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78)
The partnership agreement for Wilson, Pickett & Nelson, a general partnership, provided that
profits be shared between the partners in the ratio of their financial contributions to the partnership.
Wilson contributed $100,000, Pickett contributed $50,000 and Nelson contributed $50,000. In the
partnership's first year of operation, it incurred a loss of $110,000. What amount of the
partnership's loss, rounded to the nearest dollar, should be absorbed by Nelson?
A) $36,667 B) $40,000 C) $27,500 D) $0 E) $50,000
79)
Olivia Greer is a partner in Made for You. An analysis of Greer's capital account indicates that
during the most recent year, she withdrew $30,000 from the partnership. Her share of the
partnership's net loss was $16,000 and she made an additional equity contribution of $10,000. Her
capital account ended the year at $150,000. What was her capital balance at the beginning of the
year?
A) $186,000 B) $196,000 C) $170,000 D) $180,000 E) $154,000
80)
The following information is available on TGR Enterprises, a partnership, for the most recent fiscal
year:
Total partnership capital at beginning of the year $180,000
Partnership net income for the year $150,000
Withdrawals by partners during the year $120,000
Additional investments by partners during the year $ 60,000
There are three partners in TGR Enterprises: Tracey, Gregory and Rodgers. At the end of the year,
the partners' capital accounts were in the ratio of 2:1:2, respectively. Compute the ending capital
balances of the three partners.
A) Tracey = $84,000; Gregory = $102,000; Rodgers = $84,000.
B) Tracey = $204,000; Gregory = $102,000; Rodgers = $204,000.
C) Tracey = $60,000; Gregory = $30,000; Rodgers = $60,000.
D) Tracey = $90,000; Gregory = $90,000; Rodgers = $90,000.
E) Tracey = $108,000; Gregory = $54,000; Rodgers = $108,000.
44
81)
The following information is available on PDC Enterprises, a partnership, for the most recent fiscal
year:
Total partnership capital at beginning of the year
$1,080,000
Partnership net income for the year
$1,250,000
Withdrawals by partners during the year
$320,000
Additional investments by partners during the year
$ 70,000
There are three partners in TGR Enterprises: Pearson, Darling and Cathay. At the end of the year,
the partners' capital accounts were in the ratio of 2:2:1, respectively. Compute the ending capital
balances of Cathay.
A) $544,000. B) $416,000. C) $402,000. D) $466,000. E) $388,000.
82)
A partner can withdraw from a partnership by any of the following means except:
A)
Receiving assets from the partnership in the amount of his/her interest.
B)
Selling his/her interest to another person for cash.
C)
Receiving cash from the partnership in the amount of his/her interest.
D)
Close the business and liquidate the assets under the mutual agency principle.
E)
Selling his/her interest to another person in exchange for assets.
83)
A bonus may be paid in all of the following situations except:
A)
By remaining partners to a withdrawing partner if the recorded equity is understated.
B)
To a new partner with exceptional talents.
C)
By an existing partner to him or herself when in need of personal cash flow.
D)
By a new partner when the current value of a partnership is greater than the recorded amounts
of equity.
E)
By a withdrawing partner to remaining partners if the recorded value of the equity is
overstated.
84)
When a partner is added to a partnership:
A)
The partnership equity always increases.
B)
The partnership must continue.
C)
The underlying business operations end.
D)
The underlying business operations must close and then re-open.
E)
The previous partnership ends.
85)
A partnership recorded the following journal entry:
Cash
60,000
B. Founder, Capital
10,000
R. Aqui, Capital
10,000
H. Joiner, Capital
80,000
This entry reflects:
A)
Withdrawal of a partner who pays a $10,000 bonus to each of the other partners.
B)
Withdrawal of $10,000 each by Founder and Aqui upon the admission of a new partner.
C)
Additional investment into the partnership by Founder and Aqui.
D)
Addition of a partner who pays a bonus to each of the other partners.
E)
Acceptance of a new partner who invests $60,000 and receives a $20,000 bonus.
86)
Wright, Bell, and Edison are partners and share income in a 2:5:3 ratio. The partnership's capital
balances are as follows: Wright, $33,000, Bell $27,000 and Edison $40,000. Edison decides to
withdraw from the partnership, and the partners agree not to revalue the assets upon Edison's
retirement. The journal entry to record Edison's June 1 withdrawal from the partnership if Edison
sells his interest to Whitney for $45,000 after the other two partners approve Whitney as partner is:
A)
Debit Edison, Capital $40,000; credit Cash $40,000.
B)
Debit Edison, Capital $45,000; credit Whitney, Capital $45,000.
C)
Debit Edison, Capital $40,000; debit Cash $5,000; credit Whitney, Capital $45,000.
D)
Debit Edison, Capital $40,000; credit Whitney, Capital $40,000.
E)
Debit Edison, Capital $40,000; debit Wright, Capital $2,500; debit Bell, Capital $2,500;
credit Whitney, Capital $45,000.
87)
Wright, Bell, and Edison are partners and share income in a 2:5:3 ratio. The partnership's capital
balances are as follows: Wright, $33,000, Bell $27,000 and Edison $40,000. Edison decides to
withdraw from the partnership, and the partners agree not to revalue the assets upon Edison's
retirement. The journal entry to record Edison's June 1 withdrawal from the partnership if Edison is
paid $40,000 for his equity is:
A)
Debit Wright, Capital $20,000; Debit Bell, Capital $20,000; credit Cash $40,000.
B)
Debit Edison, Capital $40,000; credit Wright, Capital $20,000; credit Bell, Capital $20,000.
C)
Debit Edison, Capital $40,000; credit Cash $40,000.
D)
Debit Wright, Capital $20,000; Debit Bell, Capital $20,000; credit Edison, Capital $40,000.
E)
Debit Cash $40,000; credit Edison, Capital $40,000.
88)
Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $64,000, and
Martin's capital balance $67,000. Hewlett and Martin have agreed to share equally in income or
loss. The existing partners agree to accept Black with a 20% interest. Black will invest $35,000 in
the partnership. The bonus that is granted to Hewlett and Martin equals:
A)
600 to Hewlett; $900 to Martin.
B) $1,500 each.
C)
$900 each.
D)
$600 each.
E)
$0, because Hewlett and Martin actually grant a bonus to Black.
51
89)
Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $64,000, and
Martin's capital balance $61,000. Hewlett and Martin have agreed to share equally in income or
loss. Hewlett and Martin agree to accept Black with a 25% interest. Black will invest $35,000 in
the partnership. The bonus that is granted to Black equals:
A) $5,000.
B) $3,333.
C) $2,500.
D) $6,667.
E)
$0, because Black must actually grant a bonus to Hewlett and Martin.
90)
Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates
income and losses equally among the partners. The current period's ending capital account balances
are Masters, $15,000; Hardy, $15,000; Rowen, $(2,000). After all the assets are sold and liabilities
are paid, but before any contributions to cover any deficiencies, there is $28,000 in cash to be
distributed. Rowen pays $2,000 to cover the deficiency in his account. The general journal entry to
record the final distribution would be:
A)
Debit Masters, Capital $14,000; debit Hardy, Capital $14,000; credit Cash $28,000.
B)
Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Rowen, Capital $2,000;
credit Cash $28,000.
C)
Debit Masters, Capital $9,334; debit Hardy, Capital $9,333; debit Rowen, Capital $9,333;
credit Cash $28,000.
D)
Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Cash $30,000.
E)
Debit Cash $28,000; debit Rowen, Capital $2,000; credit Masters, Capital $15,000; credit
Hardy, Capital $15,000.
91)
Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates
income and losses equally among the partners. The current period's ending capital account balances
are Masters, $15,000; Hardy, $15,000; Rowen, $30,000. After all the assets are sold and liabilities
are paid, but before any contributions to cover any deficiencies, there is $54,000 in cash to be
distributed. The general journal entry to record the final distribution would be:
A)
Debit Masters, Capital $13,500; debit Hardy, Capital $13,500; debit Rowen, Capital $27,000;
credit Cash $54,000.
B)
Debit Cash $54,000; credit Rowen, Capital $13,500; credit Masters, Capital $13,500; credit
Hardy, Capital $27,000.
C)
Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; debit Rowen, Capital $30,000;
credit Loss from Liquidation $6000; credit Cash $54,000.
D)
Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; debit Rowen, Capital $30,000;
credit Gain from Liquidation $6,000; credit Cash $54,000.
E)
Debit Masters, Capital $13,000; debit Hardy, Capital $13,000; debit Rowen, Capital $28,000;
credit Cash $54,000.
92)
When a partnership is liquidated:
A)
Any gain or loss on liquidation is allocated to the partner with the highest capital account
balance.
B)
The business may continue to operate.
C)
Liabilities are paid or settled.
D)
Any remaining cash is distributed to the partners equally.
E)
Noncash assets are distributed to partners.
93)
A capital deficiency means that:
A)
At least one partner has a credit balance in his/her capital account.
B)
The partnership has more liabilities than assets.
C)
The partnership has a loss.
D)
At least one partner has a debit balance in his/her capital account.
E)
The partnership has been sold at a loss.
94)
When a partner is unable to pay a capital deficiency:
A)
The partner must take out a loan to cover the deficient balance.
B)
The deficient partner is relieved of the liability.
C)
The remaining partners must wait for the deficiency to be paid before cash is distributed.
D)
The partnership ends before distribution of cash.
E)
The deficiency is absorbed by the remaining partners before distribution of cash.
95)
Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates
each partner 1/3 of all income and losses. The current period's ending capital account balances are
Henry, $45,000; Luther, $37,000; and Gage, $(5,000). After all assets are sold and liabilities are
paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency. The journal
entry to record the distribution should be:
A)
Debit Cash $77,000, debit Gage, Capital $5,000, credit Henry, Capital $45,000, credit Luther,
Capital $37,000.
B)
Debit Cash $77,000; credit Henry, Capital $25,667; credit Luther, Capital $25,667; credit
Gage, Capital $25,666.
C)
Debit Henry, Capital $42,500; debit Luther, Capital $34,500; credit Cash $77,000.
D)
Debit Henry, Capital $25,667; debit Luther, Capital $25,667; debit Gage, Capital $25,666;
credit Cash $77,000.
E)
Debit Henry, Capital $45,000; debit Luther, Capital $37,000; credit Gage, Capital $5,000;
credit Cash $77,000.
96)
Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates
each partner 1/3 of all income and losses. The current period's ending capital account balances are
Henry, $45,000; Luther, $37,000; and Gage, $(5,000). After all assets are sold and liabilities are
paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency. What amount
of cash will Gage receive upon liquidation?
A) $0.
B)
Gage will be invoiced for $5,000.
C) $25,667.
D) $30,667.
E) $20,667.
97)
Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value
of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on
the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000.
For the partnership, the amounts recorded for the building and for Fontaine's Capital account are:
A)
Building $250,000; Fontaine, Capital $75,000.
B)
Building $250,000; Fontaine, Capital $250,000.
C)
Building $250,000; Fontaine, Capital $175,000.
D)
Building $175,000; Fontaine, Capital $175,000.
E)
Building $175,000; Fontaine, Capital $75,000.
98)
Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value
of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on
the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000.
For the partnership, the amounts recorded for Fontaine's Capital account and for Monroe's Capital
account are:
A)
Fontaine, Capital $175,000; Monroe, Capital $45,000.
B)
Fontaine, Capital $250,000; Monroe, Capital $100,000.
C)
Fontaine, Capital $0; Monroe, Capital $100,000.
D)
Fontaine, Capital $250,000; Monroe, Capital $155,000.
E)
Fontaine, Capital $175,000; Monroe, Capital $155,000.
99)
Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value
of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on
the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000.
For the partnership, the amounts recorded for total assets and for total capital account are:
A)
Total assets $405,000; total capital $305,000.
B)
Total assets $305,000; total capital $230,000.
C)
Total assets $350,000; total capital $350,000.
D)
Total assets $350,000; total capital $275,000.
E)
Total assets $405,000; total capital $330,000.
