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Exam 16: Partnership Accounting

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Question 51

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Match each of the following terms with the appropriate definitions. -A financial statement that shows total capital balances at the beginning of the period,any additional investment by partners,the income or loss of the period,the partners' withdrawals,and the ending capital balances.

A) General partner
B) Limited liability partnership
C) Unlimited liability of partners
D) C corporation
E) Statement of partners' equity
F) Mutual agency
G) Limited partnership
H) S corporation
I) Partnership
J) Partnership contract

K) A) and D)
L) C) and E)

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Question 52

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The equity section of the balance sheet of a partnership can report the separate capital account balances of each partner.

A) True
B) False

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Question 53

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At least one partner having a debit balance in his/her capital account at the point of the final distribution of cash is known as a ________.

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:

Olivia Greer is a partner in Made for You.An analysis of Greer's capital account indicates that during the most recent year,she withdrew $30,000 from the partnership.Her share of the partnership's net loss was $16,000 and she made an additional equity contribution of $10,000.Her capital account ended the year at $150,000.What was her capital balance at the beginning of the year?

An unincorporated association of two or more persons to pursue a business for profit as co-owners is a:

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

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.

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

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

A Limited Liability Partnership (LLP)is designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.

Partners' withdrawals are debited to their separate withdrawals accounts.

Brown invested $200,000 and Freeman invested $150,000 in a partnership.They agreed to an interest allowance on the partners' beginning-year capital investments at 10%,with the balance to be shared equally.Under this agreement,the shares of the partners when the partnership earns $205,000 in income are:

Harvey and Quick have decided to form a partnership.Harvey is going to contribute a depreciable asset to the partnership as his equity contribution to the partnership.The following information regarding the asset to be contributed by Harvey is available: $\begin{array} { l l } \text { Historical cost of the asset } & \$ 76,000 \\\text { Accumulated depreciation on the asset } & \$ 40,000 \\\text { Note payable secured by the asset* } & \$ 18,000 \\\text { Agreed-upon market value of the asset } & \$ 45,000 \\\\ *\text { will be assumed by the partriership }\end{array}$ Based on this information,Harvey's beginning equity balance in the partnership will be:

Fontaine and Monroe are forming a partnership.Fontaine invests a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property.Monroe invests $100,000 in cash and equipment that has a market value of $55,000. -For the partnership,the amounts recorded for the building and for Fontaine's Capital account are:

If a company wants to protect its three investors against personal liability risk,which of the following business forms would not be a suitable option?

Match each of the following terms with the appropriate definitions. -An unincorporated association of two or more persons to pursue a business for profit as co-owners.

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?

The following information is available on PDC Enterprises,a partnership,for the most recent fiscal year: $\begin{array} { l l } \text { Total partnership capital at beginning of the year } & \$ 1,080,000 \\\text { Partriership net income for the year } & \$ 1,250,000 \\\text { Withdrawals by partners during the year } & \$ 320,000 \\\text { Additional investrnents by partners during the year } & \$ 70,000\end{array}$ There are three partners in TGR Enterprises: Pearson,Darling and Cathay.At the end of the year,the partners' capital accounts were in the ratio of 2:2:1,respectively.Compute the ending capital balances of Cathay.

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: