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Exam 4: Accounting for Partnerships

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Question 71

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A partnership agreement generally contains all of the following except

A) the names and capital contributions of all the partners.
B) the expected life of the partnership.
C) the rights and duties of all partners.
D) the basis for sharing profit or loss among the partners.

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

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Question 72

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A partnership must make a profit.

A) True
B) False

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Question 73

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Joanne and Diane have a partnership in The Luxury Flooring Company. The partnership agreement includes the following provisions regarding sharing profit or loss: 1. A salary allowance of $ 90,000 to Joanne and $ 65,000 to Diane. 2. An interest allowance of 7% on capital balances at the beginning of the year. 3. The remainder to be divided 60% to Joanne and 40% to Diane. The capital balances on January 1, 2021, for Joanne and Diane were $ 480,000 and $ 1,000,000, respectively. During 2021, The Luxury Flooring Company had sales of $ 1,200,000, cost of goods sold of $ 417,000, and operating expenses of $ 335,000. Instructions Prepare an income statement for The Luxury Flooring Company for the year ended December 31, 2021. As a part of the income statement, include a division of profit to each of the partners.

Which of the following statements is true regarding a partnership?

The Statement of Partners' Equity explains

When assets are rolled into a partnership, the value that they are allocated in the partnership is the same as the value in the previous entity.

Which of the following statements is true regarding the form of a legally binding partnership contract?

The liquidation of a partnership is done to ensure that the fair value of the remaining assets is recorded accurately.

Peter and Paul have a partnership agreement that includes the following provisions regarding sharing profit or loss: 1. A salary allowance of $ 30,000 to Peter and $ 15,000 to Paul. 2. An interest allowance of 10% on capital balances at the beginning of the year. 3. The remainder to be divided 30% to Peter and 70% to Paul. The capital balances on January 1, 2021, for Peter and Paul were $ 80,000 and $ 100,000, respectively. During 2021, the Peter and Paul Merchandising Partnership had sales of $ 330,000, cost of goods sold of $ 190,000, and operating expenses of $ 60,000. Instructions Prepare an income statement for the Peter and Paul Merchandising Partnership for the year ended December 31, 2021. As a part of the income statement, include a division of profit to each of the partners.

Partnership profit/loss allocation is determined in accordance with the partnership agreement.

All of the following will result in a change in capital except for

On the financial statement of a partnership, a separate statement of the division of partnership profit or loss is prepared.

Ms. Manchester, Mr. Robertson, and Ms. Allison formed a partnership with a 4:2:1 partnership on profit. Mr. Robertson will receive what percentage of the profit at the end of the year?

When a partner withdraws by payment from the other partner's personal assets, the impact on net assets is

A partner pays income tax on the amount of money he or she withdrew from the partnership during the year.

The partners' profit and loss sharing ratio is 2:3:5, respectively. If the D, E, and F Partnership is liquidated by selling the equipment for $ 125,000, and creditors are paid in full, what is the total amount of cash that Partner D will receive in the distribution of cash to partners?

When profit is allocated in a 2:1 ratio, it means that one partner will get 2/3 of the profit.

Cleaning

A profit ratio based on capital balances might be appropriate when

Which of the following would not cause an increase in partnership capital?