respectively.
Anne retires and is paid $80,000 based on the terms of the original partnership agreement.If the goodwill method is used,what is the capital of the remaining partners?

A)Donald,$55,000;Todd,$60,000
B)Donald,$40,000;Todd,$30,000
C)Donald,$65,000;Todd,$55,000
D)Donald,$15,000;Todd,$30,000

Question 50

Brown and Green are forming a business as partners.If they do not create a formal written partnership agreement,what risks are they exposing themselves to?

Question 51

For what events or conditions should the Articles of Partnership make provision?

Question 52

Why are the terms of the Articles of Partnership important to partners?

Question 53

REFERENCE: Ref.14_04
Peter,Roberts,and Dana have the following capital balances;$80,000,$100,000 and $60,000 respectively.The partners share profits and losses 20%,40%,and 40% respectively.
Roberts retires and is paid $160,000 based on the terms of the original partnership agreement.If the goodwill method is used,what is the capital balance of Dana?

A)$20,000.
B)$60,000.
C)$110,000.
D)$120,000.
E)$230,000.

Question 54

REFERENCE: Ref.14_04
Peter,Roberts,and Dana have the following capital balances;$80,000,$100,000 and $60,000 respectively.The partners share profits and losses 20%,40%,and 40% respectively.
What is the total partnership capital after Roberts retires receiving $160,000 and using the goodwill method?

A)$20,000.
B)$60,000.
C)$80,000.
D)$120,000.
E)$230,000.

Question 55

REFERENCE: Ref.14_03
The capital account balances for Donald & Hanes LLP on January 1,2008,were as follows: Donald and Hanes shared net income and losses in the ratio of 3:2,respectively.The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income.May invested $100,000 cash,and no goodwill was recognized.
What is the new total balance of the partnership accounts?

A)$84,000.
B)$140,000.
C)$176,000.
D)$200,000.
E)$400,000.

Question 56

What theoretical argument could be made against the recognition of goodwill when there is a change in the ownership of a partnership?

Question 57

How is accounting for a partnership different from accounting for a corporation?

Question 58

By what methods can a person gain admittance to a partnership?

Question 59

REFERENCE: Ref.14_03
The capital account balances for Donald & Hanes LLP on January 1,2008,were as follows: Donald and Hanes shared net income and losses in the ratio of 3:2,respectively.The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income.May invested $100,000 cash,and no goodwill was recognized.
What is the balance of Donald's capital account after the new partnership is created?

A)$84,000.
B)$100,000.
C)$140,000.
D)$176,000.
E)$200,000.

Question 60

REFERENCE: Ref.14_04
Peter,Roberts,and Dana have the following capital balances;$80,000,$100,000 and $60,000 respectively.The partners share profits and losses 20%,40%,and 40% respectively.
Roberts retires and is paid $160,000 based on the terms of the original partnership agreement.If the goodwill method is used,what is the capital balance of Peter?

A)$20,000.
B)$60,000.
C)$110,000.
D)$120,000.
E)$230,000.

Question 61

REFERENCE: Ref.14-10
On January 1,2008,Lamb and Mona LLP admitted Noris to a 20% interest in net assets for an investment of $50,000 cash.Prior to the admission of Noris,Lamb and Mona had net assets of $100,000 and an income-sharing ratio of Lamb 25%,Mona 75%.After the admission of Noris,the partnership contract included the following provisions:
Salary of $40,000 a year to Noris.
Remaining net income in ratio Lamb 20%,Mona 60%,Noris 20%
During the fiscal year ended December 31,2008,the partnership had income of $90,000 prior to recognition of salary to Noris.
Record the journal entry to allocate the salary of Noris.

Question 62

REFERENCE: Ref.14_08
Assume the partnership of Dean,Hardin,and Roth has been in existence for a number of years.Dean decides to withdraw from the partnership when the partners' capital balances are as follows: An appraisal of the business and its property estimates the fair value to be $ 100,000.Dean has agreed to receive $64,000 in exchange for his partnership interest.
What are the remaining partners' capital balances after Dean's interest is dissolved,assuming the bonus method is applied?

Question 63

REFERENCE: Ref.14_07
Eden acquired a 20% interest in the partnership by contributing a total of $71,500 directly to the other four partners.No goodwill is to be recorded.Profits and losses have previously been split according to the following percentages: Adams,15%,Barnes,35%,Cordas,30%,and Davis,20%.After Eden made his investment,what were the individual capital balances?

Question 64

REFERENCE: Ref.14_07
Eden contributed $124,000 in cash to the business to receive a 20% interest in the partnership.Goodwill was to be recorded.The four original partners shared all profits and losses equally.After Eden made his investment,what were the individual capital balances?

Question 65

REFERENCE: Ref 14_06
Norr and Caylor established a partnership on January 1,2007.Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000.For both partners,the beginning capital balance was to equal the initial investment.Norr and Caylor agreed to the following procedure for sharing profits and losses:
- 12% interest on the yearly beginning capital balance
- $10 per hour of work that can be billed to the partnership's clients
- the remainder divided in a 3:2 ratio
The Articles of Partnership specified that each partner should withdraw no more than $1,000 per month.
For 2007,the partnership's income was $70,000.Norr had 1,000 billable hours,and Caylor worked 1,400 billable hours.In 2008,the partnership's income was $24,000,and Norr and Caylor worked 800 and 1,200 billable hours respectively.Each partner withdrew $1,000 per month throughout 2007 and 2008.
Determine the balance in both capital accounts at the end of 2007.

Question 66

Jipsom and Klark were partners with capital account balances of $80,000 and $100,000,respectively.Looney paid $32,000 to Jipsom and $40,000 to Klark for 30% of their interests in the partnership.Jipsom and Klark shared income in the ratio of 2:3.They believed that revaluation of the partnership was appropriate when a new partner was admitted.
Required:
Prepare the journal entries to record the admission of Looney to the partnership.

Question 67

REFERENCE: Ref.14-10
On January 1,2008,Lamb and Mona LLP admitted Noris to a 20% interest in net assets for an investment of $50,000 cash.Prior to the admission of Noris,Lamb and Mona had net assets of $100,000 and an income-sharing ratio of Lamb 25%,Mona 75%.After the admission of Noris,the partnership contract included the following provisions:
Salary of $40,000 a year to Noris.
Remaining net income in ratio Lamb 20%,Mona 60%,Noris 20%
During the fiscal year ended December 31,2008,the partnership had income of $90,000 prior to recognition of salary to Noris.
Record the journal entry to record the net income to the capital accounts

Question 68

REFERENCE: Ref.14-09
Assume the partnership of Howell,Madrid,and Waldrop has been in existence for a number of years.Howell decides to withdraw from the partnership when the partners' capital balances are as follows:
An appraisal of the business and its net assets estimates the fair value to be $154,000.Land with a book value of $20,000 has a fair value of $35,000.Howell has agreed to receive $84,000 in exchange for her partnership interest.
Prepare the journal entries for the dissolution of Howell's partnership interest,assuming the goodwill method is to be applied.

Question 69

REFERENCE: Ref 14_06
Norr and Caylor established a partnership on January 1,2007.Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000.For both partners,the beginning capital balance was to equal the initial investment.Norr and Caylor agreed to the following procedure for sharing profits and losses:
- 12% interest on the yearly beginning capital balance
- $10 per hour of work that can be billed to the partnership's clients
- the remainder divided in a 3:2 ratio
The Articles of Partnership specified that each partner should withdraw no more than $1,000 per month.
For 2007,the partnership's income was $70,000.Norr had 1,000 billable hours,and Caylor worked 1,400 billable hours.In 2008,the partnership's income was $24,000,and Norr and Caylor worked 800 and 1,200 billable hours respectively.Each partner withdrew $1,000 per month throughout 2007 and 2008.
Determine the amount of income allocated to each partner for 2007.

Question 70

REFERENCE: Ref.14-09
Assume the partnership of Howell,Madrid,and Waldrop has been in existence for a number of years.Howell decides to withdraw from the partnership when the partners' capital balances are as follows:
An appraisal of the business and its net assets estimates the fair value to be $154,000.Land with a book value of $20,000 has a fair value of $35,000.Howell has agreed to receive $84,000 in exchange for her partnership interest.
What are the remaining partners' capital balances after Howell's interest is dissolved,assuming the goodwill method is applied?

Question 71

REFERENCE: Ref.14-10
On January 1,2008,Lamb and Mona LLP admitted Noris to a 20% interest in net assets for an investment of $50,000 cash.Prior to the admission of Noris,Lamb and Mona had net assets of $100,000 and an income-sharing ratio of Lamb 25%,Mona 75%.After the admission of Noris,the partnership contract included the following provisions:
Salary of $40,000 a year to Noris.
Remaining net income in ratio Lamb 20%,Mona 60%,Noris 20%
During the fiscal year ended December 31,2008,the partnership had income of $90,000 prior to recognition of salary to Noris.
James,Keller,and Rivers have the following capital balances;$48,000,$70,000 and $90,000 respectively.Because of a cash shortage James invests an additional $12,000 on June 1st.Each partner withdraws $1,000 per month.James,Keller,and Rivers receive a salary of $13,000,$15,000 and $20,000,respectively,for work done during the year.Each partner receives interest of 8% on their weighted average capital balance without regard to normal drawings.Any remaining profits are split 20%,30%,and 50% respectively.The net income for the year is $30,000.What are the ending capital balances for each partner?

Question 72

REFERENCE: Ref.14_07
Eden contributes $49,000 into the partnership for a 25% interest.The four original partners share profits and losses equally.Using the bonus method,determine the balances for each of the five partners after Eden joins the partnership.

Question 73

REFERENCE: Ref.14_07
Eden acquired a 20% interest in the partnership by contributing a total of $71,500 directly to the other four partners.Goodwill is to be recorded.Profits and losses have previously been split according to the following percentages: Adams,15%,Barnes,35%,Cordas,30%,and Davis,20%.After Eden made his investment,what were the individual capital balances?

Question 74

REFERENCE: Ref 14_06
Norr and Caylor established a partnership on January 1,2007.Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000.For both partners,the beginning capital balance was to equal the initial investment.Norr and Caylor agreed to the following procedure for sharing profits and losses:
- 12% interest on the yearly beginning capital balance
- $10 per hour of work that can be billed to the partnership's clients
- the remainder divided in a 3:2 ratio
The Articles of Partnership specified that each partner should withdraw no more than $1,000 per month.
For 2007,the partnership's income was $70,000.Norr had 1,000 billable hours,and Caylor worked 1,400 billable hours.In 2008,the partnership's income was $24,000,and Norr and Caylor worked 800 and 1,200 billable hours respectively.Each partner withdrew $1,000 per month throughout 2007 and 2008.
Determine the amount of income allocated to each partner for 2008 to the nearest dollar.

Question 75

Reed,Sharp,and Tucker were partners with capital account balances of $80,000,$100,000,and $70,000,respectively.They agreed to admit Upton to the partnership.Upton purchased 30% of each partner's interest,with payments to Reed,Sharp,and Tucker of $32,000,$40,000,and $28,000,respectively.Before the admission of Upton,the profit and loss sharing ratio was 2:3:2.The partners agreed to use the bonus method to account for the admission of Upton to the partnership.
Required:
Prepare the journal entry to record the admission of Upton to the partnership.

Question 76

REFERENCE: Ref 14_06
Norr and Caylor established a partnership on January 1,2007.Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000.For both partners,the beginning capital balance was to equal the initial investment.Norr and Caylor agreed to the following procedure for sharing profits and losses:
- 12% interest on the yearly beginning capital balance
- $10 per hour of work that can be billed to the partnership's clients
- the remainder divided in a 3:2 ratio
The Articles of Partnership specified that each partner should withdraw no more than $1,000 per month.
For 2007,the partnership's income was $70,000.Norr had 1,000 billable hours,and Caylor worked 1,400 billable hours.In 2008,the partnership's income was $24,000,and Norr and Caylor worked 800 and 1,200 billable hours respectively.Each partner withdrew $1,000 per month throughout 2007 and 2008.
Determine the balance in both capital accounts at the end of 2008 to the nearest dollar.

Question 77

REFERENCE: Ref.14-10
On January 1,2008,Lamb and Mona LLP admitted Noris to a 20% interest in net assets for an investment of $50,000 cash.Prior to the admission of Noris,Lamb and Mona had net assets of $100,000 and an income-sharing ratio of Lamb 25%,Mona 75%.After the admission of Noris,the partnership contract included the following provisions:
Salary of $40,000 a year to Noris.
Remaining net income in ratio Lamb 20%,Mona 60%,Noris 20%
During the fiscal year ended December 31,2008,the partnership had income of $90,000 prior to recognition of salary to Noris.
Record the journal entry for the admission of Noris.Goodwill is not to be recorded.

Question 78

REFERENCE: Ref.14_08
Assume the partnership of Dean,Hardin,and Roth has been in existence for a number of years.Dean decides to withdraw from the partnership when the partners' capital balances are as follows: An appraisal of the business and its property estimates the fair value to be $ 100,000.Dean has agreed to receive $64,000 in exchange for his partnership interest.
Prepare the journal entry for the payment to Dean in the dissolution of his partnership interest,assuming the bonus method is to be applied.

Question 79

Under what circumstances does a partner's balance in his or her capital account have practical consequences for the partner?