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Exam 16: Accounting for Partnerships

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Question 41

Multiple Choice

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Which of the following statements is true?

A) Partners are employees of the partnership.
B) Salaries to partners are expenses on the partnership income statement.
C) Salary allowances usually reflect the relative value of services provided by partners.
D) Salary allowances are expenses.
E) Interest allowances are expenses.

F) B) and C)
G) A) and E)

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Question 42

Multiple Choice

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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 25% interest.Block will invest $35,000 in the partnership.The capital account balances after admission of Block are:

A) Block $35,000, Groh $64,000, and Jackson $61,000.
B) Block $35,000, Groh $66,500, and Jackson $63,500.
C) Block $40,000, Groh $64,000, and Jackson $61,000.
D) Block $40,000, Groh $61,500, and Jackson $58,500.
E) Block $40,000, Groh $66,500, and Jackson $63,500.

F) A) and E)
G) C) and D)

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Question 43

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A partnership has an unlimited life.

The withdrawals account of each partner is closed to retained earnings at the end of the accounting period.

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

The life of a partnership is ____________________ in duration.

Elaine Valero is a limited partner in a marketing and design firm.During the previous year her return on partnership equity was 14%.During this time, the beginning and ending balances in her capital account were $210,000 and $230,000 respectively.What was Elaine's partnership net income for this year?

A _________________________ means that at least one partner has a debit balance in his/her capital account at the point of the final distribution of cash.

Force and Zabala are partners.Force's capital balance in the partnership is $98,000 and Zabala 's capital balance is $53,000.Force and Zabala have agreed to share equally in income or loss.Force and Zabala agree to accept Burns with a 25% interest.Burns will invest $56,000 in the partnership.Which of the following statements is correct?

The withdrawals account of each partner is:

Renee Jackson is a partner in Sports Promoters.Her beginning partnership capital balance for the current year is $55,000 and her ending partnership capital balance for the current year is $62,000.Her share of this year's partnership income was $5,250.What is her partner return on equity?

Limited liability partnerships are designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.

Partners can invest both assets and liabilities into a partnership.

If a partnership contract provides for interest at 10% annually on each partner's investment, the interest:

Paco and Kate invested $99,000 and $126,000, respectively, in a partnership they began one year ago.Assuming the partnership earned $120,000 during the current year, compute the share of the net income each partner should receive under each of these independent assumptions.

___________________________ means that partners can commit or bind the partnership to any contract within the scope of the partnership business.

Web Services is organized as a limited partnership, with David White as one of its partners.David's capital account began the year with a balance of $45,000.During the year, David's share of the partnership income was $7,500 and David received $4,000 in distributions from the partnership.What is David's partner return on equity?

Armstrong withdraws from the FAP Partnership.The remaining partners agree to buy out her share for her capital balance of $35,000.Prepare the journal entry to record the withdrawal from the partnership.

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 ______________________________.

Partner return on equity is calculated as ______________________________.