FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 16: Reporting and Analyzing Partnerships

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 81

True/False

Review LaterAdd Note

Review Later

If a partner is unable to cover a deficiency and the other partners absorb the deficiency, then the partner with the deficiency is thus relieved of all liability.

A) True
B) False

Correct Answer

verified

Show Answer

Question 82

Multiple Choice

Review LaterAdd Note

Review Later

Forman and Berry are forming a partnership. Forman will invest a building that currently is being used by another business owned by Forman. The building has a market value of $80,000. Also, the partnership will assume responsibility for a $20,000 note secured by a mortgage on that building. Berry will invest $50,000 cash. For the partnership, the amounts to be recorded for the building and for Forman's Capital account are:

A) Building, $80,000 and Forman, Capital, $80,000.
B) Building, $60,000 and Forman, Capital, $60,000.
C) Building, $60,000 and Forman, Capital, $50,000.
D) Building, $80,000 and Forman, Capital, $60,000.
E) Building, $60,000 and Forman, Capital, $80,000.

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

Correct Answer

verified

Show Answer

Question 83

Multiple Choice

Review LaterAdd Note

Partners' withdrawals of assets are:

When a partner leaves a partnership, the present partnership ends, but the business can still continue to operate.

Caroline Meeks and Charlie Fox decide to form a partnership on August 1. Meeks invests the following assets and liabilities in the new partnership: The note payable is associated with the building and the partnership will assume responsibility for the loan. Fox invested $100,000 in cash and $95,000 in equipment in the new partnership. Prepare the journal entries to record the two partners' original investments in the new partnership.

In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance:

Mace and Bowen are partners and share equally in income or loss. Mace's current capital balance is $135,000 and Bowen's is $120,000. Mace and Bowen agree to accept Kent with a 30% interest in the partnership. Kent invests $115,000 in the partnership. The balances in Mace's and Bowen's capital accounts after admission of the new partner equal:

Bloom and Plant organize a partnership on January 1. Bloom's initial investment consists of $800 cash, $1,700 equipment and a $500 note payable reflecting a bank loan for the new business. Plant's initial investment is cash of $2,000. These amounts are the values agreed on by both partners. The journal entry to record Bloom's investment is:

In the absence of a partnership agreement, the law says that income of a partnership will be shared equally by the partners.

If partners agree on how to share income, but say nothing about losses, then losses are shared ___________________.

The withdrawals account of each partner is:

Duffie and Simpson have decided to liquidate their partnership after several years of losses. Their partnership agreement states that the partners share in income and losses equally. At the time of liquidation, the capital balances were $78,400 Duffie and $61,600 Simpson. The company has $14,000 cash on hand. Non-cash assets are liquidated for $120,000, with no resulting gain or loss. Liabilities of $76,000 are paid to creditors, with no gain or loss incurred. The amount to be distributed to Simpson upon liquidation is:

Sharon and Nancy formed a partnership by making capital contributions of $130,000 and $195,000 respectively. The annual partnership income of $230,000 is to be allocated assuming a salary allowance of $40,000 to Sharon and $35,000 to Nancy; interest allowances of 12% on their initial capital investments; and the balance shared equally. Prepare the entries to record the initial capital investments, the allocation of net income, and close the partner's withdrawal accounts assuming that Sharon withdrew $50,000 and Nancy withdrew $45,000.

In the absence of a partnership agreement, the law says that income (and loss) should be allocated based on:

Mutual agency implies that each partner in a partnership is a fully authorized agent of the partnership. Which of the following statements is correct regarding the authority of a partner to bind the partnership in dealings with third parties?

Bannister invested $110,000 and Wilder invested $99,000 in a new partnership. Their partnership agreement called for Wilder to receive a $70,000 annual salary allowance. Under this agreement, what are the income or loss shares of the partners if the annual partnership income is $90,000?

Parker and Ellis agree to admit Teng as a 1/3 partner for $45,000 to be paid to Parker and Ellis, divided equally. Immediately prior to Teng's entry into the partnership, Parker and Ellis each had capital balances of $90,000. The journal entry to record Teng's purchase of the partnership interest is:

Even if partners devote their time and services to their partnership, their salaries are not expenses on the income statement.

The equity section of the balance sheet of a partnership usually shows the separate capital account balances of each partner.

At least one partner having a debit balance in his/her capital account at the point of the final distribution of cash is known as a _________________________.