Ch 12 – Accounting for Partnership and LLC

As part of the initial investment, Jackson contributes accounts receivable that had a balance of $22,500 in the accounts of a sole proprietorship. Of this amount, $3,000 is deemed completely worthless. For the remaining accounts, the partnership will establish a provision for possible future uncollectible accounts of $1,500. The amount debited to Accounts Receivable for the new partnership is a. $18,000 b. $22,500 c. $21,000 d. $19,500

Partnership income and losses are usually divided on the basis of interest, salaries, and stated ratios because a. partners seldom contribute time and resources equally b. this method reflects the amount of time devoted to the partnership by the partners c. it is simpler than following the legal rules d. it prevents arguments among the partners

Seth and Rachel have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investments at 15%; salary allowances of $24,000 and $20,000, respectively; and the remainder to be divided equally. How much of the net income of $90,000 is allocated to Seth? a. $42,750 b. $47,750 c. $45,000 d. $43,250

Seth and Rachel have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remainder divided equally. How much of the net loss of $16,000 is allocated to Seth? a. $8,000 b. $6,000 c. $4,000 d. $16,000

Details of the division of net income for a partnership should be disclosed in the a. Assets section of the balance sheet b. partners' subsidiary ledger c. statement of cash flows d. partnership income statement

Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann's was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann, respectively, and 10% interest on original capital. If they agree to share the remaining profits and losses on a 3:2 ratio, what will McMann's share of the income be if the income for the year is $15,000? a. $6,000 b. $9,400 c. $12,600 d. $14,000

Nick is admitted to an existing partnership by investing cash. Nick agrees to pay a bonus for his ownership interest because of the past success of the partnership. When Nick's investment in the partnership is recorded, a. his capital account will be credited for more than the cash he invested b. his capital account will be credited for the amount of cash he invested c. a bonus will be credited for the amount of cash he invested d. a bonus will be distributed to the old partners' capital accounts

When a partner dies, the capital account balances of the remaining partners a. will increase b. will decrease c. will remain the same d. may increase, decrease, or remain the same

A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm. As a result of this transaction, the capital account balance of the other partners in the partnership a. will increase b. will decrease c. will remain the same d. may increase, decrease, or remain the same

Samuel and Darci are partners. The partnership capital for Samuel is $50,000 and that of Darci is $60,000. Josh is admitted as a new partner by investing $50,000 cash. Josh is given a 20% interest in return for his investment. The amount of the bonus to the old partners is a. $0 b. $18,000 c. $8,000 d. $10,000

A new partner may be admitted to a partnership by a. inheriting a partnership interest b. contributing assets to the partnership c. purchasing a specific quantity of assets from the partnership d. a written approval under the federal law

A change in the ownership of a partnership results in the a. consolidating of the partnership b. liquidating of the partnership c. realization of the partnership d. dissolution of the partnership

When a new partner is admitted to a partnership, there should be a(n) a. increase in the total assets of the partnership b. new capital account added to the ledger for the new partner c. increase in the total owners' equity of the partnership d. debit amount to the partner's capital account for the cash received by the current partner

When an additional partner is admitted to a partnership by contribution of assets to the partnership, a. the total assets of the partnership do not change b. no liabilities can be contributed at the same time c. the amount of the cash contribution is the same as the amount of the debit to the new partner's capital account d. the total of the owners' equity accounts increases

When a new partner is admitted to a partnership, a. a bonus may be attributable to the old partner b. a bonus may only result from more cash being given by the new partner than the value of the assets being purchased c. a bonus agreed upon by the partners is recorded as an asset so long as the amount is within the range set by the SEC d. a bonus is not recorded

The Calvin-Dogwood Partnership owns inventory that was purchased for $90,000, has a current replacement cost of $85,900, and is priced to sell for $125,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted? a. $129,100 b. $85,900 c. $90,000 d. $125,000

Immediately prior to the admission of Abbott, the Smith-Jones Partnership assets had been adjusted to current market prices and the capital balances of Smith and Jones were $40,000 and $60,000, respectively. If the parties agree that the business is worth $120,000, what is the amount of bonus that should be recognized in the accounts at the admission of Abbott? a. $60,000 b. $80,000 c. $40,000 d. $20,000

Benson and Orton are partners who share income in the ratio of 2:3 and have capital balances of $60,000 and $40,000, respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Benson's capital balance after admitting Ramsey? a. $20,000 b. $24,000 c. $48,800 d. $71,200

Alpha and Beta are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000, respectively, at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $50,000. What amount of loss on realization should be allocated to Alpha? a. $60,000 b. $20,000 c. $30,000 d. $50,000

Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and $50,000, respectively. They share income and losses in the ratio of 3:2:1. Revenue accounts for the period total $350,000. Expense accounts for the period total $380,000. The revenue and expense accounts are closed to the capital accounts. Doug withdraws from the partnership. How much cash does he receive upon withdrawal? a. $30,000 b. $20,000 c. $40,000 d. $24,000

The balance sheet of Morgan and Rockwell was as follows immediately prior to the partnership's liquidation: cash, $20,000; other assets, $160,000; liabilities, $40,000; Morgan, capital, $60,000; Rockwell, capital, $80,000. The other assets were sold for $139,000. Morgan and Rockwell share profits and losses in a 2:1 ratio. As a final cash distribution from the liquidation, Morgan will receive cash totaling a. $46,000 b. $51,000 c. $60,000 d. $49,500

Harriet, Mickey, and Zack decide to liquidate their partnership. All assets are sold, and the liabilities are paid. Following these transactions, the capital balances and profit and loss percentages are as follows: Harriet, $27,000 and 30%; Mickey, ($12,000) and 40%; Zack, $43,000 and 30%. Mickey is unable to contribute any assets to reduce the deficit. How much cash will Harriet receive as a result of the partnership liquidation? a. $27,000 b. $21,000 c. $23,400 d. $15,000

The remaining cash of a partnership (after creditors have been paid) upon liquidation is divided among partners according to their a. capital balances b. contribution of assets c. drawing balances d. income sharing ratio

A gain or loss on realization is divided among partners according to their a. income sharing ratio b. capital balances c. drawing balances d. contribution of assets

Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and Ramona, $30,000 Cr. How much cash is available for distribution to the partners? a. $120,000 b. $30,000 c. $40,000 d. $90,000

Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and Ramona, $30,000 Cr. How much cash should be distributed to Everett assuming that Miguel pays the deficiency? a. $50,000 b. $20,000 c. $30,000 d. $40,000

Partners Ken and Macki each have a $40,000 capital balance and share income and losses in the ratio of 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $50,000, and each partner is personally insolvent, Partner Macki will eventually receive cash of a. $0 b. $10,000 c. $12,000 d. $20,000