FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 16: Reporting and Analyzing Partnerships

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 71

Short Answer

Review LaterAdd Note

Review Later

A partnership that has at least two classes of partners, general and limited, allows the limited partners to have no personal liability beyond the amounts they invest in the partnership, and the limited partners have no active role except as specified in the partnership agreement is a ___________________ partnership.

Correct Answer

verified

Show Answer

Question 72

True/False

Review LaterAdd Note

Review Later

If at the time of partnership liquidation, a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency, then that partner is entitled to share in the final distribution of cash.

A) True
B) False

Correct Answer

verified

Show Answer

Question 73

Essay

Review LaterAdd Note

Cinema Products LP is organized as a limited partnership that sells movie props. Information related to the capital balances is given below. Compute the partnership return on equity.

Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Masters, $15,000; Hardy, $15,000; Rowen, $(2,000) . After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $28,000 in cash to be distributed. Rowen pays $2,000 to cover the deficiency in his account. The general journal entry to record the final distribution would be:

Partners in a partnership are not taxed on their withdrawals, but rather on _____________________________.

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.

If the partners agree on a formula to share income and say nothing about losses, then the losses are shared using the same formula.

Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. Wallace sold one-half of his partnership interest to Prince for $55,000 when his capital balance was $78,000. The partnership would record the admission of Prince into the partnership as:

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

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from the acts of other partners is a ________________________ partnership.

The Redtail Partnership agrees to dissolve. The cash balance after selling all assets and paying all liabilities is $56,000. The final capital account balances are: Paulson, $33,000; Gray, $27,000; and Chang, ($4,000). Chang agrees to pay $4,000 cash from personal funds to settle his deficiency. The partners have agreed to share income and losses equally. Prepare the journal entries to record the transactions required to dissolve this partnership.

Discuss the options for the allocation of income and loss among partners, including with and without a partnership agreement.

When a partnership is liquidated:

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 $174,000 for its first year, what amount of income is credited to Lee's capital account?

Kramer and Feldman Company is organized as a partnership. At the prior year-end, Kramer's equity balance was $352,000 and Feldman's was $256,000. For the current year, partnership net income is $137,000 ($77,000 allocated to Kramer and $60,000 allocated to Feldman); withdrawals are $87,000 ($45,000 for Kramer and $42,000 for Feldman). Compute the total partnership return on equity and the individual partner return on equity ratios.

Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $64,000, and Martin's capital balance $67,000. Hewlett and Martin have agreed to share equally in income or loss. The existing partners agree to accept Black with a 20% interest. Black will invest $35,000 in the partnership. The bonus that is granted to Hewlett and Martin equals:

R. Stetson contributed $14,000 in cash plus office equipment valued at $7,000 to the SJ Partnership. The journal entry to record the transaction for the partnership is:

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

To buy into an existing partnership, the new partner must contribute cash to the partnership.

The following information is available on PDC Enterprises, a partnership, for the most recent fiscal year: There are three partners in TGR Enterprises: Pearson, Darling and Cathay. At the end of the year, based on their proportionate investments and withdrawals, the partners' capital accounts were in the ratio of 2:2:1, respectively. Compute the ending capital balances of Cathay.