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Exam 19: Accounting for Partnerships

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Question 1

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Sam McGuire and Marcos Valle are partners,and each has a capital balance of $50,000.To gain admission to the partnership,Scott Jordan pays $35,000 directly to Valle for one-half of his equity.After the admission of Jordan,the total partners' equity in the records of the partnership will be

A) $50,000.
B) $67,500.
C) $85,000.
D) $100,000.

E) All of the above
F) A) and B)

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Question 2

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Garvey,Lopes,and Russell are partners,sharing profits and losses in the ratio of 35,35,and 30 percent respectively.Their partnership agreement provides that if one of them withdraws from the partnership,the assets and liabilities are to be revalued,the gain or loss allocated to the partners,and the retiring partner paid the balance of his account.Garvey withdraws from the partnership on December 31,2016.The capital account balances before recording revaluation are Garvey,$280,000;Lopes,$230,000;and Russell,$290,000.The effect of the revaluation is to increase Merchandise Inventory by $44,000 and the Building account balance by $76,000.How much cash will be paid to Garvey?

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The increase to Garvey's capital account...

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Question 3

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Janice Miller operates a sole proprietorship business that sells camping equipment.On January 1,2016,Miller has agreed to transfer her assets and liabilities to a partnership that will operate The Camping Company.Miller will own a two-thirds interest in the capital of the partnership.The agreed upon values of assets and liabilities to be transferred follow. Accounts receivable of $50,000 (of which approximately $2,000 is uncollectible) Merchandise inventory,$90,000 Furniture and fixtures,$60,000 Accounts payable,$32,000 Record the receipt of the assets and liabilities by the partnership on page 1 of a general journal.Omit the description.

Smith contributed $15,000 cash while J.West contributed $20,000 cash and office equipment costing $14,000 currently valued at $12,000 to a new partnership.The journal entry to record the partnership investments of Smith and West is

Blake Kredell owns and operates a retail business called Blake's Camera Shop.His postclosing trial balance on December 31,2016,is provided below.Blake plans to enter into a partnership with Carmen Santos,effective January 1,2017.Profits and losses will be shared equally.Blake will transfer all assets and liabilities of his store to the partnership,after revaluation.Santos will invest cash equal to Blake's investment after revaluation.The agreed values are: Accounts Receivable (net),$7,500;Merchandise Inventory,$27,000;and Store Equipment,$8,000. The partnership will operate under the name Picture Perfect. Required: 1)Record each partner's investment on page 1 of a general journal.Omit descriptions.2)Prepare a balance sheet for Picture Perfect just after the investments.

A partnership ____________________ occurs when the partnership's assets are sold,debts are paid off,and the remaining cash is distributed to the partners.

Establishing a fiscal year and specifying the accounting method to be used in the partnership are important elements of the partnership agreement.

Kaitlyn Fields and Tyler Unger are partners.To expand the expertise of their business,they have agreed to admit Serena Singh to the partnership on January 1,2016.The capital account balances on January 1,2016,after revaluation of assets,are Fields,$80,000,and Unger,$60,000.Net income or net loss is shared equally.On page 7 of a general journal,record the admission of Singh to the partnership on January 1,2016,assuming that Fields sells one-half of her interest to Singh for $39,000 in cash.Omit the description.

Identify and discuss the key characteristics of partnerships and partner agreements.

The partners of Jones & Wesson agreed that Jones can sell his $50,000 investment in the firm to Smith.Smith pays Jones $60,000.The entry to record the transfer of capital to Smith will include a credit to Smith,Capital for $60,000.

Partnership net income of $75,000 is to be divided between two partners,Bob Garcia and Jerry McKernan,according to the following arrangement: There will be salary allowances of $30,000 for Garcia and $20,000 for McKernan,with the remainder divided equally.How much of the net income will be distributed to Garcia and McKernan,respectively?

When a partner submits personal living expenses for company reimbursement and the expense is reflected as a reduction of period profits,the company has violated the

The separate entity assumption requires personal expenses paid by the business be charged to a partner's drawing account.

Explain the major advantages and disadvantages of the partnership form.

James Cavanaugh,proprietor has agreed to take on a partner.His net assets are market valued at $105,000 with book assets having a net value of $95,000.In the newly created partnership,Cavanaugh's capital will reflect the $95,000 book value of existing assets contributed to the new organization.

The entry to close a partner's drawing account at the end of a fiscal period includes a debit to the partner's drawing account.

Withdrawals of assets from a partnership that are intended to permanently reduce the invested capital are recorded as debits to the partners' ____________________ accounts.

Valerie Wone and Samantha Wall are partners and together have equity of $150,000 in the partnership.Sarah wishes to become a partner with ¼ interest in the firm.If her investment reflects the cash paid,how much will she contribute to the partnership?

Partnership net income of $40,000 is to be divided between two partners,Reese Row and Andrew Young,according to the following arrangement: There will be salary allowances of $25,000 for Row and $10,000 for Young,with the remainder divided 65:35.How much of the net income will be distributed to Row and Young,respectively?

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