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Exam 16: Reporting and Analyzing Partnerships

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Question 51

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Peters, Chong, and Aaron are dissolving their partnership. Their partnership agreement allocates each partner an equal share of all income and losses. The current period's ending capital account balances are Peters, $54,000; Chong, $42,000; and Aaron, $(2,000) . After all assets are sold and liabilities are paid, there is $94,000 in cash to be distributed. Aaron is unable to pay the deficiency. The journal entry to record the distribution should be:

A) Debit Peters, Capital $54,000; debit Chong, Capital $40,000; credit Cash $94,000.
B) Debit Peters, Capital $54,000; debit Chong, Capital $42,000; credit Cash $96,000.
C) Debit Peters, Capital $53,000; debit Chong, Capital $41,000; credit Cash $94,000.
D) Debit Cash $94,000, debit Aaron, Capital $2,000, credit Peters, Capital $54,000, credit Chong, Capital $42,000.
E) Debit Cash $94,000; credit Peters, Capital $47,000; credit Chong, Capital $47,000.

F) A) and C)
G) B) and D)

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Question 52

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Partner net income divided by average partner equity equals ______________________.

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Question 53

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Lemon and Parks are partners. On October 1, Lemon's capital balance is $75,000, and Parks' capital balance is $125,000. With the partnership's approval, Parks sells ½ of his partnership interest to Tambling for $70,000. Prepare the journal entry to record this transaction in the partnership records.

Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $150,000 for its first year, what amount of income is credited to North's capital account?

__________________ means that partners can commit or bind the partnership to any contract within the scope of the partnership business.

Cinema Products LP is organized as a limited partnership that sells movie props. Information related to capital balances is given below. Compute the partner return on equity for each limited partner. How would each partner evaluate the success of the partnership? What would you recommend the partners do with respect to additional investments or withdrawals?

During the closing process, each partner's withdrawals account is closed to _________________________.

Conklin plans to leave the CAP Partnership. The recorded balance in her capital account is $48,000. The remaining partners, Arthurs and Preston, agree to pay Conklin $58,000 cash and Conklin accepts. The partners share income and loss equally. Prepare the journal entry to record the transaction.

A partnership in which all partners have mutual agency and unlimited liability is called:

Mesner's and Sanchez's company is organized as a partnership. At the prior year-end, Mesner's equity balance was $258,000 and Sanchez's was $212,000. For the current year, partnership net income is $125,000 ($75,000 allocated to Mesner and $50,000 allocated to Sanchez); withdrawals are $77,000 ($40,000 for Mesner and $37,000 for Sanchez). Compute the total partnership return on equity and the individual partner return on equity ratios.

The withdrawals account of each partner is closed to retained earnings at the end of the accounting period.

Conklin plans to leave the CAP Partnership. The recorded value of his capital account is $48,000. The remaining partners Arthurs and Preston agree to pay Conklin $40,000 cash and Conklin accepts. The partners share income and loss equally. Prepare the general journal entry to record the withdrawal from the partnership.

NC Partnership has current year net income of $173,000. The partnership agreement states that partners K. Nelson and V. Chavez should receive salary allowances of $42,000 and $50,000, respectively. Any remaining income or loss is to be allocated 35% to Nelson and 65% to Chavez. Nelson's share of the net income for the year is:

A partnership may allocate salary allowances to the partners reflecting the relative value of services provided.

Leto and Duncan allow Gunner to purchase a 25% interest in their partnership for $30,000 cash. Gunner has exceptional talents that will enhance the partnership. Leto's and Duncan's capital account balances are $55,000 each. The partners have agreed to share income or loss equally. Prepare the general journal entry to record the admission of Gunner to the partnership.

Pat and Nicole formed Here & There as a limited liability company. Unless the member owners elect to be treated otherwise, the Internal Revenue Service will tax the LLC as:

Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $285,000, and Atkins' beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. Barber withdrew $90,000 during the year and Atkins withdrew $100,000. What is Barber's ending equity?

Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $285,000, and Atkins' beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. Barber withdrew $90,000 during the year and Atkins withdrew $100,000. What is Atkins's return on equity?

Match each of the following terms with the appropriate definitions.

Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Wheadon's capital account?