Question 1

Partners can invest assets but not liabilities into a partnership.

Accepted Answer

A) True 
 B)False

Question 2

Mutual agency means each partner can commit or bind the partnership to any contract within the scope of the partnership business.

Accepted Answer

A) True 
 B)False

Question 3

Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000. For the partnership, the amounts recorded for the building and for Fontaine's Capital account are:

Accepted Answer

A) Building $250,000; Fontaine, Capital $250,000. 
B) Building $175,000; Fontaine, Capital $175,000. 
C) Building $250,000; Fontaine, Capital $75,000. 
D) Building $250,000; Fontaine, Capital $175,000. 
E) Building $175,000; Fontaine, Capital $75,000.

Question 4

Carter Pearson is a partner in Event Promoters. His beginning partnership capital balance for the current year is $55,000, and his ending partnership capital balance for the current year is $62,000. His share of this year's partnership income was $6,250. What is his partner return on equity?

Accepted Answer

A) 5.34% 
B) 8.93% 
C) 10.08% 
D) 11.36% 
E) 10.68%

Question 5

The life of a partnership is ____________________ in duration.

Accepted Answer

The answer of The life of a partnership is ____________________...

Question 6

What are the ways that a new partner can be admitted to an existing partnership? Explain how to account for the admission of the new partner under each of these circumstances.

Accepted Answer

The answer of What are the ways that a new...

Question 7

Define the partner return on equity ratio and explain how a specific partner would use this ratio.

Accepted Answer

The answer of Define the partner return on equity ratio...

Question 8

Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000. For the partnership, the amounts recorded for total assets and for total capital account are:

Accepted Answer

A) Total assets $405,000; total capital $330,000. 
B) Total assets $350,000; total capital $350,000. 
C) Total assets $350,000; total capital $275,000. 
D) Total assets $305,000; total capital $230,000. 
E) Total assets $405,000; total capital $305,000.

Question 9

A partnership is an incorporated association of two or more people to pursue a business for profit as co-owners.

Accepted Answer

A) True 
 B)False

Question 10

Jason Miller and Trevor Cane organize a partnership on January 1. Miller initially invests cash of $15,000 and equipment with a fair value of $80,000 with an outstanding note balance of $33,000 that the partnership assumes as debt. Cane initially invests $50,000 cash. The journal entry to record Miller's investment is:

Accepted Answer

A) Debit J.Miller, Capital $62,000; credit Cash $15,000; credit Equipment $47,000. 
B) Debit Cash $15,000; debit Equipment $80,000; credit J.Miller, Capital $62,000; credit Notes Payable $33,000. 
C) Debit Cash $15,000; debit Equipment $47,000; credit J.Miller, Capital $62,000. 
D) Debit Cash $15,000; debit J.Miller, Capital $32,000; credit Equipment $80,000; credit Notes Payable $33,000. 
E) Debit Cash $15,000; debit Equipment $80,000; credit J.Miller, Capital $95,000.

Question 11

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a(n):

Accepted Answer

A) Partnership. 
B) Limited partnership. 
C) Limited liability partnership. 
D) General partnership. 
E) Unlimited liability company.

Question 12

Wright, Bell, and Edison are partners and share income in a 2:5:3 ratio. The partnership's capital balances are as follows: Wright, $33,000, Bell $27,000 and Edison $40,000. Edison decides to withdraw from the partnership, and the partners agree not to revalue the assets upon Edison's retirement. The journal entry to record Edison's June 1 withdrawal from the partnership if Edison is paid $40,000 for his equity is:

Accepted Answer

A) Debit Edison, Capital $40,000; credit Cash $40,000. 
B) Debit Wright, Capital $20,000; Debit Bell, Capital $20,000; credit Cash $40,000. 
C) Debit Wright, Capital $20,000; Debit Bell, Capital $20,000; credit Edison, Capital $40,000. 
D) Debit Edison, Capital $40,000; credit Wright, Capital $20,000; credit Bell, Capital $20,000. 
E) Debit Cash $40,000; credit Edison, Capital $40,000.

Question 13

Assume that the M & L partnership agreement gave March 60% and Ludwig 40% of partnership income and losses. The partnership lost $27,000 in the current period. This implies that March's share of the loss equals $16,200, and Ludwig's share equals $10,800.
March's Share of Loss = Net Loss * Allocation Percentage
March's Share of Loss = $27,000 * 60% = $16,200
Ludwig's Share of Loss = Net Loss * Allocation Percentage
Ludwig's Share of Loss = $27,000 * 40% = $10,800

Accepted Answer

A) True 
 B)False

Question 14

Accounting procedures for both C corporations and S corporations are the same in all aspects.

Accepted Answer

A) True 
 B)False

Question 15

Glade, Marker, and Walters are partners with beginning-year capital balances of $100,000, $50,000, and $50,000, 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 (Glade:Marker:Walters), respectively.
c. Partnership agreement is silent as to division of income and less.

Accepted Answer

The answer of Glade, Marker, and Walters are partners with...

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $64,000, and Martin's capital balance $61,000. Hewlett and Martin have agreed to share equally in income or loss. Hewlett and Martin agree to accept Black with a 25% interest. Black will invest $35,000 in the partnership. The bonus that is granted to Black equals:

Accepted Answer

A) $5,000. 
B) $2,500. 
C) $6,667. 
D) $3,333. 
E) $0, because Black must actually grant a bonus to Hewlett and Martin.

Question 18

The statement of changes in partners' equity shows the beginning balance in retained earnings, plus investments, less withdrawals, plus the income (or less the loss) and the ending balance in retained earnings.

Accepted Answer

A) True 
 B)False

Question 19

MacArthur, Strong, and Viet form a partnership. MacArthur contributes $190,000 cash and Strong contributes $200,000 in cash. Viet contributes equipment worth $215,000. Prepare the single journal entry to record the formation of this partnership.

Accepted Answer

The answer of MacArthur, Strong, and Viet form a partnership....

Question 20

Kramer and Jones allow Sanders to purchase a 25% interest in their partnership for $50,000 cash. Kramer and Jones 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 Sanders to the partnership.

Accepted Answer

The answer of Kramer and Jones allow Sanders to purchase...

Exam 16: Reporting and Analyzing Partnerships

Partners can invest assets but not liabilities into a partnership.

Mutual agency means each partner can commit or bind the partnership to any contract within the scope of the partnership business.

Carter Pearson is a partner in Event Promoters. His beginning partnership capital balance for the current year is $55,000, and his ending partnership capital balance for the current year is $62,000. His share of this year's partnership income was $6,250. What is his partner return on equity?

The life of a partnership is ____________________ in duration.

What are the ways that a new partner can be admitted to an existing partnership? Explain how to account for the admission of the new partner under each of these circumstances.

Define the partner return on equity ratio and explain how a specific partner would use this ratio.

A partnership is an incorporated association of two or more people to pursue a business for profit as co-owners.

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a(n) :

Accounting procedures for both C corporations and S corporations are the same in all aspects.

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

The statement of changes in partners' equity shows the beginning balance in retained earnings, plus investments, less withdrawals, plus the income (or less the loss) and the ending balance in retained earnings.

MacArthur, Strong, and Viet form a partnership. MacArthur contributes $190,000 cash and Strong contributes $200,000 in cash. Viet contributes equipment worth $215,000. Prepare the single journal entry to record the formation of this partnership.

Kramer and Jones allow Sanders to purchase a 25% interest in their partnership for $50,000 cash. Kramer and Jones 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 Sanders to the partnership.