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Exam 12: Partnerships

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Question 41

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Explain the type of information needed to prepare journal entries to record the formation of a partnership.

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When partners invest in a partnership,th...

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Question 42

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A capital deficiency can arise from liquidation losses,excessive withdrawals,or recurring losses in prior periods.

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Question 43

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Collins and Farina are forming a partnership.Collins is investing a building that has a fair market value of $70,000.However,the building is subject to a $36,000 mortgage.Farina is investing $20,000 cash.The amount to be credited to Collins' capital account is:

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

Discuss the characteristics of partnerships and similar organizations.

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

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

A capital deficiency means that:

The statement of changes in equity shows the beginning balance in retained earnings,plus investments,less partners' withdrawals,the income or loss,and the ending balance in retained earnings.

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

The withdrawals account of each partner is:

Gillian and Emily invested $90,000 and $130,000,respectively,in a partnership they began one year ago.Assuming the partnership's net income was $250,000 for this year,calculate the share of the net income each partner should receive under the following assumptions. (1)The partnership agreement specifies a salary allowance of $50,000 to Gillian and $60,000 to Emily,and the balance shared equally. (2)The partnership agreement specifies a salary allowance of $45,000 to Gillian and $60,000 to Emily,10% interest on their investments,and the balance shared equally.

In the absence of a partnership agreement,the law says income/loss sharing should be based on:

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

Explain the steps involved in the liquidation of a partnership.

Discuss the accounting issues involved in the admission or withdrawal of a partner from a partnership.

A partner can withdraw from a partnership by:

Zandusky invested $50,000 and Laurie invested $40,000 in a partnership and agreed to share income and losses by allowing a $5,000 annual salary allowance to Zandusky and a $6,000 annual salary allowance to Laurie.As well,each partner is to receive a share of net income equal to a 10% return on capital investments,and the balance is to be divided equally.Under this agreement,what are the shares of the partners if the partnership income is $65,000?

In a limited partnership the general partner has unlimited liability.

The legal relationship among the partners whereby each partner is an agent of the partnership and is able to bind the partnership to contracts within the apparent scope of the partnership's business is called: