Accounting Chapter 12 Singers Capital Account a 75000b 40000c 25000d 20000e

55)

The following information is available regarding Grace Smit’s capital account in Enterprise

Consulting Group, a general partnership, for a recent year:

Beginning of the year balance

$22,000

Share of partnership income

$ 8,500

Withdrawals made during the year

$ 6,000

What is Smit’s partner return on equity during the year in question?

A) 34.7% B) 55.7% C) 10.8% D) 36.6% E) 11.4%

56)

Partnership accounting does not:

A)

Use a withdrawals account for each partner.

B)

Allocate net income to each partner according to the partnership agreement.

C)

Tax the business entity.

D)

Allocate net loss to each partner according to the partnership agreement.

E)

Use a capital account for each partner.

57)

Partnership accounting is the same as accounting for:

A)

A sole proprietorship, except that separate capital and withdrawal accounts are kept for each

partner.

B)

A sole proprietorship.

C)

A corporation.

D)

A corporation, except that retained earnings is used to keep track of partners’ withdrawals.

E)

An S corporation.

58)

Partners’ withdrawals of assets are:

A)

Credited to their retained earnings.

B)

Debited to their asset accounts.

C)

Credited to their withdrawals accounts.

D)

Debited to their withdrawals accounts.

E)

Debited to their retained earnings.

59)

The withdrawals account of each partner is:

A)

A permanent account that is not closed.

B)

Credited with that partner’s share of net income.

C)

Closed to that partner’s capital account.

D)

Closed to the Income Summary account.

E)

Debited with that partner’s share of net loss.

60)

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:

A)

Debit R. Stetson, Capital $21,000; credit SJ Partnership, Capital $21,000.

B)

Debit Cash $14,000; debit Office Equipment $7,000; credit SJ Partnership, Capital $21,000.

C)

Debit Cash $14,000; debit Office Equipment $7,000; credit Common Stock $21,000.

D)

Debit Cash $14,000; debit Office Equipment $7,000; credit R Stetson, Capital $21,000.

E)

Debit SJ Partnership $21,000; credit R. Stetson, Capital $21,000.

61)

T. Andrews contributed $14,000 in to the T & B Partnership. The journal entry to record the

transaction for the partnership is:

A)

Debit T. Andrews, Capital $14,000; credit T & B Partnership, Capital $14,000.

B)

Debit T & B Partnership $14,000; credit T. Andrews, Capital $14,000.

C)

Debit Cash $14,000; credit T. Andrews, Capital $14,000.

D)

Debit Cash $14,000; credit T & B Partnership, Capital $14,000.

E)

Debit Cash $14,000; credit Common Stock $14,000.

62)

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:

A)

Building, $80,000 and Forman, Capital, $60,000.

B)

Building, $60,000 and Forman, Capital, $60,000.

C)

Building, $60,000 and Forman, Capital, $50,000.

D)

Building, $60,000 and Forman, Capital, $80,000.

E)

Building, $80,000 and Forman, Capital, $80,000.

63)

Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market

value of $180,000. However, the building carries a $56,000 mortgage that will be assumed by the

partnership. Smart is investing $120,000 cash. The balance of Maxwell’s Capital account will be:

A) $56,000. B) $180,000. C) $60,000. D) $64,000. E) $124,000.

64)

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:

Historical cost of the asset

$76,000

Accumulated depreciation on the asset

$40,000

Note payable secured by the asset*

$18,000

Agreed-upon market value of the asset

$45,000

*will be assumed by the partnership

Based on this information, Harvey’s beginning equity balance in the partnership will be:

A) $36,000 B) $27,000 C) $45,000 D) $76,000 E) $18,000

65)

Dalworth and Minor have decided to form a partnership. Minor is going to contribute a depreciable

asset to the partnership as her equity contribution to the partnership. The following information

regarding the asset to be contributed by Minor is available:

Historical cost of the asset $276,000

Accumulated depreciation on the asset $140,000

Note payable secured by the asset and assumed by the partnership $118,000 Agreed-

upon market value of the asset $245,000

Based on this information, Minor’s beginning equity balance in the partnership will be:

A) $158,000 B) $136,000 C) $276,000 D) $18,000 E) $127,000

66)

In the absence of a partnership agreement, the law says that income (and loss) should be allocated

based on:

A)

Interest allowances.

B)

Equal shares.

C)

Salary allowances.

D)

The ratio of capital investments.

E)

A fractional basis.

67)

In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each

partner’s investment, the interest allowance:

A)

Is ignored when earnings are not sufficient to pay interest.

B)

Can make up for unequal capital contributions.

C)

Must be paid because the partnership contract has unlimited life.

D)

Legally becomes a liability of the general partner.

E)

Is an expense of the business.

68)

Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis

contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the

income (loss) division to be based on the ratio of capital investments. If the partnership had income

of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand)

would be credited to Singer’s capital account?

A) $75,000. B) $40,000. C) $25,000. D) $20,000. E) $30,000.

69)

Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis

contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the

income (loss) division to be based on the ratio of capital investments. If the partnership had income

of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand)

would be credited to Wheadon’s capital account?

A) $30,000. B) $40,000. C) $25,000. D) $20,000. E) $75,000.

70)

Christie and Jergens formed a partnership with capital contributions of $300,000 and $400,000,

respectively. Their partnership agreement calls for Christie 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 $135,000, then Christie and Jergens’s respective shares are:

A) $35,000; $100,000.

B) $90,000; $40,000.

C) $57,857; $77,143.

D) $67,500; $67,500.

E) $92,500; $42,500.

71)

Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000,

respectively. Their partnership agreement calls for Farmer to receive a $70,000 per year salary. The

remaining income or loss is to be divided equally. If the net income for the current year is

$135,000, then Farmer and Taylor’s respective shares are:

A) $90,000; $45,000.

B) $106,140; $28,860.

C) $67,500; $67,500.

D) $102,500; $32,500.

E) $130,000; $5,000.

72)

Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000,

respectively. Their partnership agreement calls for Farmer to receive a $70,000 per year salary. The

remaining income or loss is to be divided equally. Assuming net income for the current year is

$135,000, the journal entry to allocate net income is:

A)

Debit Income Summary, $135,000; Credit Farmer, Capital, $106,140; Credit Taylor, Capital,

$28,860.

B)

Debit Income Summary, $130,000; Credit Taylor, Capital, $102,500; Credit Farmer, Capital,

$32,500.

C)

Debit Income Summary, $135,000; Credit Farmer, Capital, $102,500; Credit Taylor, Capital,

$32,500.

D)

Debit Income Summary, $135,000; Credit Farmer, Capital, $67,500; Credit Taylor, Capital,

$67,500.

E)

Debit Income Summary, $135,000; Credit Farmer, Capital, $130,000; Credit Taylor, Capital,

$5,000.

73)

Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000,

respectively. Their partnership agreement calls for Farmer to receive a $70,000 per year salary. The

remaining income or loss is to be divided equally. Assuming net loss for the current year is

$15,000, the journal entry to allocate the net loss is:

A)

Debit Income Summary, $15,000; Credit Taylor, Capital, $7,500; Credit Farmer, Capital,

$7,500.

B)

Debit Taylor, Capital, $42,500; Credit Income Summary, $15,000; Credit Farmer, Capital,

$27,500.

C)

Debit Income Summary, $15,000; Debit Taylor, Capital, $27,500; Credit Taylor, Capital,

$32,500.

D)

Debit Income Summary, $15,000; Debit Farmer, Capital, $27,500; Credit Taylor, Capital,

$42,500.

E)

Debit Income Summary, $15,000; Credit Farmer, Capital, $7,500; Credit Taylor, Capital,

$7,500.

74)

Which of the following statements is true?

A)

Salaries to partners are expenses on the partnership income statement.

B)

Interest allowances are expenses.

C)

Salary allowances are expenses.

D)

Partners are employees of the partnership.

E)

Salary allowances usually reflect the relative value of services provided by partners.

75)

Zheng invested $100,000 and Murray invested $200,000 in a partnership. They agreed to share

incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per

year salary allowance to Murray, plus 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 $105,000 in income are:

A)

$70,000 to Zheng; $60,000 to Murray.

B)

$35,000 to Zheng; $70,000 to Murray.

C)

$52,500 to Zheng; $52,500 to Murray.

D)

$57,500 to Zheng; $47,500 to Murray.

E)

$42,500 to Zheng; $62,500 to Murray.

38

76)

Zheng invested $100,000 and Murray invested $200,000 in a partnership. They agreed to share

incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per

year salary allowance to Murray, plus an interest allowance on the partners’ beginning-year capital

investments at 10%, with the balance to be shared equally. Assuming net income for the current

year is $105,000, the journal entry to allocate net income is:

A)

Debit Income Summary, $105,000; Credit Zheng, Capital, $52,500, Credit Murray, Capital,

$52,500.

B)

Debit Zheng, Capital, $57,500, Debit Murray, Capital, $47,500; Credit Income Summary,

$105,000;

C)

Debit Income Summary, $105,000; Credit Zheng, Capital, $35,000, Credit Murray, Capital,

$70,000.

D)

Debit Income Summary, $105,000; Credit Zheng, Capital, $57,500, Credit Murray, Capital,

$47,500.

E)

Debit Income Summary, $105,000; Credit Zheng, Capital, $42,500, Credit Murray, Capital,

$62,500.

77)

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:

A)

$122,500 to Brown; $82,500 to Freeman.

B)

$117,143 to Brown; $87,857 to Freeman.

C)

$105,000 to Brown; $100,000 to Freeman.

D)

$102,500 to Brown; $102,500 to Freeman.

E)

$112,750 to Brown; $92,250 to Freeman.