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63. What is the
dissolution
of a partnership?
64. By what methods can a person gain admittance to a partnership?
65. What events cause the
dissolution
of a partnership?
66. For what events or conditions should the Articles of Partnership make
provision?
The Articles of Partnership should be a comprehensive document that is fair to
all the partners. It should contain the following provisions:
67. How is accounting for a partnership different from accounting for a
corporation?
68. Why are the terms of the Articles of Partnership important to partners?
69. Brown and Green are forming a business as partners. If they do not create
a formal written partnership agreement, what risks are they exposing themselves
to?
70. What theoretical argument could be made against the recognition of
goodwill when there is a change in the ownership of a partnership?
71. Under what circumstances does a partner's balance in his or her capital
account have practical consequences for the partner?
72. Reed, Sharp, and Tucker were partners with capital account balances of
$80,000, $100,000, and $70,000, respectively. They agreed to admit Upton to the
partnership. Upton purchased 30% of each partner's interest, with payments
directly to Reed, Sharp, and Tucker of $32,000, $40,000, and $28,000,
respectively. Before the admission of Upton, the profit and loss sharing ratio was
2:3:2. The partners agreed to use the bonus method to account for the admission
of Upton to the partnership.
Required:
Prepare the journal entry to record the admission of Upton to the partnership.
73. Jipsom and Klark were partners with capital account balances of $80,000
and $100,000, respectively. Looney directly paid $32,000 to Jipsom and $40,000
to Klark for 30% of their interests in the partnership. Jipsom and Klark shared
income in the ratio of 2:3. They believed that revaluation of the partnership was
appropriate when a new partner was admitted.
Required:
Prepare the journal entries to record the admission of Looney to the partnership.
74. Norr and Caylor established a partnership on January 1, 2010. Norr
invested cash of $100,000 and Caylor invested $30,000 in cash and equipment
with a book value of $40,000 and fair value of $50,000. For both partners, the
beginning capital balance was to equal the initial investment. Norr and Caylor
agreed to the following procedure for sharing profits and losses:
- 12% interest on the yearly beginning capital balance
- $10 per hour of work that can be billed to the partnership's clients
- the remainder divided in a 3:2 ratio
The Articles of Partnership specified that each partner should withdraw no more
than $1,000 per month.
For 2010, the partnership's income was $70,000. Norr had 1,000 billable hours,
and Caylor worked 1,400 billable hours. In 2011, the partnership's income was
$24,000, and Norr and Caylor worked 800 and 1,200 billable hours respectively.
Each partner withdrew $1,000 per month throughout 2010 and 2011.
Determine the amount of net income allocated to each partner for 2010.
75. Norr and Caylor established a partnership on January 1, 2010. Norr
invested cash of $100,000 and Caylor invested $30,000 in cash and equipment
with a book value of $40,000 and fair value of $50,000. For both partners, the
beginning capital balance was to equal the initial investment. Norr and Caylor
agreed to the following procedure for sharing profits and losses:
- 12% interest on the yearly beginning capital balance
- $10 per hour of work that can be billed to the partnership's clients
- the remainder divided in a 3:2 ratio
76. Norr and Caylor established a partnership on January 1, 2010. Norr
invested cash of $100,000 and Caylor invested $30,000 in cash and equipment
with a book value of $40,000 and fair value of $50,000. For both partners, the
beginning capital balance was to equal the initial investment. Norr and Caylor
agreed to the following procedure for sharing profits and losses:
- 12% interest on the yearly beginning capital balance
- $10 per hour of work that can be billed to the partnership's clients
- the remainder divided in a 3:2 ratio
77. Determine the balance in both capital accounts at the end of 2011 to the
nearest dollar.
Capital account balances at the end of 2011:
78. The ABCD Partnership has the following balance sheet at January 1, 2010,
prior to the admission of new partner, Eden.
