Chapter 12 – Accounting for Partnerships
Comparative Analysis — BTN 12-2
1. Apple was organized/founded in 1976, and Google was
2. Apple’s initial public offering occurred in 1980. Google’s initial public
offering occurred in 2004.
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Chapter 12 – Accounting for Partnerships
Ethics Challenge — BTN 12-3
1. Income allocation per original agreement
Mobey Oak Chesterfield Total
Salary allowance…........... $ 3,000 $ 3,000 $ 3,000 $ 9,000
2. Income allocation per Chesterfield’s proposal
Mobey Oak Chesterfield Total
(.10 x 50,000)
(.30 x 50,000)
(.60 x 50,000)
3. The ethical concern here is that Chesterfield has proposed a change to
the partnership agreement that appears to be only self-serving. It is true
that Chesterfield is the group’s largest producer and, therefore, is
A potentially fair compromise would be to study the referral patterns of
Mobey and Oak. Through analysis, a dollar value can be assigned to the
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Chapter 12 – Accounting for Partnerships
Communicating in Practice — BTN 12-4
— STUDY NOTES –—
ORGANIZATIONS WITH PARTNERSHIP CHARACTERISTICS
I. Limited Partnerships
II. Limited Liability Partnerships
III. S Corporations
IV. Limited Liability Companies
I. Limited Partnerships
These organizations are identified in its name with the words “Limited
Partnership,” or “Ltd.,” or “L.P.”
A limited partnership has two classes of partners, general and limited. At
partners have no active role except as specified in the partnership
agreement.
A limited partnership agreement often specifies unique procedures for
allocating incomes and losses between general and limited partners.
The same basic accounting procedures are used for both limited and
from malpractice or negligence claims resulting from the acts of another
partner. When a partner provides service resulting in a malpractice claim,
that partner has personal liability for the claim. The remaining partners
who were not responsible for the actions resulting in the claim are not
personally liable for it.
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Chapter 12 – Accounting for Partnerships
Communicating in Practice (Concluded)
Continued
III. S Corporations
Certain corporations with 100 or fewer stockholders can elect to be
treated like a partnership for income tax purposes. These corporations are
called Sub-Chapter S or simply “S” corporations. This distinguishes them
from other corporations, called Sub-Chapter C or simply “C” corporations.
“S” corporations provide stockholders with the same limited liability
feature as “C” corporations. The advantage to an “S” corporation is it
doesn’t pay income taxes. If stockholders work for an “S” corporation,
their salaries are treated as expenses of the corporation.
IV. Limited Liability Companies
A new form of business organization is the limited liability company. The
names of these businesses usually include the words “Limited Liability
Company” or an abbreviation such as “LLC” or “LC.”
This form of business has certain features like a corporation and others
A limited liability company usually has a limited life.
For income tax purposes, the IRS usually classifies a limited liability
company as a partnership.
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Chapter 12 – Accounting for Partnerships
Taking It to the Net — BTN 12-5
1. The account titles given in the equity section of Advanced BioEnergy,
LLC are:
2. There are 25,410,852 units and 24,714,180 units issued and outstanding
at September 30, 2013 and 2012, respectively.
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Chapter 12 – Accounting for Partnerships
Teamwork in Action — BTN 12-6
1.
Income (Loss)
Sharing Plan Calculations Baker Warner Rice Total
(a) $450,000/3……………………………………..…..…..….$150,000 $150,000 $150,000 $ 450 ,000
(d) Net Income…………………………….…..….... $ 450,000
Interest allowances:
10% x $200,000………………..…..…..…...$ 20,000
10% x $300,000………………..…..…..…... $ 30,000
10% x $500,000………………..…..…..…... $ 50,000
Total interest…………………………..…..…... (100 ,000)
2. Team members share solutions.
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Chapter 12 – Accounting for Partnerships
Entrepreneurial Decision — BTN 12-7
1. Daniel, Craig, and their future partners would be wise to construct an
agreement that includes the following:
a) names (reputations) and contributions
2. The partnership form of business organization will have several
advantages for Daniel, Craig, and their partners. Three of these
3. Several disadvantages exist with the partnership form of organization.
Three of these include: (a) The greatest disadvantage is that each
Global Decision — BTN 12-8
1. Byung-Chull Lee (also referred to as Lee Byung-Chull)
organized/started the company in 1938 in Taegu, Korea.
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Chapter 12 – Accounting for Partnerships
2. In the beginning, the company focused primarily on trade export,
selling dried Korean fish, vegetables, and fruit to Manchuria and
3. Samsung groups its affiliated companies into five areas:
Electronics
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