35.
Paid-in Capital refers to:
36.
Income taxes to a partnership:
37.
When deciding the form of organization of a new business the factors to consider would be
all of the following except:
38.
When a corporation declares a dividend:
39.
Sally Smythe enters into a partnership by contributing the following:
Cash $15,000; Accounts Receivable $4,500; Machinery which cost $3,000 and has a fair
market value of $2,125; and accounts payable of $1,200. What amount will be recorded in
her capital account?
40.
Partner A earns $68,000 from a partnership. Partner B earns $57,000 but withdraws only
$49,000. How much must Partner B report in his income tax return as income?
41.
When evaluating the liquidity of a proprietorship, creditors will likely base their decision
on:
42.
When evaluating the liquidity of a partnership, creditors will likely base their decision on:
AppC-19
43.
John’s Metalworks Incorporated recently issued 10,000 shares of stock in exchange for
$100,000. Metalworks’ journal entry to record this transaction included:
44.
An S corporation must have a maximum of ____ stockholders.
Essay Questions
45.
A and B are partners. A has $50,000 in his capital account and B has $75,000 at the
beginning of the year. A receives a salary of $15,000 and B receives $12,000. Each partner
receives 5% of the beginning balance of their capital accounts. The remainder is split 45%
to A and 55% to B. Net income for the year was $125,000. What is the amount of each
capital account at year-end?
46.
C, D, and E are partners. C has $25,000 in her capital account. D has $35,000 in hers, and E
has $45,000. Each gets a salary allowance of $15,000. C gets 10% interest on the beginning
balance in the capital account, D gets 12%, and E gets 14%. The remainder is divided 20%
to C, 35% to E, and 45% to E. What is the balance in the capital account at the end of the
year if net income was $80,000?
47.
Grey, Dailey, and Sanders have formed a partnership. Net income for the first year
amounted to $50,400. The partnership agreement states that Grey will receive a salary of
$10,000, Dailey will receive $15,000, and Sanders will receive $20,000. They each have
capital accounts of $30,000, $40,000, and $50,000 respectively. The contract calls for
interest of 12% of their beginning capital balances for each partner. Any profit or loss will
be split equally. How much income will each partner receive?
48.
The retained earnings account of Company XYZ has a balance of $350,000 at the end of
2014. At the end of 2015 the following information is available.
What is the amount of retained earnings at the end of 2015?
49.
Listed below are several accounting terms introduced in this section.
Each of the following statements may (or may not) describe one of these accounting terms.
In the space provided, indicate the term described, or enter “none” if the statement does
not correctly describe any of the terms.
_________(A.) An unincorporated business owned by one person.
_________(B.) An example of an organized securities market.
_________(C.) The right of each partner to negotiate binding contracts.
_________(D.) The total earnings of a corporation less dividends paid out.
_________(E.) Investments by the owners of a corporation.
_________(F.) A partnership where one or more partners are not personally liable for the
debts of the partnership.
_________(G.) An organization that serves the professional needs of a CPA.
_________(H.) A business that is responsible for its own debts and which pays income
taxes on its earnings.
_________(I.) An unincorporated business owned by two or more people.
_________(J.) A corporation whose shares are not publicly traded.
50.
X Corporation had a net income of $375,000 in 2015. The Board of Directors declared a
dividend of $0.25 a share on the 150,000 shares outstanding on December 13 to be paid on
December 23. Retained earnings on January 01, 2016 were $630,000.
(a) Prepare the journal entries for the declaration of the dividends and for the payment of
these dividends.
(b) Prepare the Retained Earnings Statement at the end of 2015.
51.
Stewart and Brooke form a partnership. Stewart invests $80,000 and Brooke invests
$120,000. If there are any profits or losses they will share them as follows:
They will each receive a salary of $25,000.
Any remaining amount will be allocated ¾ to Brooke and ¼ to Stewart.
(1) If the partnership income for the year is $115,000 what amount will be allocated to
Brooke?
(2) If the partnership income for the year is $125,000 what amount will be allocated to
Stewart?
(3) If the partnership income for the year is $45,000 what amount will be allocated to
Stewart and what amount to Brooke?
52.
Sue and Al form a partnership. Sue invests $20,000 and Al invests $25,000. In the first year
the partnership earns $60,000. Sue withdraws $7,500 and Al withdraws $12,000. Each
receives a salary of $15,000 and the remainder is divided 60% to Al and 40% to Sue.
Prepare a schedule showing the capital accounts for Sue and Al.