Unlock document.
This document is partially blurred.
Unlock all pages and 1 million more documents.
Get Access
Title: Question 1
QA_Ori: Under the circumstances described, the death, bankruptcy, or legal inability of
a partner to execute a contract ends a partnership. In addition, if a partnership is
Title: Question 2
QA_Ori: Mutual agency means that each partner is an agent of the partnership and can
Title: Question 3
QA_Ori: All partners in a general partnership have unlimited liability. A limited
Title: Question 4
QA_Ori: Yes, partners can limit the right of a partner. Such an agreement is
Title: Question 5
QA_Ori: No, he does not have this right. A partnership is a voluntary association
Title: Question 6
QA_Ori: If partners agree on the method of sharing incomes, but say nothing of
Title: Question 7
Title: Question 8
QA_Ori: Unlimited liability means that the creditors of a partnership have the right to
Title: Question 9
QA_Ori: George's claim is not valid unless the previously agreed upon method of
Title: Question 10
QA_Ori: No. Kay is still liable to her former partners for her share of the losses.
Title: Question 11
QA_Ori: At all times in the accounting history of a partnership (or any
organization), assets must equal liabilities plus equity. When the assets are converted
Title: Question 12
Title: Quick Study 12-1
QA_Ori:
a. The partnership will need to pay because it is a merchandising firm. That is, if
b. A public accounting firm is not in the merchandising business. Consequently,
Title: Quick Study 12-2
QA_Ori:
Stolton Bright Total
Net income 52,000
Salary allowances
Stolton $15,000
Title: Quick Study 12-3
QA_Ori: If Blake is allocated a $100,000 salary allowance and there remains $4,000 to
Title: Quick Study 12-4
QA_Ori: Since Carley is a limited partner, she is not personally liable for any unpaid
Title: Quick Study 12-5
QA_Ori:
Choi, Capital 10,000
Title: Quick Study 12-6
QA_Ori:
Cash 40,000
Title: Quick Study 12-7
QA_Ori:
1.
Field Brown Snow Total
Initial investments $131,250 $165,000 $153,750 $450,000
2. a)
May 31 Cash 3,750
3. a)
May 31 Brown, Capital 1,875
Snow, Capital 1,875
Title: Quick Study 12-8
QA_Ori:
Total partnership return on equity = Net Income/Average equity
Howe partner return on equity = Partner net income/Average partner equity
Duley partner return on equity = Partner net income/Average partner equity
Title: Exercise 12-1
QA_Ori:
Characteristic General Partnerships
1. Life Limited
2. Owners’ liability Unlimited
3. Legal status Not separate from partners
Title: Exercise 12-2
QA_Ori:
a. Recommended Organization: Sharif, Henry, and Korb might first consider organizing
their business as a general partnership. However, a problem for these new graduates is
Taxation: As a corporation, any income will be subject to corporate income tax.
Any dividends paid to the stockholders will also normally be taxed, but at a much lower
Advantages: Several key advantages to the corporate form include its limited
b. Recommended Organization: The two doctors should form a partnership. A
Taxation: The owners will pay individual taxes on income earned by the partnership but
Advantages: The advantages of the partnership are ease of formation and owner
authority.
c. Recommended Organization: Munson should consider setting up a limited
Taxation: All partners will pay individual taxes on income distributed to them, but
Title: Exercise 12-3
QA_Ori:
1a. 2013
Mar. 1 Cash 82,500
Land 60,000
1b. 2013
1c. 2013
Dec. 31 Eckert, Capital 34,000
Kelley, Capital 20,000
Dec. 31 Income Summary 90,000
2.
Capital account balances
Eckert
Kelley
Initial investment
*Supporting calculations
Eckert
Kelley
Total
Net income
Total salary allowance
Total interest allowances
Eckert
Kelley
Total allocated equally
Balance of income
_______
_______
$ 0
Shares of the partners
Title: Exercise 12-4
1. QA_Ori:
Jan. 1 Cash 17,500
Equipment 82,500
2.
Jan. 1 Cash 31,250
A. Barber, Capital 31,250
To record initial capital investment of Barber.
Title: Exercise 12-5
QA_Ori:
Kramer Knox Total
Plan (1) $160,000 x 1/2 $80,000 $80,000 $160,000
$68,571 $91,429 $160,000
Plan (3) Net income $160,000
Salary allowances $50,000 $40,000 90,000
Balance allocated equally
Title: Exercise 12-6
QA_Ori:
Kramer Knox Total
1. Net income $ 98,800
Salary allowances $50,000 $ 40,000 90,000
Interest allowances
2. Net income $ (16,800)
Salary allowances $50,000 $ 40,000 90,000
Interest allowances
Title: Exercise 12-7
QA_Ori:
1.
Nov. 1 Cash 90,000
Madison, Capital 90,000
2.
Nov. 1 Cash 120,000
Madison, Capital 94,500
3.
Nov. 1 Cash 80,000
Main, Capital 6,800
Supporting computations
Title: Exercise 12-8
QA_Ori:
1.
Jan. 31 Tulip, Capital 60,000
Cash 60,000
To record retirement of Tulip.
2.
3.
Jan. 31 Tulip, Capital 60,000
Hunter, Capital* 18,750
Title: Exercise 12-9
QA_Ori:
Sept. 30 Mandy, Capital 100,000
Title: Exercise 12-10
QA_Ori:
a. Loss from selling assets
* Alternative computation
b. Loss allocation
QA_Ori:
Turner Roth Lowe Total
Capital balances before loss
liquidation $ 2,500 $ 14,000 $ 31,500 $ 48,000
Allocation of loss
c. Liability to be paid
Each partner should pay the amount of the debit (deficit) balance in his or her own
capital account.
