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Exam 16: Reporting and Analyzing Partnerships

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Question 41

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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.

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Question 42

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

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

F) A) and D)
G) B) and E)

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Question 43

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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:

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:

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.

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.

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:

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

The life of a partnership is ____________________ in duration.

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

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.

Partners can invest assets but not liabilities into a partnership.

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

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

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.

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:

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?

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

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:

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