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Exam 28: Accounting for Partnerships

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Question 61

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Arthur,Barnett and Cummings form a partnership.Arthur contributes $250,000 cash and Barnett contributes $230,000 in cash.Cummings contributes equipment worth $255,000.Prepare the single journal entry to record the formation of this partnership.

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Question 62

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Conley and Liu allow Lepley to purchase a 25% interest in their partnership for $35,000 cash.Lepley has exceptional talents that will enhance the partnership.Conley's and Liu'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 Lepley to the partnership.

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Question 63

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The BlueFin Partnership agreed to dissolve.The remaining cash balance after liquidating partnership assets and liabilities is $60,000.The final capital account balances are: Smith,$30,000; Nagy,$20,000; and Russ,$10,000.Prepare the journal entry to distribute the remaining cash to the partners.

A partner can be admitted into a partnership by ________________________ or by ______________________________.

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

Marquis and Bose agree to accept Sherman into their partnership.Sherman will contribute $25,000 in cash.Prepare the journal entry to record this transaction.

Partners can invest both assets and liabilities into a partnership.

Brown and Rubix are partners.Brown's capital balance in the partnership is $73,000 and Rubix's capital balance is $62,000.Brown and Rubix have agreed to share equally in income or loss.Brown and Rubix agree to accept Cabela with a 20% interest.Cabela will invest $41,500 in the partnership.The bonus that is granted to Brown and Rubix equals:

If partners devote their time and services to their partnership,their salaries are expenses on the income statement.

Identify and discuss the key characteristics of partnerships.Also,identify nonpartnership organizations that possess the positive aspects of both partnerships and corporations.

Armstrong plans to leave the FAP Partnership.The recorded balance in her capital account is $48,000.The remaining partners,Peters and Floyd,agree to pay Armstrong $58,000 cash.The partners have agreed to share income and loss equally.Prepare the journal entry to record the transaction.

Chad Forrester is a limited partner in a sports management firm.During the previous year his return on partnership equity was 16%.The beginning balance in his capital account was $450,000 and his partnership net income for this year was $75,000.What was the balance in Chad's capital account at the end of last year?

Shelby and Mortonson formed a partnership with capital contributions of $300,000 and $400,000,respectively.Their partnership agreement calls for Shelby to receive a $60,000 per year salary.Also,each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments.The remaining income or loss is to be divided equally.If the net income for the current year is $125,000,then Shelby and Mortonson's respective shares are:

In the absence of a partnership agreement,the law says that income and loss should be allocated based on:

Sierra and Jenson formed a partnership.Sierra contributed $25,000 cash and accounts receivable worth $11,000.Jenson's investment included cash,$5,000; inventory,$18,000; and supplies,$1,000.Prepare the journal entries to record each partner's investment in the new partnership.

A partnership is an unincorporated association of two or more people to pursue a business for profit as co-owners.

If a partner withdraws from a partnership and the recorded value of his or her equity is overstated,then a bonus goes to _____________________; if the recorded value of the withdrawing partner's equity is understated,then a bonus goes to _______________________.

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

Kathleen Reilly and Ann Wolf decide to form a partnership on August 1.Reilly invested the following assets and liabilities in the new partnership: $\begin{array} {| l |c| c| } \hline& \text { Cost / Book Value } & \text { Market Value } \\\hline \text { Larnd } & \$ 75,000 & \$ 100,000 \\\hline \text { Buildirg } & \$ 50,000 & \$ 300,000 \\\hline \text { Nate Payable } & \$ 198,000 & \$ 198,000\\\hline\end{array}$ The note payable is associated with the building and the partnership will assume the responsibility for the loan.Wolf invested $60,000 in cash and $105,000 in new equipment in the new partnership.Prepare the journal entries to record the two partner's original investments in the new partnership.

Force and Zabala are partners.Force's capital balance in the partnership is $98,000 and Zabala 's capital balance is $53,000.Force and Zabala have agreed to share equally in income or loss.Force and Zabala agree to accept Burns with a 25% interest.Burns will invest $56,000 in the partnership.The total bonus that is granted to the existing partners equals: