FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 26: Accounting for Partnerships

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Short Answer

Review LaterAdd Note

Review Later

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

Correct Answer

verified

Show Answer

Question 62

True/False

Review LaterAdd Note

Review Later

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

A) True
B) False

Correct Answer

verified

Show Answer

Question 63

True/False

Review LaterAdd Note

When partners invest in a partnership, their capital accounts are credited for the amount invested.

Collins and Farina are forming a partnership. Collins is investing a building that has a market value of $80,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Farina is investing $20,000 cash. The balance of Collins' Capital account will be:

When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

Khalid, Dina and James are partners with beginning-year capital balances of $400,000, $320,000 and $160,000, respectively. The partners agreed to share income and loss as follows: Salary of $30,000 to Khalid, $50,000 to Dina and $55,000 to James. An interest allowance of 10% on beginning-of-year capital balances. Any remaining balance is to be divided equally. If partnership net income for the year is $190,000, determine each partner's share and make the appropriate journal entry to close the Income Summary to the capital accounts.

Baldwin and Tanner formed a partnership. Baldwin's initial capital account balance was $125,000 and Tanner's was $105,000. They agreed to share income and loss as follows: Baldwin 40%, Tanner 60%. Income was $102,000 in year 1 and $150,000 in year 2. Assume they each withdrew $10,000 per year. Calculate the capital balances for Baldwin and Tanner at the end of year 2.

In closing the accounts at the end of a period, the partners' capital accounts are credited for their share of the partnership loss or debited for their share of the partnership net income.

Holden, Phillips and Rogers are partners with beginning-year capital balances of $120,000, $60,000 and $60,000, 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 (Holden:Phillips:Rogers), respectively. (c) Partnership agreement is silent as to division of income and less.

Shelby and Mortonson formed a partnership with capital contributions of $300,000 and $400,000, respectively. Their partnership agreement calls for Shelby to receive a $60,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Shelby and Mortonson's respective shares are:

When a partnership is liquidated, its business is ended.

When a partner invests in a partnership, his/her capital account is __________ for the invested amount.

The BlueFin Partnership agrees to dissolve. The cash balance after selling all assets and paying all liabilities is $60,000. The final capital account balances are: Smith, $35,000; Nagy, $29,000; and Russ, ($4,000). Russ is unable to pay the capital deficiency. Prepare the journal entries to record the transactions required to dissolve this partnership.

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

A capital deficiency exists when all partners have a credit balance in their capital accounts.

A partnership agreement:

Rodriguez, Sate and Melton are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Rodriguez, $30,000, Sate, $30,000, Melton, $(4,000) . After all the assets are sold and liabilities are paid, but before any contributions are considered to cover any deficiencies, there is $56,000 in cash to be distributed. Melton pays $4,000 to cover the deficiency in her account. The general journal entry to record the final distribution would be:

What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.

Sierra and Jenson formed a partnership. Sierra contributed $25,000 cash and accounts receivable worth $11,000. Jenson's investment included cash, $5,000; inventory, $18,000; and supplies, $1,000. Prepare the journal entries to record each partner's investment in the new partnership.

The withdrawals account of each partner is: