97.
Barber and Atkins are partners in an accounting firm and share net income and loss
equally. Barber’s beginning partnership capital balance for the current year is $285,000,
and Atkins’ beginning partnership capital balance for the current year is $370,000. The
partnership had net income of $250,000 for the year. Barber withdrew $90,000 during the
year and Atkins withdrew $100,000. What is Barber’s ending equity?
98.
Barber and Atkins are partners in an accounting firm and share net income and loss
equally. Barber’s beginning partnership capital balance for the current year is $285,000,
and Atkins’ beginning partnership capital balance for the current year is $370,000. The
partnership had net income of $250,000 for the year. Barber withdrew $90,000 during the
year and Atkins withdrew $100,000. What is Barber’s return on equity?
99.
Barber and Atkins are partners in an accounting firm and share net income and loss
equally. Barber’s beginning partnership capital balance for the current year is $285,000,
and Atkins’ beginning partnership capital balance for the current year is $370,000. The
partnership had net income of $250,000 for the year. Barber withdrew $90,000 during the
year and Atkins withdrew $100,000. What is Atkins’s return on equity?
100.
Fellows and Marshall are partners in an accounting firm and share net income and loss
equally. Fellows’ beginning partnership capital balance for the current year is $185,000,
and Marshall’s beginning partnership capital balance for the current year is $260,000. The
partnership had net income of $350,000 for the year. Fellows withdrew $80,000 during the
year and Marshall withdrew $70,000. What is Marshall’s return on equity?
101.
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?
102.
Reno contributed $104,000 in cash plus equipment valued at $27,000 to the RD
Partnership. The journal entry to record the transaction for the partnership is:
103.
Bloom and Plant organize a partnership on January 1. Bloom’s initial investment consists
of $800 cash, $1,700 equipment and a $500 note payable reflecting a bank loan for the
new business. Plant’s initial investment is cash of $2,000. These amounts are the values
agreed on by both partners. The journal entry to record Bloom’s investment is:
104.
Bloom and Plant organize a partnership on January 1. Bloom’s initial investment consists
of $800 cash, $1,700 equipment and a $500 note payable reflecting a bank loan for the
new business. Plant’s initial investment is cash of $2,000. These amounts are the values
agreed on by both partners. The journal entry to record Plant’s investment is:
105.
Wallace and Simpson formed a partnership with Wallace contributing $60,000 and
Simpson contributing $40,000. Their partnership agreement calls for the income (loss)
division to be based on the ratio of capital investments. The partnership had income of
$150,000 for its first year of operation. When the Income Summary is closed, the journal
entry to allocate partner income is:
106.
Wallace and Simpson formed a partnership with Wallace contributing $60,000 and
Simpson contributing $40,000. Their partnership agreement calls for the income (loss)
division to be based on the ratio of capital investments. Wallace sold one-half of his
partnership interest to Prince for $55,000 when his capital balance was $78,000. The
partnership would record the admission of Prince into the partnership as:
107.
Wallace, Simpson, and Prince are partners and share income and losses in a 3:4:3 ratio.
The partnership’s capital balances are Wallace, $68,000; Simpson, $90,000; and Prince,
$42,000. Royal is admitted to the partnership on July 1 with a 20% equity and invests
$50,000. The partnership would record the admission of Royal into the partnership as:
108.
Samuel organized a limited partnership and is the only general partner. Francesca
invested $25,000 in the partnership and was admitted as a limited partner with the
understanding that she would receive 12% of the profits. After several unprofitable years,
the partnership ceased business, at which time the partnership had liabilities $60,000
greater than its assets. How much money can the partnership creditors obtain from
Francesca personally to satisfy the partnership debts?
109.
Jason Miller and Trevor Cane organize a partnership on January 1. Miller initially invests
cash of $15,000 and equipment with a fair value of $80,000 with an outstanding note
balance of $33,000 that the partnership assumes as debt. Cane initially invests $50,000
cash. The journal entry to record Miller’s investment is:
110.
NC Partnership has current year net income of $173,000. The partnership agreement
states that partners K. Nelson and V. Chavez should receive salary allowances of $42,000
and $50,000, respectively. Any remaining income or loss is to be allocated 35% to Nelson
and 65% to Chavez. Nelson’s share of the net income for the year is:
111.
Parker and Ellis agree to admit Teng as a 1/3 partner for $45,000 to be paid to Parker and
Ellis, divided equally. Immediately prior to Teng’s entry into the partnership, Parker and
Ellis each had capital balances of $90,000. The journal entry to record Teng’s purchase of
the partnership interest is:
112.
Duffie and Simpson have decided to liquidate their partnership after several years of
losses. Their partnership agreement states that the partners share in income and losses
equally. At the time of liquidation, the capital balances were $78,400 Duffie and $61,600
Simpson. The company has $14,000 cash on hand. Non-cash assets are liquidated for
$120,000, with no resulting gain or loss. Liabilities of $76,000 are paid to creditors, with no
gain or loss incurred. The amount to be distributed to Simpson upon liquidation is:
Matching Questions
113.
Match each of the following terms with the appropriate definitions.
1. Unlimited
liability of
A corporation with 100 or fewer
stockholders that can elect to be treated as a
partnership for income tax purposes but
retain the same limited liability as other
2. Limited
The legal relationship among partners
whereby each partner can commit or bind the
partnership to any contract within the scope
3. General
An unincorporated association of two or
more persons to pursue a business for profit
The legal relationship among general
partners that makes each of them personally
responsible for paying the debts of the
5. Mutual
The agreement between partners that sets
terms under which the affairs of the
A corporation that does not qualify for nor
elect to be treated as a partnership for
income tax purposes and therefore is subject
7. Partnership
A partner who assumes unlimited liability
8. Limited
liability
A partnership that protects innocent
partners from malpractice or negligence
claims resulting from the acts of another
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
10. Statement of
A partnership that has two classes of
partners, limited partners and general
partners. Limited partners have no personal
liability beyond the amount they invest in the
partnership, and have no active role except as
Short Answer Questions
114.
Identify and discuss the key characteristics of partnerships. Also, identify other
organizations that possess partnership characteristics.
115.
Define the partner return on equity ratio and explain how a specific partner would use this
ratio.
116.
How are partners’ investments in a partnership recorded?
117.
Discuss the options for the allocation of income and loss among partners, including with
and without a partnership agreement.
118.
What are the ways that a new partner can be admitted to an existing partnership? Explain
how to account for the admission of the new partner under each of these circumstances.
119.
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.
120.
Explain the steps involved in the liquidation of a partnership.
121.
What factors should be considered before establishing a partnership?
Essay Questions
122.
Cinema Products LP is organized as a limited partnership that sells movie props.
Information related to capital balances is given below. Compute the partner return on
equity for each limited partner. How would each partner evaluate the success of the
partnership? What would you recommend the partners do with respect to additional
investments or withdrawals?
Turner
Kelly
Total
Capital balance,
beginning of year
890,000
570,000
1,460,000
Net income for
current year
85,000
65,000
150,000
Withdrawals for
current year
40,000
25,000
65,000