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Exam 16: Partnership Accounting

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Question 31

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The following information is available on TGR Enterprises, a partnership, for the most recent fiscal year: Total partnership capital at beginning of the year $180,000 Partnership net income for the year $150,000 Withdrawals by partners during the year $120,000 Additional investments by partners during the year $ 60,000 There are three partners in TGR Enterprises: Tracey, Gregory and Rodgers. At the end of the year, the partners' capital accounts were in the ratio of 2:1:2, respectively. Compute the ending capital balances of the three partners.

A) Tracey = $108,000; Gregory = $54,000; Rodgers = $108,000.
B) Tracey = $90,000; Gregory = $90,000; Rodgers = $90,000.
C) Tracey = $204,000; Gregory = $102,000; Rodgers = $204,000.
D) Tracey = $84,000; Gregory = $102,000; Rodgers = $84,000.
E) Tracey = $60,000; Gregory = $30,000; Rodgers = $60,000.

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

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Question 32

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Advantages of a partnership include:

A) Limited life.
B) Mutual agency.
C) Unlimited liability.
D) Tax-free designation of all income earned
E) Voluntary association.

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

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Question 33

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

Jakobs, Penn, and Lundt are partners with beginning-of-year capital balances of $400,000, $320,000, and $160,000, respectively. The partners agreed to share income and loss as follows: Salary of $30,000 to Jakobs, $50,000 to Penn, and $36,000 to Lundt. An interest allowance of 8% on beginning-of-year capital balances. Any remaining balance is to be divided equally. If partnership net income for the year is $190,000, determine each partner's share and make the appropriate journal entry to close the Income Summary to the capital accounts.

The owners of a limited liability company (LLC), who are called members, are protected with the same limited liability feature as owners of corporations.

Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Caitlin, $120,000; Chris, $80,000; and Molly, $100,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $160,000. The balance in Caitlin's capital account immediately after Paul's admission is:

Feldt is a partner in Feldt & Dodson Company. Feldt's share of the partnership income is $18,600 and her average partnership equity is $155,000. Her partner return on equity equals 8.33.

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:

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?

Forman and Berry are forming a partnership. Forman will invest a building that currently is being used by another business owned by Forman. The building has a market value of $80,000. Also, the partnership will assume responsibility for a $20,000 note secured by a mortgage on that building. Berry will invest $50,000 cash. For the partnership, the amounts to be recorded for the building and for Forman's Capital account are:

Which of the following statements is true?

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

Define the partner return on equity ratio and explain how a specific partner would use this ratio.

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

Total partnership income is reported to the IRS on Form 1065.

Partnership accounting does not:

Partners can invest assets but not liabilities into a partnership.

Bannister invested $110,000 and Wilder invested $99,000 in a new partnership. Their partnership agreement called for Wilder to receive a $70,000 annual salary allowance. Under this agreement, what are the income or loss shares of the partners if the annual partnership income is $90,000?

A partnership has a limited life.

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