147)
Darien and Hayden agree to accept Kevin into their partnership. Kevin will contribute $22,000 in
cash. Prepare the journal entry to record this transaction.
148)
Palmer withdraws from the FAP Partnership. The remaining partners agree to buy out her share for
her capital balance of $65,000. Prepare the journal entry to record the withdrawal from the
partnership.
149)
Lemon and Parks are partners. On October 1, Lemon’s capital balance is $75,000, and Parks’
capital balance is $125,000. With the partnership’s approval, Parks sells ½ of his partnership
interest to Tambling for $70,000. Prepare the journal entry to record this transaction in the
partnership records.
150)
Leto and Duncan allow Gunner to purchase a 25% interest in their partnership for $30,000 cash.
Gunner has exceptional talents that will enhance the partnership. Leto’s and Duncan’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.
151)
Conklin plans to leave the CAP Partnership. The recorded value of his capital account is $48,000.
The remaining partners Arthurs and Preston agree to pay Conklin $40,000 cash and Conklin
accepts. The partners share income and loss equally. Prepare the general journal entry to record the
withdrawal from the partnership.
152)
Conklin plans to leave the CAP Partnership. The recorded balance in her capital account is
$48,000. The remaining partners, Arthurs and Preston, agree to pay Conklin $58,000 cash and
Conklin accepts. The partners share income and loss equally. Prepare the journal entry to record
the transaction.
153)
Kramer and Jones allow Sanders to purchase a 25% interest in their partnership for $50,000 cash.
Kramer and Jones both have capital balances of $55,000 each, and have agreed to share income
and loss equally. Prepare the journal entry to record the admission of Sanders to the partnership.
154)
The Redtail Partnership agrees to dissolve. The remaining cash balance after liquidating
partnership assets and liabilities is $70,000. The final capital account balances are: Paulson,
$35,000; Gray, $25,000; and Chang, $10,000. Prepare the journal entry to distribute the remaining
cash to the partners.
155)
The Redtail Partnership agrees to dissolve. The cash balance after selling all assets and paying all
liabilities is $56,000. The final capital account balances are: Paulson, $33,000; Gray, $27,000; and
Chang, ($4,000). Chang agrees to pay $4,000 cash from personal funds to settle his deficiency.
Prepare the journal entries to record the transactions required to dissolve this partnership.
156)
The Redtail Partnership agrees to dissolve. The cash balance after selling all assets and paying all
liabilities is $60,000. The final capital account balances are: Paulson, $35,000; Gray, $29,000; and
Chang, ($4,000). Chang is unable to pay the capital deficiency. Prepare the journal entries to
record the transactions required to dissolve this partnership.
157)
Sharon and Nancy formed a partnership by making capital contributions of $130,000 and $195,000
respectively. They predict annual partnership income of $230,000 and are considering the
following alternative plans of sharing income and loss: (a) in the ratio of their initial capital
investments; or (b) salary allowances of $40,000 to Sharon and $35,000 to Nancy; interest
allowances of 12% on their initial capital investments; and the balance shared equally. Assuming
that both partners put about the same amount of time into the business, which method of allocating
income would be best?
158)
Sharon and Nancy formed a partnership by making capital contributions of $130,000 and $195,000
respectively. The annual partnership income of $230,000 is to be allocated assuming a salary
allowance of $40,000 to Sharon and $35,000 to Nancy; interest allowances of 12% on their initial
capital investments; and the balance shared equally. Prepare the entries to record the initial capital
investments, the allocation of net income, and close the partner’s withdrawal accounts assuming
that Sharon withdrew $50,000 and Nancy withdrew $45,000.
159)
Kramer and Feldman Company is organized as a partnership. At the prior year-end, Kramer’s
equity balance was $352,000 and Feldman’s was $256,000. For the current year, partnership net
income is $137,000 ($77,000 allocated to Kramer and $60,000 allocated to Feldman); withdrawals
are $87,000 ($45,000 for Kramer and $42,000 for Feldman). Compute the total partnership return
on equity and the individual partner return on equity ratios.
160)
Masco, Short, and Henderson who are partners in the MSH Company share income and loss in a
2:2:1 ratio. They plan to liquidate their partnership. At liquidation, their balance sheet appears as
follows. Prepare journal entries for (a) the sale of land and equipment sold as a package for
$500,000, (b) the allocation of the gain or loss, (c) the payment of the liabilities, and (d) the
distribution of cash to the individual partners.
MSH Company
Balance Sheet
January 31
Assets
Liabilities and Equity
Cash
$200,000
Accounts Payable
$221,500
Equipment
200,000
Masco, Capital
210,000
Land
350,000
Short, Capit
1
a
0
l4
178,000
Land
350,000
Short, Capital
178,000
Henderson, Capital
140,500
Total assets
$750,000
Total liabilities and equity
$750,000
350,000
50,000
Masco, Capital (210,000 — 20,000)……………
190,000
Henderson, Capital (140,500 — 10,000)…………
130,500
161)
Tower, Knight, and Spears are partners who share income and loss in a 3:2:2 ratio. The
partnership’s capital balances are as follows: Tower, $332,000; Knight, $124,000; and Spears,
$214,000. Spears decides to withdraw from the partnership, and the partners agree not to have the
assets revalued upon Spears’ retirement. Prepare journal entries to record Spears’ withdrawal from
the partnership under each of the following separate assumptions: Spears (a) sells his interest to
Conner for $200,000 after Tower and Knight approve the entry of Conner as a partner; (b) is paid
$214,000 in partnership cash for his equity; (c) is paid $205,000 in partnership cash for his equity;
(d) is paid $220,000 in partnership cash for his equity.
107
162)
Tower, Knight, and Spears are partners who share income and loss in a 4:2:2 ratio. The
partnership’s capital balances are as follows: Tower, $292,000; Knight, $114,000; and Spears,
$194,000. Damsel is admitted to the partnership on March 1 with a 25% equity. Prepare the
journal entries to record Damsel’s entry into the partnership under each of the following separate
assumptions: Damsel invests (a) $200,000; (b) $180,000; and (c) $240,000.
163)
On May 1, Gosworth and Jordan formed a partnership. Gosworth contributed cash of $100,000
and equipment valued at $142,000. Jordan contributed land valued at $130,000 and a building
valued at $250,000. The partnership also assumed responsibility for Jordan’s $120,000 long-term
note payable associated with the land and building. The partners agreed to share income as
follows: Gosworth is to receive a salary allowance of $38,000, both are to receive an annual
interest allowance of 8% of their beginning-year capital investments, and any remaining income or
loss is to be shared equally. During the year, Gosworth withdrew $40,000 and Jordan withdrew
$42,000 cash. After the adjusting and closing entries are made to the revenue and expense
accounts at the end of the year, the Income Summary account had a credit balance of $140,000.
Prepare the journal entries to record (a) the partners’ initial capital investments, (b) their cash
withdrawals, and (c) closing of both the Withdrawals and Income Summary accounts.
164)
Mesner’s and Sanchez’s company is organized as a partnership. At the prior year-end, Mesner’s
equity balance was $258,000 and Sanchez’s was $212,000. For the current year, partnership net
income is $125,000 ($75,000 allocated to Mesner and $50,000 allocated to Sanchez); withdrawals
are $77,000 ($40,000 for Mesner and $37,000 for Sanchez). Compute the total partnership return
on equity and the individual partner return on equity ratios.
SHORT ANSWER QUESTIONS
165)
The life of a partnership is ________ in duration.
ESSAY QUESTIONS
166)
A ________ is an unincorporated association of two or more people to pursue a business for profit
as co-owners.
167)
________ means that partners can commit or bind the partnership to any contract within the scope
of the partnership business.
168)
implies that each partner in a partnership can be called on to personally pay a
partnership’s debts.
169)
A partnership that has at least two classes of partners, general and limited, allows the limited
partners to have no personal liability beyond the amounts they invest in the partnership, and the
limited partners have no active role except as specified in the partnership agreement is a
partnership.
170)
A partnership designed to protect innocent partners from malpractice or negligence claims resulting
from the acts of other partners is a partnership.
171)
A relatively new form of business organization that protects partners with limited liability, allows
limited partners to assume an active management role, and is taxed as a partnership is a .
172)
Partners in a partnership are not taxed on their withdrawals , but rather on ________.
173)
Partner net income divided by average partner equity equals .
174)
When a partner invests in a partnership, his/her capital account is ________ for the invested
amount.
175)
During the closing process, partner’s capital accounts are ________ for their share of net income
and ________ for their share of net loss.
176)
During the closing process, each partner’s withdrawals account is closed to ________.
177)
If partners agree on how to share income, but say nothing about losses, then losses are shared
________.
178)
A partner can be admitted into a partnership by ________ or by ________.
179)
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 ________.
180)
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 ________.