Chapter 12--Accounting for Partnerships and Limited Liability Companies Student: 1, There are only four legal structures to form and operate a business. True False 2. Ina general partnership, each partner is individually liable to creditors for debts incurred by the partnership, to the extent of the partner's capital balance. True False 3. A partnership is a legal entity separate from its owners, True False 4, A partnership is subject to federal income taxes. Te False 5. A disadvantage of partnerships is the mutual agency of all partners. True False 6. A partnership requires only an agreement between two or more persons to organize, True False 7. Bach partner may withdraw the assets he or she contributed to the partnership at any time. Te False 8, When compared to a corporation, one of the major disadvantages of the partnership is its limited life. True False9, When compared to a corporation, one of the major advantages of a partnerships is its relative ease of formation. Tre False 10. An advantage of the partnership form of business is that each partner's potential loss is limited to that partner's investment in the partnership, True False 11. A Limited Liability Company is a business entity form designed to overcome some of the disadvantages of the partnership form. True False 12. For tax purposes, a Limited Liability Company may elect to be treated as a partnership. True False 13. The Limited Liability Company may elect to be manager managed rather than member managed which means that only authorized members may legally bind the corporation. True False 14, Each partner has a separate capital and withdrawal account. True False 15. The chart of accounts for a partnership, with the exception of drawing and capital accounts, does not differ from the chart of accounts for a sole proprietorship. True False 16. The equity reporting for a Limited Liability Company is similar to that of a partnership but the changes in capital are shown on a statement of members’ equity. True False 17. When a partner invests noncash assets in a partnership, the assets are recorded at the partner's book value. True False18. Accounts receivable contributed to the partnership are recorded at their face value, True False 19. A new partner contributes accounts receivable to a partnership which appear in the ledger of his sole proprietorship at $20,500 and there was an allowance for doubtful accounts of $750. If $600 of the accounts receivables are completely worthless, the partnership accounts receivable should be debited for $19,900. True False 20. One reason that distributions of income and loss are prepared is to obtain the information to record a closing entry. True False 21. If nothing is stated, partnership income is divided in proportion to the individual partner's capital balance. True False 22. The salary allocation to partners used in dividing net income would also appear as salary expense on the partnership income statement. Tre False 23. If the articles of partnership provide for annual salary allowances of $36,000 and $18,000 to X and ¥ respectively and net income is $30,000, X's share of net income is $20,000. True False 24. If the net income of a partnership is less than the total of the allowances provided by the partnership agreement, the difference must be divided among the partners in the income-sharing ratio, True False 25. The amount that a partner withdraws as a monthly salary allowance does not affect the division of net income. True False26. A devotes full time and B devotes one-half time to their partnership. If the partnership agreement is silent concerning the division of net income, A will receive a $20,000 share of a net income of $30,000. Tre False 27. In the distribution of income, the net income is less than the salary and interest allowances granted; the remaining balance will be a negative amount that must be divided among the partners as though it were a loss. True False 28. Details of the division of partnership income should normally be disclosed in the financial statements. True False 29, Whenever a partnership is dissolved, the assets are liquidated. True False 30. When a partnership dissolves, a new partnership is formed and a new partnership agreement should be prepared. True False 31. Many partnerships provide for the admission of new partners or withdrawals of present partners by amending existing partnership agreements, so that the firm may continue to operate without executing a new agreement, True False 32. A person may be admitted to a partnership only with the consent of all the current partners. True False 33, Partnership's asset accounts should be changed from cost to fair market value when a new partner is, admitted to a firm or an existing partner withdraws and dies. True False34, In admitting a new partner, where the company chooses to use the purchase of an interest method, the capital interest of the new partner is obtained from the current partners and both the total assets and total capital are increased. True False 35. When a new partner purchases the entire interest of an old partner, the new partner's capital account should be credited for the amount he or she paid to the old partner. True False 36, If a new partner is given a 20% interest in the firm then the new partner will receive a 20% interest in earnings, True False 37. When a new partner is admitted by making an investment in the partnership, the old partners’ capital accounts are always credited. True False 38. When a new partner is admitted by making an investment of assets in the partnership and the new partner has to pay a premium for admission, a bonus is divided among the old partners’ capital accounts. True False 39, Sarno has a capital balance of $42,000 after adjusting the assets to fair market value, Minton contributes, $22,000 to receive a 30% interest in the new partnership. The bonus paid by Minton is $2,800, Tre False 40. When a partner withdraws from the partnership, the partnership dissolves. True False 41, If not enough partnership cash or other assets are available to pay the withdrawing partner, a liability may be created for the amount owed the withdrawing partner. True False42, When a partner withdraws from the partnership by selling his or her interest back to the partnership, the remaining partners must pay the withdrawing partner a specified amount from their personal assets. True False 43. X sells to A one-half of a partnership capital interest that totals $70,000 for $40,000. A's capital account in the partnership should be credited for $40,000. True False 44, When a new partner is admitted to a partnership, all partnership assets should be revised to reflect current prices True False 45. If a new partner is to be admitted to a partnership and a bonus is attributed to the old partnership, the bonus should be divided between the capital accounts of the original partners according to their capital balances. True False 46. When a new partner is admitted to a partnership, bonuses attributable to either the old partnership or to the incoming partner may be recognized in accordance with the agreement among the partners. Truc False 47. Dissolution is the term which solely means to liquidate the partnership. True False 48. In a partnership liquidation, gains and losses on the sale of partnership assets are divided among the partners’ capital accounts on the basis of their capital balances. True False 49. If the share of losses on realization of the sale of noncash assets exceed the balance in a partner's capital account, the resulting balance is called a deficiency. True False50, In a partnership liquidation, if a partner has a debit capital balance in his or her capital account, he or she is, responsible for contributing personal assets sufficient (o eliminate the deficit Te False 51. The process of winding up the affairs of a partnership is referred to as realization. True False 52. The distribution of cash, as the final process in winding up the affairs of a partnership, is based on the income-sharing ratio. True False 53. Ifa partner's capital balance is a debit after it has absorbed its share of the loss on realization, the balance is, referred to as a deficiency. True False 54, In the liquidating process, any uncollected cash becomes a loss to the partnership and is divided among the remaining partners capital balances based on their income-sharing ratio. True False 55. After all noncash assets have been converted to cash and all liabilities paid, A, B, and C have capital balances of $10,000 (debit), $5,000 (debit), and $25,000 (credit). The cash available for distribution to the partners is $10,000. True False 56, The statement of members’ equity is used for equity reporting of a partnership. Tre False 57. The partner capital accounts may change due to capital additions, net income, or withdrawals. True False 58, Revenue per employee may be used to measure partnership (LLC) efficiency. True False59, Which of the following is characteristic of a general partnership? A. The partners have co-ownership of partnership property. B. The partnership is subject to federal income tax. C. The partnership has an unlimited life. D. The partners have limited liability. 60. Which of the following is not a characteristic of a general partnership? A. the partnership is created by a contract B. mutual agency C. partners share equally in net income or net losses unless an agreement states differently D, dissolution occurs only when all partners agree 61. Which of the following is an advantage of a general partnership when compared to a corporation? A.A partnership is more likely to have a positive net income. B. The partnership is relatively inexpensive to organize. C. Creditors to a partnership cannot attach personal assets of partners D. The partnership usually hires professional managers. 62. Which of the following is a disadvantage of a partnership when compared to corporation? A. The partnership is more likely to have a net loss. B. The partnership is easier to organize. C. The partnership is less expensive to organize D. The partnership has limited life. 63. An advantage of the partnership form of business organization is A. unlimited liability B, mutual agency C. case of formation D. limited life 64, The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is called A. unlimited liability B. ease of formation C. mutual agency D. dissolution65. When a limited partnership is formed A. the partnership activities are limited B. all partners have limited liability C. some of the partners have limited liability D. none of the partners have limited liability 66, Which of the following below is not one of the four major forms of business entities that are discussed in this chapter? A. Sole proprietorship B, Corporation C. Partnership D. Subchapter $ corporation 67. Which of the following below is not a characteristic of a Limited Liability Company? A. unlimited life B, limited legal liability C. taxable D. moderate ability to raise capital 68. The operating agreement for a Limited Liability Company is sometimes called: A. atticles of organization B. articles of partnership €. Schedule C D. the Uniform Partnership Act 69. When a partnership is formed, assets contributed by the partners should be recorded on the partnership books at their A. book values on the partners’ books prior to their being contributed to the partnership B. fair market value at the time of the contribution C. original costs to the partner contributing them D. assessed values for property purposes70. As part of the initial investment, a partner contributes equipment that had originally cost $125,000 and on which accumulated depreciation of $100,000 has been recorded. If similar equipment would cost $150,000 to replace and the partners agree on a valuation of $38,000 for the contributed equipment, what amount should be debited to the equipment account? A, $38,000 B. $150,000 C. $125,000 D. $100,000 71. As part of the initial investment, Omar contributes accounts receivable that had a balance of $22,500 in the accounts of a sole proprietorship. Of this amount, $2,000 is completely worthless. For the remaining accounts, the partnership will establish a provision for possible future uncollectible accounts of $1,500. The amount debited to Accounts Receivable for the new partnership is A, $19,000 B. $22,500 C. $21,000 D. $20,500, 72. Radley and Smithers share income and losses in a 2:1 ratio after allowing for salaries to Radley of $48,000 and $60,000 to Smithers. Net income for the partnership is $96,000. Income should be divided as follows: A. Radley, $48,000; Smithers, $48,000 B, Radley, $56,000; Smithers, $40,000 C. Radley, $64,000; Smithers, $32,000 D. Radley, $40,000; Smithers, $56,000 73. Franco and Elisa share income equally. During the current year the partnership net income was $40,000, Franco made withdrawals of $12,000 and Blisa made withdrawals of $17,000. At the beginning of the year, the capital account balances were: Franco capital, $40,000; Elisa capital, $58,000. Franco's capital account balance at the end of the year is A. $74,500 C. $60,000 D. $48,000 74, Franco and Blisa share income equally. During the current year the partnership net income was $40,000, Franco made withdrawals of $12,000 and Elisa made withdrawals of $17,000. At the beginning of the year, the capital account balances were: Franco capital, $42,000; Elisa capital, $58,000. Elisa’s capital account balance at the end of the year is A. $81,000 B. $50,000 C. $61,000 D. $95,00075, Partnership income and losses are usually divided on the basis of interest, salaries, and stated ratios because A. partners seldom contribute time and resources equally B. this method reflects the amount of time devoted to the partnership by the partners C. itis simpler than following the legal rules D. it prevents arguments among the partners 76. A ratio of 3:2:1 is the same as A. 30%:20%: 10% B. 3/6:2/6:1/6 C. 3/10:2/10:1/20 D. None of these 77. Compton and Danson form a partnership in which Compton contributes $70,000 in assets and agrees to devote half time to the partnership. Danson contributed $50,000 in assets and agrees to devote full time to the partnership. If no additional information is available, how will Compton and Danson share in the division of income? A57 B12 Chl D. 5:2 78. Xavier and Yolonda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 15%, salary allowances of $22,000 and $20,000 respectively, and the remainder equally. How much of the net income of $90,000 is allocated to Xavier? A. $30,250 B. $47,750 C. $45,000 D. $42,250 79. Xavier and Yolonda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net income of $40,000 is allocated to Xavier? A. $20,000 B. $22,000 C. $32,000 D.S080. Xavier and Yolonda have original investments of $50,000 and $100,000 respectively in a partnership. ‘The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net loss of $6,000 is allocated to Xavier? A. $4,000 B. $1,000 C. $3,000 D. $6,000 81. If there is no written agreement as to the way income will be divided among partners A. they will share income and losses equally B. they will share income and losses according to their capital balances C. they will share income and losses according to the time devoted to the business. D. there really is no partnership agreement 82. Partner A has a capital balance of $40,000 and devotes full time to the partnership. Partner B has a capital balance of $50,000 and devotes half time to the partnership. If no other information is available regarding distributions, in what ratio is net income to be divided? A45 1 4 B. c. D. 83. Details of the division of net income for a partnership should be disclosed A. in the asset section of the balance sheet B. in the partners’ subsidiary ledger C. in the statement of cash flows D. in the partnership income statement 84. Pia and Ramona are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000 respectively. Income Summary has a ctedit balance of $40,000. What is Pia’s capital balance after closing Income Summary to Capital? ‘A. $70,000 B. $114,000 C. $110,000 D. $74,00085, Pia and Ramona are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000 respectively. Income Summary has a ctedit balance of $40,000. What is Ramona’s capital balance after closing Income Summary to Capital? A. $110,000 B. $146,000 €. $106,000 D. $150,000 86. Use the following information to answer the following questions. Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $7,500 and a fair market value of $20,000, Marta will invest a building with a book value of $40,000 and a fair market value of $58,000. ‘What amount will be recorded to the building account? A. $28,000 B. $18,000 C. $40,000 D. $58,000 87. Use the following information to answer the following questions. Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $7,500 and a fair market value of $20,000, Marta will invest a building with a book value of $40,000 and a fair market value of $58,000. ‘What amount will be recorded to Izabelle’s capital account? A. $20,000 B. $7,500 C. $27,500 D. $12,500 88. Use the following information to answer the following questions. Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $7,500 and a fair market value of $20,000. Marta will invest a building with a book value of $40,000 and a fair market value of $58,000. ‘What amount will be recorded to Marta's capital account ? A. $18,000 B. $20,000 C. $40,000 D. $58,00089, Robert Johnson contributed equipment, inventory, and $42,000 cash to the partnership. ‘The equipment had a book value of $25,000 and market value of $28,000. ‘The inventory has a book value of $50,000, but only had a market value of $15,000 due to obsolescence. The partnership also assumed a $12,000 note payable owed by Robert that was originally used to purchase the equipment. What amount should Robert's capital account be recorded? A. $85,000 B. $73,000 C. $117,000 D. $105,000 90, Henry Jones contributed equipment, inventory, and $44,000 cash to the partnership. The equipment had a book value of $35,000 and market value of $28,000. The inventory has a book value of $25,000, but only had a market value of $12,000, due to obsolescence. The partnership also assumed a $15,000 note payable owed by Henry that was originally used to purchase the equipment. ‘What amount should Henry's capital account be recorded? A. $104,000 B, $89,000 C. $69,000 D. $84,000 91. Ofelia and Teresa share income and losses in a 2:1 ratio after allowing for salaries to Ofelia of $48,000 and $60,000 to Teresa, Net income for the partnership is $132,000. Income should be divided as follows A, Ofelia, $56,000; Teresa, $76,000 B, Ofelia, $60,000; Teresa, $72,000 C. Ofelia, $72,000; Teresa, $60,000 D. Ofelia, $64,000; Teresa, $68,000 92. Carla and Eliza share income equally. During the current year the partnership net income was $40,000, Carla made withdrawals of $12,000 and Eliza made withdrawals of $17,000. At the beginning of the year, the capital account balances were: Carla capital, $42,000; Eliza capital, $55,000. Eliza's capital account balance at the end of the year is A. $52,000 B. $58,000 C. $82,000 D. $75,00093, Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 20%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net income of $91,000 is allocated to Yolanda? A, $26,500 B. $46,000 C. $45,000 D. $45,500 94, Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 20%, salary allowances of $34,000 and $26,000 respectively, and the remainder equally. How much of the net income of $100,000 is allocated to Yolanda? A. $49,000 B. $51,000 C. $50,000 D. $56,000 95. Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 20%, salary allowances of $34,000 and $26,000 respectively, and the remainder equally. How much of the net income of $100,000 is allocated to Xavier? A. $49,000 B. $51,000 C. $50,000 D. $56,000 96. Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $38,000 and $28,000 respectively, and the remainder equally. How much of the net income of $75,000 is allocated to Yolanda? A. $66,000 B. $40,000 C. $35,000 D. $43,00097. Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $38,000 and $28,000 respectively, and the remainder equally. How much of the net income of $75,000 is allocated to Xavier? A, $66,000 B. $40,000 C. $35,000 D. $43,000 98. Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net loss of $6,000 is allocated to Yolanda? A. $1,000 B. $3,000 C. $5,000 D.S0 99. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $40,000 and $60,000 respectively. Income Summary has a credit balance of $20,000. What is Tomas's capital balance after closing Income Summary to Capital? A. $45,000, B. $55,000 C. $65,000 D. $75,000 100. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $80,000 and $120,000 respectively. Income Summary has a credit balance of $30,000. What is Tomas’ capital balance after closing Income Summary to Capital? A. $102,500 B. $22,500 C. $57,500 D. $127,500 101. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $80,000 and $120,000 respectively. Income Summary has a credit balance of $30,000. What is Saturn’s capital balance after closing Income Summary to Capital? A. $102,500 B. $120,000 C.$112,500 D. $127,500102. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $40,000 and $60,000 respectively. Income Summary has a credit balance of $20,000. What is Saturn's capital balance after closing Income Summary to Capital? A. $55,000 B. $75,000 C. $45,000 D. $65,000 103. Franco and Jason share income and losses in a 2:1 ratio after allowing for salaries to Franco of $15,000 and $30,000 to Jason. If the partnership suffers a $15,000 loss, by how much would Jason’s capital account increase? ‘A. $10,000 B. $20,000 C. $40,000 D. $25,000 104, Lambert invests $20,000 for a 1/3 interest in a partnership in which the other partners have capital totaling $34,000 before admitting Lambert, After distribution of the bonus, what is Lambert's capital? A. $18,000 B. $20,000 C. $6,667 D. $11,333 105. Douglas pays Selena $45,000 for her 30% interest in a partnership with total net assets of $125,000. Following this transaction, Douglas’ capital account should have a credit balance of A. $37,500 B. $45,000 C. $13,500 D. mote than $45,000 106. Nick is admitted to an existing partnership by investing cash. Nick agrees to pay a bonus for his ‘ownership interest because of the past success of the partnership. When Nick’s investment in the partnership is recorded A. his capital account will be credited for more than the cash he invested B. his capital account will be credited for the amount of cash he invested C. a bonus will be credited for the amount of cash he invested D. a bonus will be distributed to the old partners’ capital accounts,107. Bobbi and Stuart are partners. ‘The partnership capital of Bobbi is $40,000 and Stuart is $70,000. Bobbi sells his interest in the partnership to John for $50,000. The journal entry to record the admission of John as a new partner would include A. accredit to John’s capital for $40,000 B. a credit to Stuart’s capital for $10,000 C. a credit John’s capital for $50,000 D. a credit to John’s capital for $40,000 and a credit to Stuart's capital for $10,000 108. When a partner dies, the capital account balances of the remaining partners A. will increase B. will decrease C. will remain the same D. may increase, decrease, or remain the same 109. A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm, As a results of this transaction, the capital account balance of the other partners in the partnership A. will increase B. will decrease C. will remain the same D, may increase, decrease, or remain the same 110. Samuel and Darei are partners, ‘The partnership capital for Samuel is $50,000 and for Darci is $60,000. Josh is admitted as a new partner by investing $50,000 cash. Josh is given a 20% interest in return for his investment. The amount of the bonus to the old partners is, A.S0 B. $18,000 C. $8,000 D. $10,000 ILL. Abby and Bailey are partners who share income in the ratio of 2:1 and have capital balances of $60,000 and $30,000 respectively. With the consent of Bailey, Sandra buys one half of Abby's interest for $35,000, For what amount will Abby's capital account be debited to record admission of Sandra to the partnership? ‘A. $40,000 B. $15,000 C. $35,000 D. $30,000112. A new partner may be admitted to a partnership by A. inheriting a partnership interest B. contributing assets to the partnership C. purchasing a specific quantity of assets from the partnership D. a written approval under the federal law 113. A change in the ownership of a partnership results in the A. consolidating of the partnership B. liquidating of the partnership C. realization of the partnership D. dissolution of the partnership 114, When a new partner is admitted to a partnership, there should be a(n) A. revaluation of assets B. realization of assets C. allocation of assets D, return of assets 115. When a new partner is admitted to a partnership, there should be a(n) A. increase in the total assets of the partnership. B. new capital account added to the ledger for the new partner. C. increase in the total owner's equity of the partnership. D, debit amount to the partner's capital account for the cash received by the current partner. 116. When an additional partner is admitted to a partnership by contribution of assets to the partnership A. the total assets of the partnership do not change B. no liabilities can be contributed at the same time C. the amount of the cash contribution is the same as the amount of the debit to the new partner's capital account D. the total of the owner's equity accounts increases 117. When a new partner is admitted to a partnership ‘A. a bonus may be attributable to the old partner B. a bonus may only result from more cash being given by the new partner than the value of the of the assets being purchased C. a bonus agreed upon by the partners is recorded as an asset so long as the amount is within the range set by the SEC D. a bonus is not recorded118. The Calvin-Dogwood Partnership owns inventory that was purchased for $90,000, has a current replacement cost of $85,900, and is priced to sell for $125,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted? A. $129,100 B. $85,900 C. $90,000 D. $125,000 119. Immediately prior to the admission of Abbott, the Smith-Jones Partnership assets had been adjusted to current market prices, and the capital balances of Smith and Jones were $40,000 and $60,000 respectively. IF the parties agree that the business is worth $120,000, what is the amount of bonus that should be recognized in the accounts at the admission of Abbott? A. $60,000 B, $80,000 C. $40,000 D. $20,000 120, Benson and Orton are partners who share income in the ratio of 2:3 and have capital balances of $60,000 and $40,000 respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Benson’s capital balance after admitting Ramsey? A. $20,000 B. $24,000 C. $48,800 D. $71,200 121, Benson and Orton are partners who share income in the ratio of 2:3 and have capital balances of $60,000 and $40,000 respectively. Ramsey is admitted to the partnership and is given a 10% interest by investing $20,000. What is Orton's capital balance after admitting Ramsey? A. $44,800 B. $35,200 C. $20,000 D. $16,000 122. Benton and Orton are partners who share income in the ratio of 1:3 and have capital balances of $70,000 and $30,000 respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Benton's capital balance after admitting Ramsey? ‘A. $20,000 B. $7,000 C. $70,000 D. $63,000123. Benson and Orton are partners who share income in the ratio of 1:3 and have capital balances of $70,000 and $30,000 respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Orton's capital balance after admitting Ramsey” A. $20,000 B. $9,000 €. $70,000 D. $63,000 124. Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann’ was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will Singer's share of the income be if the income for the year was $50,000? A. $24,000 B, $22,000 C. $16,000 D. $23,400 125. Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann’s was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will McMann‘s share of the income be if the income for the year was $30,000? A. $20,000 B. $18,000 C. $18,600 D. $17,400 126, Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann’s was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will Singer's share of the income (loss) be if the net loss for the year was $10,000? A. ($12,600) B. ($14,000) C. ($6,000) D. ($10,000)127. Singer and McMann are partners in a business, Singer’s original capital was $40,000 and McMann’ s was $60,000, They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will Singer's share of the income be if the income for the year was $15,000? A. $9,000 B. $2,400 C. $1,000 D. $5,600 128. Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann’ s was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest ‘on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will McMann's share of the income be if the income for the year was $15,000? A. $6,000 B. $9,400 C. $12,600 D. $14,000 129. Alpha and Beta are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $50,000. What amount of loss on realization should be allocated to Alpha? A. $60,000 B. $20,000 C. $30,000 D, $50,000 130, Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and $50,000 respectively. They share income in the ratio of 3:2:1. Income Summary with a debit balance of $30,000 is closed to the capital accounts. Doug withdraws from the partnership. How much cash does he get upon withdrawal? A. $30,000 B. $20,000 C. $40,000 D. $24,000 131. A partnership liquidation occurs when A. anew partner is admitted B. a partner dies C. the ownership interest of one partner is sold to a new partner D. the assets are sold, liabilities paid, and business operations terminated132. The balance sheet of Morgan and Rockwell was as follows immediately prior to the partnership's being liguidated: cash, $20,000; other assets, $160,000; liabilities, $40,000; Morgan capital, $60,000; Rockwell capital, $80,000. The other assets were sold for $139,000. Morgan and Rockwell share profits and losses in a 2:1 ratio. As a final cash distribution from the liquidation, Morgan will receive cash totaling A. $46,000 B. $51,000 C. $60,000 D. $49,500 133, Harriet, Mickey, and Zack decide to liquidate their partnership. All assets are sold and the liabilities are paid, Following these transactions, the capital balances and profit and loss percentages are as follows: Harriet, $27,000 and 30%; Mickey, $(12,000) and 40%; Zack, $43,000 and 30%. Mickey is unable (o contribute any assets to reduce the deficit. How much cash will Harriet receive as a results of the partnership liquidation? A. $27,000 B. $21,000 C. $23,400 D. $15,000 134. The remaining cash of a partnership (after creditors have been paid) upon liquidation is divided among partners according to their A, capital balances B. contribution of assets C. drawing balances D. income sharing ratio 135. A gain or loss on realization is divided among partners according to their A. income sharing ratio B. capital balances C. drawing balances D. contribution of assets 136, Adriana and Belen are partners who share income in the ratio of 3:2 and have capital balances of $50,000 and $90,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $90,000. How much cash should be distributed to Adriana? A. $50,000 B. $20,000 C. $30,000 D. $45,000137, Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and Ramona, $30,000 Cr. How much cash is available for distribution to the partners? A. $120,000 B. $30,000 C. $40,000 D. $90,000 138. Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and Ramona, $30,000 Cr. How much cash should be distributed to Everett assuming that Miguel pays the deficiency? A. $50,000 B. $20,000 C. $30,000 D. $40,000 139. Antonio and Barbara are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $80,000, What amount of loss on realization should be allocated to Barbara? A. $80,000 B, $10,000 C. $20,000 D. $30,000 140. Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $130,000. What amount of loss on realization should be allocated to Soledad? A, $60,000 B. $27,500 C. $92,500141, Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $130,000. What amount of loss on realization should be allocated to Winston? A. $110,000 B. $97,500 C. $42,500 D. $82,500 142. Partners Ken and Macki each have a $40,000 capital balance and share income and losses in a 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $80,000, the Macki’s capital account will A. decrease by $16,000. B. decrease by $24,000. C. increase by $24,000. D. decrease by $40,000. 143, Partners Ken and Macki each have a $40,000 capital balance and share income and losses in a 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $50,000, and each partner is personally insolvent, Partner Macki will eventually receive cash of A. $0. B. $10,000. C. $12,000. D. $20,000. 144, Partners Ken and Macki each have a $40,000 capital balance and share income and losses in a 3:2, Cash equals $20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $60,000, and both partners agree to make up an capital deficits with personal cash contributions, Partner Macki will eventually receive cash of A. 80, B. $4,000. C. $16,000. D. $24,000.145. The capital accounts of Harrison and Marti have balances of $160,000 and $110,000, respectively, on January 1, 2014, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year ‘was $264,000. The atticles of partnership make no reference to the division of net income. Based on this information, the statement of partners’ equity for 2014 would show what amount in the capital account for Marti on December 31, 20147 A, $216,000 B. $164,000 C. $380,000 D. $52,000 146. The capital accounts of Harrison and Marti have balances of $160,000 and $110,000, respectively, on January 1, 2014, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year ‘was $264,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners’ equity for 2014 would show what amount in the capital account for Harrison on December 31, 20147 A. $216,000 B. $164,000 C. $380,000 D. $52,000 147. The capital accounts of Harrison and Marti have balances of $160,000 and $110,000, respectively, on January 1, 2014, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year ‘was $264,000. The articles of partnership make no reference to the division of net income, Based on this information, the statement of partners’ equity for 2010 would show what amount as total capital for the partnership on December 31, 2010? A, $228,000 B. $176,000 C. $404,000 D. $752,000148. The capital accounts of Hawk and Martin have balances of $160,000 and $140,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income for the year ‘was $258,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners’ equity for 2010 would show what amount in the capital account for Martin on December 31, 20107 A, $173,000 B, $211,000 C. $201,000 D. $232,000 149. The capital accounts of Hawk and Martin have balances of $160,000 and $140,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income for the year ‘was $258,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners’ equity for 2010 would show what amount in the capital account for Hawk on December 31, 2010? A. $211,600 B. $213,000 C. $201,000 D. $203,000 150. The capital accounts of Hawk and Martin have balances of $160,000 and $140,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income for the year ‘was $258,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners’ equity for 2010 would show what amount as total capital for the partnership on December 31, 2010? A, $384,600 B. $412,600 C. $404,000 D. $414,000 151. Immediately prior to the admission of Allen, the Sanson-Jeremy Partnership assets had been adjusted to current market prices, and the capital balances of Sanson and Jeremy were $80,000 and $120,000 respectively. If the parties agree that the business is worth $240,000, what is the amount of bonus that should be recognized in the accounts at the admission of Allen? A. $60,000 B. $80,000 C. $40,000 D. $100,000152. The Craig-Doran Partnership owns inventory that was purchased for $85,000, has a current replacement cost of $54,500, and is priced to sell for $98,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted? ‘A. $98,000 B. $54,500 C. $85,000 D. $79,167 153. Paul and Roger are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000 respectively. Income Summary has a ctedit balance of $50,000. What is Roger's capital balance after closing Income Summary to Capital? A. $155,000 B. $150,000 C. $110,000 D, $115,000 154, Paul and Roger are partners who share income in the ratio of 3:2. ‘Their capital balances are $90,000 and $130,000 respectively. Income Summary has a credit balance of $50,000. What is Paul's capital balance after closing Income Summary to Capital? A, $108,000 B. $120,000 €. $115,000 D. $180,000 155, Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income when there is no reference to division in partership agreement. A. $75,000 and $75,000 B. $37,500 and $112,500 €. $100,000 and $50,000 D. $112,500 and $37,500 156, Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income in ratio of capital balances. A. $75,000 and $75,000 B. $37,500 and $112,500 C. $100,000 and $50,000 D. $50,000 and $100,000157. Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income in ratio of time devoted to business. A. $75,000 and $75,000 B. $37,500 and $112,500 C. $100,000 and $50,000 D. $112,500 and $37,500 158. Aaron and Kim form a partnership by combining the assets of their separate businesses. Aaron contributes accounts receivable with a face amount of $50,000 and equipment with a cost of $180,000 and accumulated depreciation of $100,000. ‘The partners agree that the equipment is to be priced at $68,000, that $3,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $2,000 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Kim contributes cash of $21,000 and merchandise inventory of $44,500. The partners agree that the merchandise inventory is to be priced at $48,000. Journalize the entries to record in the partnership accounts (a) Aaron's investment and (b) Kim's investment. 159. Barton and Fallows form a partnership by combining the assets of their separate businesses. Barton contributes accounts receivable with a face amount of $50,000 and equipment with a cost of $190,000 and accumulated depreciation of $100,000. The partners agree that the equipment is to be priced at $85,000, that $3,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $1,500 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Fallows contributes cash of $28,500 and merchandise inventory of $55,500. The partners agree that the merchandise inventory is to be priced at $60,000. Journalize the entries to record in the partnership accounts (a) Barton's investment and (b) Fallows’ investment.160. Trevor Smith contributed equipment, inventory, and $54,000 cash to a partnership, The equipment had a book value of $30,000 and a market value of $36,000. The inventory had a book value of $60,000, but only had a market value of $20,000, due to obsolescence, The partnership also assumed a $17,000 note payable owed by Smith that was used originally to purchase the equipment. Provide the journal entry for Smith’s contribution to the partnership. 161. Emerson and Dakota formed a partnership dividing income as follows 1. Annual salary allowance to Emerson of $48,000 2. Interest of 8% on each partner's capital balance on January 1 3. Any remaining net income divided equally. Emerson and Dakota had $25,000 and $140,000 respectively in their January 1 capital balances, Net income for the year was $220,000. How much net income should be distributed to Emerson?162. Emerson and Dakota formed a partnership dividing income as follows 1. Annual salary allowance to Emerson of $58,000 2. Interest of 8% on each partner’s capital balance on January 1 Any remaining net income divided equally. Emerson and Dakota had $25,000 and $140,000 respectively in their January | capital balances. New income for the year was $220,000. How much net income should be distributed to Dakota? 163. Gavin invested $45,000 in the Jason and Kelly partnership for ownership equity of $45,000. Prior to the investment land was revalued to a market value of $320,000 from a book value of $200,000. Jason and Kelly share net income in a 1:2 ratio. a, Provide the journal entry for the revaluation of land, b. Provide the journal entry to admit Gavin. 164. Malcolm has a capital balance of $90,000 after adjusting to fair market value. Celeste contributes $45,000 to receive a 25% interest in a new partnership with Malcolm, Determine the amount and recipient of the partner bonus.165. Prior to liquidating their partnership, Craig and Jenny had capital accounts of $70,000 and $110,000, respectively. ‘The partnership assets were sold for $285,000. ‘The partnership had $25,000 of liabilities. Craig and Jenny share income and losses equally. Determine the amount received by Jenny as a final distribution from liquidation of the partnership. 166. The capital accounts of Hogan and Moss have balances of $90,000 and $65,000, respectively on January 1, 2011, the beginning of the current fiscal year. On April 10, Hogan invested an additional $8,000. During the year, Hogan and Moss withdrew $40,000 and $32,000, respectively, and net income for the year was $98,000. The articles of partnership make no reference to the division of net income. Required: )—— Tournalize the entries a Close the income suramary account » Close the drawing accounts 2) Prepare a of partners" equity for 2011 for the partners pot Hogan and Moss.167. Hamir, Darci, and Pete are partners sharing income 3:2:1, respectively. After the firm’s loss from liquidation is distributed, the capital account balances were: Hamir, $45,000 Dr.; Darci, $90,000 Cr., and Pete, $64,000 Cr. If Hamir is personally bankrupt and unable to pay any of the $45,000, what will be the amount of cash received by Darci and Pete upon liquidation? Show your work. 168. S, Stephens and J. Perez are partners in Space Designs. Stephens and Perez share income equally. D. Fredricks will be admitted to the partnership. Prior to the admission, equipment was revalued downward by $8,000. The capital balances of each partner are $100,000 and $139,000, respectively, prior to the revaluation. Required: ) Provide the joural entry for the asset 2) Provide the journal entry for Fredrick adm under the followin e indepen dent situation 4. Fredricks purchased a 20% interest for $50,000. b. Fredricks purchased a 30% interest for $125,000.169. After the tangible assets have been adjusted to current market prices, the capital accounts of Harper and Kablil have balances of $60,000 and $90,000, respectively. Fay is to be admitted to the partnership, contributing $45,000 cash, for which she is to receive an ownership equity of $60,000. All partners share equally in income. Required: (1) Journalize the entry to record the admission of Fay, who is to receive a bonus of $15,000. (2) What are the capital balances of each partner after the admission of the new partner? 170. The partnership of Abraham Associates began operations on January 1, 2010, with contributions from two partners as follows: Waverley 35,000 [Marquez 0,000) ‘The following additional partner wansactions took place during the yeut a a 8 Required In early January, Houston is admited to the partnership by contributing $25,000 cash for a 25% intrest. Net income of $160,000 was eared in 2010, In addition, Waverley received salary allowance of $30,000 for the year, The three partners agree to an income-sharing ratio equal to their capital balances ater admitting Houston, The partners’ withdrawals ae equal to half oftheir respective distributions of income after salary (i.e. half ther respective portions of the $130,000) Prepare a statement of partnership equity forthe year ended December 31, 2010.171, The capital accounts of Hope and Indiana have balances of $115,000 and $95,000, respectively, Clint and Casey are (o be admitted to the partnership. Clint buys one-fifth of Hope's interest for $30,000 and one-fourth of Indiana’s interest for $20,000. Casey contributes $45,000 cash to the partnership, for which he is to receive an ownership equity of $45,000. Required: (1) Journalize the entries to record the admission of (a) Clint and (b) Casey. (2) What are the capital balances of each partner after the admission of the new partners? 172. Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in the year’s net income of $200,000 under each of the following independent assumptions: @ No agreement concerning division of nt income; o) Divided in the ratio of original capital investment © Interest a the rate of 15% allowed on original investments and the remainder divided in the ratio of 2:3; @ Salary allowances of $50,000 and $70,000, respectively, and the balance divided equally © Allowance of interest a the rate of 15% on original investments, salary allowances of $50,000 and $70,000, respectively, and the reminder divided equally. 173. Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in the year’s net income of $380,000 under each of the following independent assumptions: @ No agreement concerning division of net income: oo Divided in the ratio of original capital investment © Interest atthe rate of 15% allowed on orginal investments and the remainder divided in the ratio of 2:3 @ Salary allowances of $50,000 and $70,000, respectively, and the balance divided equally © Allowance of interest atthe rate of 15% on original investments, salary allowances of $50,000 and $70,000, respectively, andthe remainder divided equally.174, Benson contributed land, inventory, and $22,000 cash to a partnership. The land had a book value of $65,000 and a market value of $111,000. The inventory had a book value of $60,000 and a market value of $58,000, The partnership also assumed a $52,000 note payable owned by Benson that was used originally to purchase the land. Required: Provide the journal entry for Benson's contribution to the partnership. 175. Prior to liquidating their partnership, Porter and Robert had capital accounts of $160,000 and $100,000 respectively. Prior to liquidation, the partnership had no cash assets other than what was realized from the sale of the partnership assets. These partnership assets were sold for $250,000. The partnership had $10,000 of liabilities. Porter and Robert share income and losses equally. Required: Determine the amount received by Porter as a final distribution from liquidation of the partnership.176. Prior to liquidating their partnership, Samuel and Brian had capital accounts of $60,000 and $240,000, respectively. The partnership assets were sold for $120,000. The partnership had no liabilities. Samuel and Brian share income and losses equally. Required: a. Determine the amount of Samuel's deficiency. b, Determine the amount distributed to Brian, assuming Samuel is unable to satisfy the deficiency. 177, Basy Sailing, LLC _ provides repair services for commercially-owned boats and yachts. The firm has 5 members in the LLC, which did not change between 2011 and 2012. During 2012, the business expanded into three new regions of the country. The following revenue and employee information is provided: OTT ey [Revenues Gn thousands) 50,605 57.150 Number of employees Is, (rs Required: 44 For 2011 and 2012, determine the revenue per employee (excluding members) ‘Interpret the tend between the two years178. Gleason invested $90,000 in the James and Kirk partnership for ownership equity of $90,000. Prior to the investment land was revalued to a market value of $425,000 from a book value of $200,000. James and Kirk share net income in a 1:2 ratio. a, Provide the journal entry for the revaluation of land. b. Provide the journal entry to admit Gleason. 179. Top Notch, LLC provides repair services for oil rigs. The firm has 5 members in the LLC, which did not change between 2011 and 2012. During 2012, the business expanded into three new regions of the country. The following revenue and employee information is provided: aT oT iRevenues (in thousands) 60525 58,500 Number of emplayees 20 60. Required 4 For 2011 and 2012, determine the revenue per employee (excluding members) bs. Interpret the trend between the two years180. Match each statement to the item listed below. 1. Simple to form. 2. Place where changes in partner capital accounts for a period of time are reported. 3. A step during liquidation when partnership assets are sold. 4, Where the share of loss on realization is greater than the balance in partner capital, 5. Each partner may act on behalf of the entire partnership so that the liabilities created by one partner become the liabilities of all partners. 6. An association of two or more persons to own and manage a business for profit 7. Used to divide the excess of allowances over loss when net losses occur. 8. The winding up process of a partnership. 181, Match the term with the appropriate definition 1, Without an agreement, the law will stipulate this method of sharing profits and losses 2. When a partnership cannot pay its debts with business assets, the partners must use personal assets to meet the debt 3. Agreement that is the contract between partners 4. Causes the dissolution of a partnership 5. The final step in the liquidation of a partnership 6. Every partner can bind the business to a contract within the scope of the partnership's regular business operations 7. A voluntary association of two or more persons who co-own a business for profit 8. The process of going out of business by selling the entity’s assets and paying its liabilities statement of partnership equity deficiency mutual agency partnership proprietorship realization income sharing ratio liquidation unlimited liability articles of partnership partnership mutual agency liquidation equally distribution of remaining cash to partners death of a partner182. Gentry, sole proprietor of a hardware business, decides to form a partnership with Noel. Gentry's accounts are as follows: Book Value cash $25,000 Accounts Receivable (net) 52,000 Taventary| 112,000 Land 440,000 Building nes) 300,000 ‘Accounts Payable 25,000 ‘Mortgage Payable 145,000 [Noel agrees to contibute $60,000 fora 20% interest, Jouznaize the enties to record (a) Gentzy's investment and (b) Noel's investment 183. Jeff Layton, sole proprictor of a hardware business, decides to form a partnership with Nicholas Fell, Jeff's accounts are as follows: Book Value cash $ 30,000 Accounts Receivable (net) 55,000 Taventary 112,000, Land 40,000 Building net) 500,000 ‘Accounts Payable 25,000 Mortgage Payable 125,000 Nicholas agrees to contribute $120,000 for 20% interest. Tournalize the enties to record (a) Jet's investment and (b) Nicholas” investment.184. Sharp and Townson had capital balances of $60,000 and $90,000 respectively at the beginning of the current fiscal year. The articles of partnership provide for salary allowances of $25,000 and $30,000 respectively, an allowance of interest at 12% on the capital balances at the beginning of the year, with the remaining net income divided equally. Net income for the current year was $110,000. (2) Present the income division ection of the income statement for the current year (b) Assuming thatthe net income had been $55,000 instead of $110,000, present the income division section ofthe income statement fr the current year 185. Sharp and Townson had capital balances of $60,000 and $120,000 respectively on January 1 of the current year, On May 8, Sharp invested an additional $10,000 in the partnership. During the year, Sharp and Townson withdrew $25,000 and $45,000 respectively. After closing all expense and revenue accounts at the end of the year, Income Summary has a credit balance of $90,000, that Sharp and Townson have agreed to split on a 2:1 basis, respectively. (a) Souralize she entries to close the income summary account and the drawing accounts (b) Prepare the statement of owner's equity forthe cutent year 186. Daja and Whitnee had capital balances of $140,000 and $160,000 respectively at the beginning of the current fiscal year. The articles of partnership provide for salary allowances of $25,000 and $35,000 respectively, an allowance of interest at 12% on the capital balances at the beginning of the year, with the remaining net income divided equally. Net income for the current year was $120,000. (a) Present the income division section of the income statement forthe curtent year (b) Assuming thatthe net income had been $50,000 instead of $120,000, present the income division section ofthe income statement fr the current year187. Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income under each of the following assumptions: (a) Noagreement as to division of net income () In satio of capital balances fe) Taatio of tine devoted 0 business 188, Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $120,000 of net income under each of the following assumptions: (a) No agreement as to division of net income. (b) __Inratio of capital balances fe) Tnatio of ume devoted o business (@) Interest of 10% on capital balances and remainder equally. fe) Interest of 10% on capital balances, salaries of $40,000 to Jackson and $20,000 to Campbell, and the remainder equally.189, Derek and Hailey, partners sharing net income in the ratio of 2:1, admit Ben to the partnership in accordance with the following agreement (1) Merchandise inventory recorded inthe partnership accounts at $62,500 isto be revalued at its current replacement price of $68,500. 2) Bens to invest $48,000 in cash fora 30% interest inthe partnership, which has (tal net assets (assets minus liabilities) of $130,000 after the inventory is revalued, @) The income-sharing ratio of Derek, Hailey, and Ben is to be 2:1: Required: (a) Jouralize the entries to record the revaluation of merchandise inventory, ad the admission of Ben tothe partnership. (©) A few years later the capital balances of Derek, Haley, and Ben were $150,000, $90,000, and $55,000 respectively. At tis time Kacy is admitted to the partnership by the purehase of one-half of Derek's interest for $80,000, Journalize the entry to record the admission of Kacy tothe paraership 190. Kala and Leah, partners in Best Designs, have capital balances of $40,000 and $60,000 respectively. Adam joins the partnership by buying one-half of Kala’s interest for $30,000. In addition, because of Adam’s outstanding sales skills, the partners agree to increase his interest to 40% if he invests another $10,000. The income-sharing ratio of Kala, Leah, and Adam is 4:3:1 (a) Tournalize the entries to record the admission of Adam tothe pattnership. () Immediately ater Adam's admission othe partnership, Leah sells one-fourth of her interest to Denton for $35,000, Tournalize the entry to record this tansaction191, Immediately prior to the process of liquidation, partners Micco, Niccum, and Orwell have capital balances ‘of $70,000, $20,000, and $30,000 respectively. ‘There is a cash balance of $10,000, noncash assets total $160,000, and liabilities total $50,000. The partners share net income and losses in the ratio of 2:2:1. Journalize the entries to record the liquidation outlined below, using Assets as the account title for the noncash assets and Liabilities as the account title for all creditors’ claims. (2) Sold the noncash assets fr $80,000 in ash (©) Divided the loss on realization (©) Paid the liabilities (@) Received cash from the partner withthe deficiency. fe) Distributed the cash to the partaers, 192, After discontinuing the ordinary business operations and closing the accounts on May 7, the ledger of the partnership of Anna, Brian, and Cole indicated the following: 87500 Noncash Assets 105,000 Liabilities $ 27500 ‘ana, Capital 445,000 Brian, Capital 15,000 Cole, Capital 25,000 300 112.500 ‘The partuers share net income and losses in the ratio of 3.21. Between May 7-30, the noncash assets were sold for $150,000, the liabilities were paid, and the remaining cash was dstibuted tothe partaers. (a) Prepare a statement of partnership Liquidation, () Assume the same fats as in (a), except thatthe noncash assets were sold fr $45,000 and any partner with a capital deficiency pays the amount ofthe deficiency tothe partnership. Prepare a statement of partnership liquidation193. Barker invested $128,000 in the Granger and Monroe partnership for ownership equity of $128,000, Prior to the investment, equipment was revalued to a market value of $90,000 from a book value of $66,000. Granger and Montoe share net income in a 2:1 ratio. Required: a. Provide the journal entry for the revaluation of equipment b. Provide the journal entry to admit Barker. 194, Watson purchased one-half of Dalton’ interest in the Patton and Dalton partnership for $45,000. Prior to the investment, land was revalued to a market value of $135,000 from a book value of $93,000. Patton and Dalton share net income equally. Dalton had a capital balance of $35,000 prior to these transactions. Required: a. Provide the journal entry for the revaluation of land. b. Provide the journal entry to admit Watson, 195, Wonder purchased one-half of Darwin's interest in the Todd and Darwin's partnership for $50,000. Prior to the investment, land was revalued to a market value of $175,000 from a book value of $100,000. Todd and Darwin share net income equally. Darwin had a capital balance of $40,000 prior to these transactions, Required: a. Provide the journal entry for the revaluation of land. b. Provide the journal entry to admit Wonder.196. Describe the items which should be covered in a partnership agreement, 197. What is a partnership? List three advantages and three disadvantages of the partnership form of business organization.Chapter 12--Accounting for Partnerships and Limited Liability Companies Key 1, There are only four legal structures to form and operate a business. FALSE 2. In a general partnership, each partner is individually liable to creditors for debts incurred by the partnership, to the extent of the partner's capital balance. FALSE 3. A partnership is a legal entity separate from its owners. FALSE 4, A partnership is subject to federal income taxes. 5. A disadvantage of partnerships is the mutual agency of all partners. TRUE 6. A partnership requires only an agreement between two or more persons to organize, TRUE 7. Bach partner may withdraw the assets he or she contributed to the partnership at any time. FALSE 8, When compared to a corporation, one of the major disadvantages of the partnership is its limited life. TRUE9, When compared to a corporation, one of the major advantages of a partnerships is its relative ease of formation. TRUE 10. An advantage of the partnership form of business is that each partner's potential loss is limited to that partner's investment in the partnership, FALSE 11. A Limited Liability Company is a business entity form designed to overcome some of the disadvantages of the partnership form. TRUE 12, For tax purposes, a Limited Liability Company may elect to be treated as a partnership. TRUE 13, The Limited Liability Company may elect to be manager managed rather than member managed which ‘means that only authorized members may legally bind the corporation. TRUE 14, Each partner has a separate capital and withdrawal account. TRUE 15. The chart of accounts for a partnership, with the exception of drawing and capital accounts, does not differ from the chart of accounts for a sole proprietorship. TRUE 16. The equity reporting for a Limited Liability Company is similar to that of a partnership but the changes in capital are shown on a statement of members’ equity. TRUE 17, When a partner invests noncash assets in a partnership, the assets are recorded at the partner's book value. FALSE18. Accounts receivable contributed to the partnership are recorded at their face value, TRUE 19. A new partner contributes accounts receivable to a partnership which appear in the ledger of his sole proprietorship at $20,500 and there was an allowance for doubtful accounts of $750. If $600 of the accounts receivables are completely worthless, the partnership accounts receivable should be debited for $19,900. TRUE 20. One reason that distributions of income and loss are prepared is to obtain the information to record a closing entry TRUE 21. If nothing is stated, partnership income is divided in proportion to the individual partner's capital balance. FALSE 22, The salary allocation to partners used in dividing net income would also appear as salary expense on the partnership income statement. FALSE 23. If the articles of partnership provide for annual salary allowances of $36,000 and $18,000 to X and ¥ respectively and net income is $30,000, X's share of net income is $20,000. FALSE 24. If the net income of a partnership is less than the total of the allowances provided by the partnership agreement, the difference must be divided among the partners in the income-sharing ratio, FALSE 25. The amount that a partner withdraws as a monthly salary allowance does not affect the division of net income. TRUI26. A devotes full time and B devotes one-half time to their partnership. If the partnership agreement is silent concerning the division of net income, A will receive a $20,000 share of a net income of $30,000. FALSE 27. In the distribution of income, the net income is less than the salary and interest allowances granted; the remaining balance will be a negative amount that must be divided among the partners as though it were a loss. TRUE 28. Details of the division of partnership income should normally be disclosed in the financial statements. TRUE 29. Whenever a partnership is dissolved, the assets are liquidated. FALSE 30. When a partnership dissolves, a new partnership is formed and a new partnership agreement should be prepared. TRUE 31. Many partnerships provide for the admission of new partners or withdrawals of present partners by amending existing partnership agreements, so that the firm may continue to operate without executing a new agreement, TRUE 32. A person may be admitted to a partnership only with the consent of all the current partners. TRUE 33, Partnership's asset accounts should be changed from cost to fair market value when a new partner is admitted to a firm or an existing partner withdraws and dies. TRUE34, In admitting a new partner, where the company chooses to use the purchase of an interest method, the capital interest of the new partner is obtained from the current partners and both the total assets and total capital are increased. FALSE 35. When a new partner purchases the entire interest of an old partner, the new partner's capital account should be credited for the amount he or she paid to the old partner. FALSE 36. If a new partner is given a 20% interest in the firm then the new partner will receive a 20% interest in earnings, FALSE 37. When a new partner is admitted by making an investment in the partnership, the old partners’ capital accounts are always credited. FALSE 38. When a new partner is admitted by making an investment of assets in the partnership and the new partner has to pay a premium for admission, a bonus is divided among the old partners’ capital accounts. TRUE 39, Sarno has a capital balance of $42,000 after adjusting the assets to fair market value, Minton contributes, $22,000 to receive a 30% interest in the new partnership. The bonus paid by Minton is $2,800, TRUE 40. When a partner withdraws from the partnership, the partnership dissolves. TRUE 41, If not enough partnership cash or other assets are available to pay the withdrawing partner, a liability may be created for the amount owed the withdrawing partner. TRUE42, When a partner withdraws from the partnership by selling his or her interest back to the partnership, the remaining partners must pay the withdrawing partner a specified amount from their personal assets. FALSE 43. X sells to A one-half of a partnership capital interest that totals $70,000 for $40,000. A's capital account in the partnership should be credited for $40,000. FALSE 44, When a new partner is admitted to a partnership, all partnership assets should be revised to reflect current prices. TRUE 45. If a new partner is to be admitted to a partnership and a bonus is attributed to the old partnership, the bonus should be divided between the capital accounts of the original partners according to their capital balances. FALSE 46, When a new partner is admitted to a partnership, bonuses attributable to either the old partnership or to the incoming partner may be recognized in accordance with the agreement among the partners. TRUE 47. Dissolution is the term which solely means to liquidate the partnership. FALSE 48. In a partnership liquidation, gains and losses on the sale of partnership assets are divided among the partners’ capital accounts on the basis of their capital balances. FALSE 49. If the share of losses on realization of the sale of noncash assets exceed the balance in a partner's capital account, the resulting balance is called a deficiency. TRUI50, In a partnership liquidation, if a partner has a debit capital balance in his or her capital account, he or she is, responsible for contributing personal assets sufficient (o eliminate the deficit TRUE 51. The process of winding up the affairs of a partnership is referred to as realization. FALSE 52. The distribution of cash, as the final process in winding up the affairs of a partnership, is based on the income-sharing ratio. FALSE 53. Ifa partner's capital balance is a debit after it has absorbed its share of the loss on realization, the balance is, referred to as a deficiency. TRUE 54, In the liquidating process, any uncollected cash becomes a loss to the partnership and is divided among the remaining partners’ capital balances based on their income-sharing ratio. TRUE 55. After all noncash assets have been converted to cash and all liabilities paid, A, B, and C have capital balances of $10,000 (debit), $5,000 (debit), and $25,000 (credit). The cash available for distribution to the partners is $10,000. TRUE 56, The statement of members’ equity is used for equity reporting of a partnership. FALSE 57. The partner capital accounts may change due to capital additions, net income, or withdrawals. TRUE 58, Revenue per employee may be used to measure partnership (LLC) efficiency. TRUE59, Which of the following is characteristic of a general partnership? Az The partners have co-ownership of partnership property. B. The partnership is subject to federal income tax. C. The partnership has an unlimited life. D, The partners have limited liability. 60. Which of the following is not a characteristic of a general partnership? A. the partnership is created by a contract B. mutual agency C. partners share equally in net income or net losses unless an agreement states differently D, dissolution occurs only when all partners agree 61. Which of the following is an advantage of a general partnership when compared to a corporation? A. A partnership is more likely to have a positive net income. B. The partnership is relatively inexpensive to organize. C. Creditors to a partnership cannot attach personal assets of partners. D, The partnership usually hires professional managers. 62. Which of the following is a disadvantage of a partnership when compared to a corporation? A. The partnership is more likely to have a net loss. B. The partnership is easier to organize. C. The partnership is less expensive to organize. D. The partnership has limited life, 63. An advantage of the partnership form of business organization is A. unlimited Liability B, mutual agency C. case of formation D. limited life 64, The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is called A. unlimited liability B. ease of formation C. mutual agency D. dissolution65. When a limited partnership is formed A. the partnership activities are limited B. all partners have limited liability C. some of the partners have limited liability D. none of the partners have limited liability 66, Which of the following below is not one of the four major forms of business entities that are discussed in this chapter? A. Sole proprietorship B. Corporation C. Partnership D. Subchapter S corporation 67. Which of the following below is not a characteristic of a Limited Liability Company? A. unlimited life B. limited legal liability C.taxable D, moderate ability to raise capital 68. The operating agreement for a Limited Liability Company is sometimes called: A. articles of organization B. articles of partnership C. Schedule C D. the Uniform Partnership Act 69. When a partnership is formed, assets contributed by the partners should be recorded on the partnership books at their A. book values on the partners’ books prior to their being contributed to the partnership B. fair market value at the time of the contribution original costs to the partner contributing them D. assessed values for property purposes70. As part of the initial investment, a partner contributes equipment that had originally cost $125,000 and on which accumulated depreciation of $100,000 has been recorded. If similar equipment would cost $150,000 to replace and the partners agree on a valuation of $38,000 for the contributed equipment, what amount should be debited to the equipment account? A. $38,000 B. $150,000 C. $125,000 D. $100,000 71. As part of the initial investment, Omar contributes accounts receivable that had a balance of $22,500 in the accounts of a sole proprietorship. Of this amount, $2,000 is completely worthless. For the remaining accounts, the partnership will establish a provision for possible future uncollectible accounts of $1,500. ‘The amount debited to Accounts Receivable for the new partnership is A. $19,000 B, $22,500 C. $21,000 D. $20,500 72. Radley and Smithers share income and losses in a 2:1 ratio after allowing for salaries to Radley of $48,000 and $60,000 to Smithers. Net income for the partnership is $96,000. Income should be divided as follows: A, Radley, $48,000; Smithers, $48,000 B. Radley, $56,000; Smithers, $40,000 C. Radley, $64,000; Smithers, $32,000 D. Radley, $40,000; Smithers, $56,000 73. Franco and Elisa share income equally. During the current year the partnership net income was $40,000, Franco made withdrawals of $12,000 and Blisa made withdrawals of $17,000. At the beginning of the year, the capital account balances were: Franco capital, $40,000; Elisa capital, $58,000. Franco's capital account balance at the end of the year is A. $74,500 C. $60,000 D. $48,000 74, Franco and Blisa share income equally. During the current year the partnership net income was $40,000. Franco made withdrawals of $12,000 and Elisa made withdrawals of $17,000. At the beginning of the year, the capital account balances were: Franco capital, $42,000; Elisa capital, $58,000. Elisa’s capital account balance at the end of the year is A. $81,000 B. $50,000 ©. $61,000 D. $95,00075, Partnership income and losses are usually divided on the basis of interest, salaries, and stated ratios because A. partners seldom contribute time and resources equally B. this method reflects the amount of time devoted to the partnership by the partners C. itis simpler than following the legal rules D. it prevents arguments among the partners 76, A ratio of 3:2:1 is the same as A, 30%:20%:10% B, 3/6:216:1/6 C. 3/10:2/10:1/20 D. None of these 77. Compton and Danson form a partnership in which Compton contributes $70,000 in assets and agrees to devote half time to the partnership. Danson contributed $50,000 in assets and agrees to devote full time to the partnership. If no additional information is available, how will Compton and Danson share in the division of income? A. 5:7 B.1:2 Li D.5:2 78. Xavier and Yolonda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 15%, salary allowances of $22,000 and $20,000 respectively, and the remainder equally. How much of the net income of $90,000 is allocated to Xavier? A, $30,250 B. $47,750 C. $45,000 D. $42,250 79. Xavier and Yolonda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net income of $40,000 is allocated to Xavier? A. $20,000 B. $22,000 C. $32,000 D. $080. Xavier and Yolonda have original investments of $50,000 and $100,000 respectively in a partnership. ‘The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net loss of $6,000 is allocated to Xavier? A. $4,000 B. $1,000 $3,000 D. $6,000 81. If there is no written agreement as to the way income will be divided among partners A. they will share income and losses equally BB. they will share income and losses according to their capital balances C. they will share income and losses according to the time devoted to the business. D. there really is no partnership agreement 82. Partner A has a capital balance of $40,000 and devotes full time to the partnership. Partner B has a capital balance of $50,000 and devotes half time to the partnership, If no other information is available regarding distributions, in what ratio is net income to be divided? A45 B.:l C834 DA 83. Details of the division of net income for a partnership should be disclosed A. in the asset section of the balance sheet B. in the partners’ subsidiary ledger C. in the statement of cash flows D. in the partnership income statement 84. Pia and Ramona are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000 respectively. Income Summary has a ctedit balance of $40,000. What is Pia’s capital balance after closing Income Summary to Capital? A. $70,000 B.S114,000 C. $110,000 D. $74,00085, Pia and Ramona are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000 respectively. Income Summary has a ctedit balance of $40,000. What is Ramona’s capital balance after closing Income Summary to Capital? A. $110,000 B. $146,000 C. $106,000 D, $150,000 86. Use the following information to answer the following questions. Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $7,500 and a fair market value of $20,000, Marta will invest a building with a book value of $40,000 and a fair market value of $58,000. ‘What amount will be recorded to the building account? A. $28,000 B. $18,000 C. $40,000 D. $58,000 87. Use the following information to answer the following questions. Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $7,500 and a fair market value of $20,000, Marta will invest a building with a book value of $40,000 and a fair market value of $58,000. ‘What amount will be recorded to Izabelle’s capital account? A. $20,000 B. $7,500 C. $27,500 D. $12,500 88. Use the following information to answer the following questions. Tzabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $7,500 and a fair market value of $20,000. Marta will invest a building with a book value of $40,000 and a fair market value of $58,000. What amount will be recorded to Marta’s capital account ? A. $18,000 B. $20,000 C. $40,000 D. $58,00089, Robert Johnson contributed equipment, inventory, and $42,000 cash to the partnership. ‘The equipment had a book value of $25,000 and market value of $28,000. ‘The inventory has a book value of $50,000, but only had a market value of $15,000 due to obsolescence. The partnership also assumed a $12,000 note payable owed by Robert that was originally used to purchase the equipment. What amount should Robert's capital account be recorded? A. $85,000 B. $73,000 C. $117,000 D. $105,000 90, Henry Jones contributed equipment, inventory, and $44,000 cash to the partnership. The equipment had a book value of $35,000 and market value of $28,000. The inventory has a book value of $25,000, but only had a market value of $12,000, due to obsolescence. The partnership also assumed a $15,000 note payable owed by Henry that was originally used to purchase the equipment. ‘What amount should Henry's capital account be recorded? A. $104,000 8. $89,000 C. $69,000 D. $84,000 91. Ofelia and Teresa share income and losses in a 2:1 ratio after allowing for salaries to Ofelia of $48,000 and $60,000 to Teresa. Net income for the partnership is $132,000. Income should be divided as follows A, Ofelia, $56,000; Teresa, $76,000 B, Ofelia, $60,000; Teresa, $72,000 C. Ofelia, $72,000; Teresa, $60,000 D. Ofelia, $64,000; Teresa, $68,000 92. Carla and Eliza share income equally. During the current year the partnership net income was $40,000, Carla made withdrawals of $12,000 and Eliza made withdrawals of $17,000. At the beginning of the year, the capital account balances were: Carla capital, $42,000; Eliza capital, $55,000. Eliza's capital account balance at the end of the year is A. $52,000 B. $58,000 C. $82,000 D. $75,00093, Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 20%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net income of $91,000 is allocated to Yolanda? A. $26,500 B. $46,000 C. $45,000 D. $45,500 94, Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 20%, salary allowances of $34,000 and $26,000 respectively, and the remainder equally. How much of the net income of $100,000 is allocated to Yolanda? A. $49,000 B. $51,000 C. $50,000 D. $56,000 95. Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 20%, salary allowances of $34,000 and $26,000 respectively, and the remainder equally. How much of the net income of $100,000 is allocated to Xavier? A. $49,000 B. $51,000 C. $50,000 D. $56,000 96. Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $38,000 and $28,000 respectively, and the remainder equally. How much of the net income of $75,000 is allocated to Yolanda? A. $66,000 B. $40,000 C. $35,000 D. $43,00097. Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $38,000 and $28,000 respectively, and the remainder equally. How much of the net income of $75,000 is allocated to Xavier? A. $66,000 B. $40,000 C. $35,000 D. $43,000 98. Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net loss of $6,000 is allocated to Yolanda? A. $1,000 B. $3,000 C. $5,000 D. $0 99. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $40,000 and $60,000 respectively. Income Summary has a credit balance of $20,000. What is Tomas's capital balance after closing Income Summary to Capital? A. $45,000 B. $55,000 C. $65,000 D. $75,000 100. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $80,000 and $120,000 respectively. Income Summary has a credit balance of $30,000. What is Tomas’ capital balance after closing Income Summary to Capital? A. $102,500 B. $22,500 C. $57,500 D. $127,500 101. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $80,000 and $120,000 respectively. Income Summary has a credit balance of $30,000. What is Saturn's capital balance after closing Income Summary to Capital? A. $102,500 B. $120,000 C. $112,500 D. $127,500102. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $40,000 and $60,000 respectively. Income Summary has a credit balance of $20,000. What is Saturn's capital balance after closing Income Summary to Capital? A. $55,000 B. $75,000 C. $45,000 D. $65,000 103. Franco and Jason share income and losses in a 2:1 ratio after allowing for salaries to Franco of $15,000 and $30,000 to Jason. If the partnership suffers a $15,000 loss, by how much would Jason’s capital account increase? A. $10,000 B. $20,000 C. $40,000 1D. $25,000 104, Lambert invests $20,000 for a 1/3 interest in a partnership in which the other partners have capital totaling $34,000 before admitting Lambert. After distribution of the bonus, what is Lambert's capital? ‘A. $18,000 B. $20,000 C. $6,667 D, $11,333 105. Douglas pays Selena $45,000 for her 30% interest in a partnership with total net assets of $125,000. Following this transaction, Douglas’ capital account should have a credit balance of A. $37,500 B. $45,000 C. $13,500 D. mote than $45,000 106. Nick is admitted to an existing partnership by investing cash. Nick agrees to pay a bonus for his ‘ownership interest because of the past success of the partnership. When Nick’s investment in the partnership is recorded A. his capital account will be credited for more than the cash he invested B. his capital account will be credited for the amount of cash he invested C. a bonus will be credited for the amount of cash he invested D. a bonus will be distributed to the old partners’ capital accounts,107. Bobbi and Stuart are partners. ‘The partnership capital of Bobbi is $40,000 and Stuart is $70,000. Bobbi sells his interest in the partnership to John for $50,000. The journal entry to record the admission of John as a new partner would include A, a credit to John’s capital for $40,000 B. a credit to Stuart's capital for $10,000 C. acredit John's capital for $50,000 D. a ctedit to John’s capital for $40,000 and a credit to Stuart's capital for $10,000 108. When a partner dies, the capital account balances of the remaining partners A. will increase B. will decrease C. will remain the same D. may increase, decrease, or remain the same 109. A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm, As a results of this transaction, the capital account balance of the other partners in the partnership A. will increase B. will decrease C. will remain the same D, may increase, decrease, or remain the same 110. Samuel and Darei are partners. ‘The partnership capital for Samuel is $50,000 and for Darci is $60,000. Josh is admitted as a new partner by investing $50,000 cash. Josh is given a 20% interest in return for his investment. The amount of the bonus to the old partners is, A.$0 B. $18,000 C. $8,000 D. $10,000 ILL. Abby and Bailey are partners who share income in the ratio of 2:1 and have capital balances of $60,000 and $30,000 respectively. With the consent of Bailey, Sandra buys one half of Abby's interest for $35,000, For what amount will Abby's capital account be debited to record admission of Sandra to the partnership? A. $40,000 B. $15,000 C. $35,000 D. $30,000112. A new partner may be admitted to a partnership by A. inheriting a partnership interest B. contributing assets to the partnership C. purchasing a specific quantity of assets from the partnership D. a written approval under the federal law 113. A change in the ownership of a partnership results in the A. consolidating of the partnership B. liquidating of the partnership C. realization of the partnership D. dissolution of the partnership 114, When a new partner is admitted to a partnership, there should be a(n) A. revaluation of assets B. realization of assets C. allocation of assets D. return of assets 115. When a new partner is admitted to a partnership, there should be a(n) A. increase in the total assets of the partnership. B. new capital account added to the ledger for the new partner. C. inerease in the total owner's equity of the partnership. D, debit amount to the partner's capital account for the cash received by the current partner. 116. When an additional partner is admitted to a partnership by contribution of assets to the partnership A. the total assets of the partnership do not change B. no liabilities can be contributed at the same time C. the amount of the cash contribution is the same as the amount of the debit to the new partner's capital account D. the total of the owner's equity accounts increases 117. When a new partner is admitted to a partnership, A. a bonus may be attributable to the old partner B. a bonus may only result from more cash being given by the new partner than the value of the of the assets being purchased C. a bonus agreed upon by the partners is recorded as an asset so long as the amount is within the range set by the SEC D. a bonus is not recorded118. The Calvin-Dogwood Partnership owns inventory that was purchased for $90,000, has a current replacement cost of $85,900, and is priced to sell for $125,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted? A. $129,100 B. $85,900 C. $90,000 D. $125,000 119. Immediately prior to the admission of Abbott, the Smith-Jones Partnership assets had been adjusted to current market prices, and the capital balances of Smith and Jones were $40,000 and $60,000 respectively. IF the parties agree that the business is worth $120,000, what is the amount of bonus that should be recognized in the accounts at the admission of Abbott? A $60,000 B, $80,000 ©. $40,000 D. $20,000 120, Benson and Orton are partners who share income in the ratio of 2:3 and have capital balances of $60,000 and $40,000 respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Benson's capital balance after admitting Ramsey? A. $20,000 B. $24,000 C. $48,800 D. $71,200 121, Benson and Orton are partners who share income in the ratio of 2:3 and have capital balances of $60,000 and $40,000 respectively, Ramsey is admitted to the partnership and is given a 10% interest by investing $20,000. What is Orton's capital balance after admitting Ramsey? A. $44,800 B. $35,200 C. $20,000 D. $16,000 122. Benton and Orton are partners who share income in the ratio of 1:3 and have capital balances of $70,000 and $30,000 respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Benton's capital balance after admitting Ramsey? A. $20,000 B. $7,000 C. $70,000 D. $63,000123. Benson and Orton are partners who share income in the ratio of 1:3 and have capital balances of $70,000 and $30,000 respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Orton's capital balance after admitting Ramsey” A. $20,000 B. $9,000 C. $70,000 D, $63,000 124. Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann’ was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will Singer's share of the income be if the income for the year was $50,000? A. $24,000 B. $22,000 C. $16,000 D, $23,400 125. Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann’'s was, $60,000. They agree to salaties of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will McMann‘s share of the income be if the income for the year was $30,000? A. $20,000 B. $18,000 C. $18,600 D. $17,400 126, Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann’s was, $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will Singer's share of the income (loss) be if the net loss for the year was $10,000? A. ($12,600) B. ($14,000) ($6,000) D. ($10,000)127. Singer and McMann are partners in a business, Singer’s original capital was $40,000 and McMann’ s was $60,000, They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will Singer's share of the income be if the income for the year was $15,000? A. $9,000 B. $2,400 C.$1,000 D. $5,600 128. Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann’ s was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will McMann's share of the income be if the income for the year was $15,000? A. $6,000 B. $9,400 C. $12,600 D. $14,000 129. Alpha and Beta are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $50,000. What amount of loss on realization should be allocated to Alpha? A. $60,000 B. $20,000 C. $30,000 D, $50,000 130, Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and $50,000 respectively. They share income in the ratio of 3:2:1. Income Summary with a debit balance of $30,000 is closed to the capital accounts. Doug withdraws from the partnership. How much cash does he get upon withdrawal? A. $30,000 B. $20,000 $40,000 D. $24,000 131. A partnership liquidation occurs when A. anew partner is admitted B. a partner dies C. the ownership interest of one partner is sold to a new partner D. the assets are sold, liabilities paid, and business operations terminated132. The balance sheet of Morgan and Rockwell was as follows immediately prior to the partnership's being liguidated: cash, $20,000; other assets, $160,000; liabilities, $40,000; Morgan capital, $60,000; Rockwell capital, $80,000. The other assets were sold for $139,000. Morgan and Rockwell share profits and losses in a 2:1 ratio. As a final cash distribution from the liquidation, Morgan will receive cash totaling A. $46,000 B. $51,000 C. $60,000 D. $49,500 133, Harriet, Mickey, and Zack decide to liquidate their partnership. All assets are sold and the liabilities are paid, Following these transactions, the capital balances and profit and loss percentages are as follows: Harriet, $27,000 and 30%; Mickey, $(12,000) and 40%; Zack, $43,000 and 30%. Mickey is unable (o contribute any assets to reduce the deficit. How much cash will Harriet receive as a results of the partnership liquidation? A. $27,000 B. $21,000 C. $23,400 D. $15,000 134. The remaining cash of a partnership (after creditors have been paid) upon liquidation is divided among partners according to their A. capital balances B. contribution of assets C. drawing balances D. income sharing ratio 135. A gain or loss on realization is divided among partners according to their A. income sharing ratio capital balances C. drawing balances D. contribution of assets 136. Adriana and Belen are partners who share income in the ratio of 3:2 and have capital balances of $50,000 and $90,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $90,000. How much cash should be distributed to Adriana? A. $50,000 B. $20,000 C. $30,000 D. $45,000137, Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and Ramona, $30,000 Cr. How much cash is available for distribution to the partners? A. $120,000 B. $30,000 C. $40,000 D. $90,000, 138. Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and Ramona, $30,000 Cr. How much cash should be distributed to Everett assuming that Miguel pays the deficiency? A. $50,000 B. $20,000 C. $30,000 D. $40,000 139. Antonio and Barbara are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $80,000, What amount of loss on realization should be allocated to Barbara? A. $80,000 B. $10,000 €.$20,000 1D. $30,000 140. Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $130,000. What amount of loss on realization should be allocated to Soledad? A. $60,000 B, $27,500 C. $92,500141, Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $130,000. What amount of loss on realization should be allocated to Winston? A. $110,000 8. $97,500 C. $42,500 D. $82,500 142. Partners Ken and Macki each have a $40,000 capital balance and share income and losses in a 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $80,000, the Macki’s capital account will A. decrease by $16,000. B, decrease by $24,000. C. increase by $24,000. D, decrease by $40,000. 143, Partners Ken and Macki each have a $40,000 capital balance and share income and losses in a 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $50,000, and each partner is personally insolvent, Partner Macki will eventually receive cash of A. $0. B. $10,000. $12,000. 1D, $20,000. 144, Partners Ken and Macki each have a $40,000 capital balance and share income and losses in a 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $60,000, and both partners agree to make up an capital deficits with personal cash contributions, Partner Macki will eventually receive cash of A. $0. 8. $4,000, C. $16,000. D. $24,000.145. The capital accounts of Harrison and Marti have balances of $160,000 and $110,000, respectively, on January 1, 2014, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year ‘was $264,000. The atticles of partnership make no reference to the division of net income. Based on this information, the statement of partners’ equity for 2014 would show what amount in the capital account for Marti on December 31, 20147 A. $216,000 B. $164,000 C. $380,000 D. $52,000 146. The capital accounts of Harrison and Marti have balances of $160,000 and $110,000, respectively, on January 1, 2014, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year ‘was $264,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners’ equity for 2014 would show what amount in the capital account for Harrison on December 31, 20147 A. $216,000 B. $164,000 C. $380,000 1, $52,000 147. The capital accounts of Harrison and Marti have balances of $160,000 and $110,000, respectively, on January 1, 2014, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year was $264,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners’ equity for 2010 would show what amount as total capital for the partnership on December 31, 2010? A. $228,000 B, $176,000 C. $404,000 D. $752,000148. The capital accounts of Hawk and Martin have balances of $160,000 and $140,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income for the year ‘was $258,000. The atticles of partnership make no reference to the division of net income. Based on this information, the statement of partners’ equity for 2010 would show what amount in the capital account for Martin on December 31, 20107 A. $173,000 B. $211,000 C.$201,000 D. $232,000 149. The capital accounts of Hawk and Martin have balances of $160,000 and $140,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income for the year ‘was $258,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners’ equity for 2010 would show what amount in the capital account for Hawk on December 31, 2010? A. $211,600 B. $213,000 C. $201,000 1D, $203,000 150. The capital accounts of Hawk and Martin have balances of $160,000 and $140,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income for the year was $258,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners’ equity for 2010 would show what amount as total capital for the partnership on December 31, 2010? A. $384,600 B. $412,600 C. $404,000 D. $414,000 151. Immediately prior to the admission of Allen, the Sanson-Jeremy Partnership assets had been adjusted to current market prices, and the capital balances of Sanson and Jeremy were $80,000 and $120,000 respectively. If the parties agree that the business is worth $240,000, what is the amount of bonus that should be recognized in the accounts at the admission of Allen? A. $60,000 B. $80,000 €. $40,000 D. $100,000152. The Craig-Doran Partnership owns inventory that was purchased for $85,000, has a current replacement cost of $54,500, and is priced to sell for $98,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted? A. $98,000 B. $54,500 C. $85,000 D. $79,167 153. Paul and Roger are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000 respectively. Income Summary has a ctedit balance of $50,000. What is Roger's capital balance after closing Income Summary to Capital? A. $155,000 B. $150,000 $110,000 D, $115,000 154, Paul and Roger are partners who share income in the ratio of 3:2. ‘Their capital balances are $90,000 and $130,000 respectively. Income Summary has a credit balance of $50,000. What is Paul’s capital balance after closing Income Summary to Capital? A. $108,000 B. $120,000 $115,000 D. $180,000 155, Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income when there is no reference to division in partership agreement. A. $75,000 and $75,000 B. $37,500 and $112,500 C. $100,000 and $50,000 D. $112,500 and $37,500 156, Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income in ratio of capital balances. A. $75,000 and $75,000 B. $37,500 and $112,500 C. $100,000 and $50,000 ‘D. $50,000 and $100,000157. Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income in ratio of time devoted to business. A. $75,000 and $75,000 B. $37,500 and $112,500 C. $100,000 and $50,000 D. $112,500 and $37,500 158. Aaron and Kim form a partnership by combining the assets of their separate businesses. Aaron contributes accounts receivable with a face amount of $50,000 and equipment with a cost of $180,000 and accumulated depreciation of $100,000. ‘The partners agree that the equipment is to be priced at $68,000, that $3,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $2,000 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Kim contributes cash of $21,000 and merchandise inventory of $44,500. The partners agree that the merchandise inventory is to be priced at $48,000. Journalize the entries to record in the partnership accounts (a) Aaron's investment and (b) Kim's investment. (2) Accounts Receivable 46,500 Equipment 68,000 Allowanee for Doubsful Accounts 2,000 Aaron, Capital 112,500 ©) Cash 21,000 Mecchandite Inventory 48,000 Kim, Capital 69,000 159. Barton and Fallows form a partnership by combining the assets of their separate businesses. Barton contributes accounts receivable with a face amount of $50,000 and equipment with a cost of $190,000 and accumulated depreciation of $100,000. ‘The partners agree that the equipment is to be priced at $85,000, that $3,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $1,500 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Fallows contributes cash of $28,500 and merchandise inventory of $55,500. The partners agree that the merchandise inventory is to be priced at $60,000, Journalize the entries to record in the partnership accounts (a) Barton’s investment and (b) Fallows’ investment. (2) Accounts Receivable 46,500 Equipment 85,000 ‘Allowance for Doubtful Accounts 1,500 Barton, Capital 130,000 Cah 28.500 Merchandise Inventory 60,000 Fallows, Capital 88,500160. Trevor Smith contributed equipment, inventory, and $54,000 cash to a partnership, The equipment had a book value of $30,000 and a market value of $36,000. The inventory had a book value of $60,000, but only had a market value of $20,000, due to obsolescence, The partnership also assumed a $17,000 note payable ‘owed by Smith that was used originally to purchase the equipment. Provide the journal entry for Smith’s contribution to the partnership. cash 54,000 Inventory 20,000 guipment 36,000 Notes Payable 110 0 ‘Trevor Smith, Capital 930 0 161. Emerson and Dakota formed a partnership dividing income as follows: 1. Annual salary allowance to Emerson of $48,000 2. Interest of 8% on each partner's capital balance on January 1 3. Any remaining net income divided equally. Emerson and Dakota had $25,000 and $140,000 respectively in their January 1 capital balances, Net income for the year was $220,000, How much net income should be distributed to Emerson? Salary Interest (8% ° $25,000) Remaining income Total distibution to Emerson ($220,000 - 48,000 -$2,000 -$11,200) °sost = $79,400162. Emerson and Dakota formed a partnership dividing income as follows 1. Annual salary allowance to Emerson of $58,000 2. Interest of 8% on each partner’s capital balance on January 1 Any remaining net income divided equally. Emerson and Dakota had $25,000 and $140,000 respectively in their January | capital balances. New income for the year was $220,000. How much net income should be distributed to Dakota? Salary 0 Interest (8% $140,000) 11,200 Remaining income 74.400" ‘Total diswibution to Emerson 385,600 "($220,000 - $58,000 -$2,000 -$11,200) °so%% = $74,400 163. Gavin invested $45,000 in the Jason and Kelly partnership for ownership equity of $45,000. Prior to the investment land was revalued to a market value of $320,000 from a book value of $200,000. Jason and Kelly share net income in a 1:2 ratio. a, Provide the journal entry for the revaluation of land b. Provide the journal entry to admit Gavin. a Land 120, 00 aso, 400 Capital 0 Kelly, 800 Capital 0 b Cash 45.000 Gavia, 445,000 Capital164, Malcolm has a capital balance of $90,000 after adjusting to fair market value, Celeste contributes $45,000 to receive a 25% interest in a new partnership with Malcolm. Determine the amount and recipient of the partner bonus Equity of Malcom $90,000 Celeste's contribution 45,000 “Total equity after admitting Celeste 5135,000 CColeste's equity interest 2564 CCeleste's equity alter admission sae Celeste's contribution $45,000 CCeleste's equity alter admission 33,750 Bonus paid to Malcolm Ei3s0 165. Prior to liquidating their partnership, Craig and Jenny had capital accounts of $70,000 and $110,000, respectively. The partnership assets were sold for $285,000. The partnership had $25,000 of liabilities. Craig and Jenny share income and losses equally. Determine the amount received by Jenny as a final distribution from liquidation of the partnership. jenny ¥ equity prior to iqundaton [Realization of aset sales 15285,000, Book value of asets ($180,000 + $25,000) 205.000 (Gain on iquidation IS 80,000, jenny's shave of gain (OW $80,000) Denny's cath distribution166. The capital accounts of Hogan and Moss have balances of $90,000 and $65,000, respectively on January 1, 2011, the beginning of the current fiscal year. On April 10, Hogan invested an additional $8,000. During the year, Hogan and Moss withdrew $40,000 and $32,000, respectively, and net income for the year was $98,000. The articles of partnership make no reference to the division of net income. Required: )—— Tournalize the entries wo: a Close the income suramary aeeoun ». Close the drawing accounts, 2) Prepare a of partners equity for 2011 for the partners pof Hogan and Moss. (2) Incom98,000 mary Hogan, Capital 49,000 ‘Moss, Capital 9,000 (©) Hoga 40,000 Capit Moss, 3.000 Capit Hogaa, Drawing 40,000 Moss, Drawing 32,000 @ Hogan and Moss Statement of Parners’ Equity Forthe Year Ended December 31, 201Capital, January 1, 2011 $155,000 ‘Additional investoent during the year s.000 163.000 [Net income for the year 98,000 3361,000 ‘Withdrawals during the year 72.000 Capital, December 31, 2011 ‘3iss,000 167. Hamir, Darci, and Pete are partners sharing income 3:2:1, respectively. After the firm’s loss from liguidation is distributed, the capital account balances were: Hamir, $45,000 Dr.; Darci, $90,000 Cr., and Pete, $64,000 Cr. If Hamir is personally bankrupt and unable to pay any of the $45,000, what will be the amount of cash received by Darci and Pete upon liquidation? Show your work. amie ach ee ‘pial balances er realization 45,000) 90,000 5,000 [Distibation of partner deficiene r 0,000) [as.0007" (Capital balances after deticieney ditibution 30. 60,000 fs49,000, 345,000 “26 2845,000 “183168. S. Stephens and J. Perez are partners in Space Designs. Stephens and Perez share income equally. D. Fredricks will be admitted to the partnership. Prior to the admission, equipment was revalued downward by $8,000. The capital balances of each partner are $100,000 and $139,000, respectively, prior to the revaluation. Required: (Provide the journal entry for the asset 2) Provide the journal entry for Fredrick Sade under the followin z indepen dent Fredricks purchased a 20% intrest for $50,000. b. Fredricks purchased a 30% interest for $125,000.a, @, S400 Stephens0 » Capital 5. Perez, 4,00 Capital 0 Equi8,00 pmed @ Cas 500 hb 00 S. 3.10 Step0 hens ‘Supporting calculations forthe bonus: Ecuity of S. Stephens Equity of J. Perez Contribution by D. Fredricks ‘Total equity aller admitting D. Fredricks D. Fredricks” equity interest after admission D, Fredricks’ equity after admission Contribution by D. Fredricks Bonus paid to D. Fredricks’ ‘The bonus to Fredricks is debited equally between Stephens” and Perez's capital, accounts $96,000 135,000 50,000 ‘$281,000 20% $36,200 50,000 56200©) Cas 1250 bh 00 S. 9,100 Steph Capit al 1. 9,100 Peres, Capit al D. 106,800 Fredti ks, Capit a Suppor ting caleula for the bonus Fquis96,0 ty 0f00 s Step hens Eguil35,0 ty 0f00 1 Hare_30 iss & eau inter ater admHare$106, is's 800 y aller Con $125; ‘eibuo00 by D. Fred rick Har106.8 ies OD y alee Bon $182 wus 00 paid toS Step and 1 Pere The Sip aad Pee feed fea iy Step and Pere ul169. After the tangible assets have been adjusted to current market prices, the capital accounts of Harper and Kablil have balances of $60,000 and $90,000, respectively. Fay is to be admitted to the partnership, contributing $45,000 cash, for which she is to receive an ownership equity of $60,000. All partners share equally in income. Required: (1) Journalize the entry to record the admission of Fay, who is to receive a bonus of $15,000. (2) What are the capital balances of each partner after the admission of the new partner? aw @ Cash 45,000 Harp 7,500, Capit al Kahli7.500 1 Capit a Pay, 60,000 Capit al Harp $2,500 Kabli82,500 1 Fay 60,000 170. The partnership of Abraham Associates began operations on January 1, 2010, with contributions from two partners as follows: Vavedley 35,000 argue 0.000) “The following additional pariner transactions took place during the yest a @ eo In early January, Houston is admitted to the partnership by contributing $25,000 cash for a 25% interes. Netincome of $160,000 was earned in 2010. In addition, Waverley received a salary allowance of $30,000 for the year. The three partners agree to an income-sharing ratio equal to their capital balances after admitting Houston, ‘The partners’ withdrawals are equal to half of their espective distributions of income afer salary (Le. hal thei respective portions of the $130,000),Required Prepare a statement of partnership equity forthe year ended December 31, 2010. ABRAHAM ASSOCIATES Statement of Partnership Equity For the Year Ended December 31, 2010 javerley, Capital [Marquez, Capital ouston, Capital ]lotal Partnership Icapital aripeship capital, anuary 1, 2010 [595,000 (520-000, [s75.000, diission of Houston : [- 5000 s.000 [Salary allowance’ [0,000 50.000 Iemaining income 5.500. 15,000 [32.500 130,000 Less: Partner withdrawal 22.750), 126,000) 15.250) 165.000) artsership capital, December 31, 87,150 66,000 Igsi.250 fs195,000 bio. Admission of Houston: Equity of inital partners prior to admission Contribution by Houston Total Houston's equity interest after admission Houston's equity after admission Contribution by Houston No bonus [Net income distribution ‘The income-sharing ratio is equal tothe proportion ofthe capital balances after admitting Houston according tothe partership agreement $35,000 / $100,000 = 35% ‘Marquez: $40,000 / 100.000 = 40% Houston: $25,000 / 100,000 = 255 ‘These ratios can be multiplied by the $130,000 remaining income ($160,000 ~ $30,000 salary allowance to Waverley) to distribute the earnings to the respective pariner capital accounts, Withdrawale Half ofthe remaining income is distributed to the three pariners. Waverley need not take the salary allowance asa withdrawal but may allow itto accumulate in the member equity account171, The capital accounts of Hope and Indiana have balances of $115,000 and $95,000, respectively. Clint and Casey are to be admitted to the partnership. Clint buys one-fifth of Hope's interest for $30,000 and one-fourth of Indiana’s interest for $20,000. Casey contributes $45,000 cash to the partnership, for which he is to receive an ownership equity of $45,000. Required: (1) Journalize the entries to record the admission of (a) Clint and (b) Casey. (2) What are the capital balances of each partner after the admission of the new partners? we Hope, 23 Capit 00 ao 20% sus, 000), India 23, na, 75 Capit 0 a (25% $950 00) Clin, 46,750 Capit al o ash 45, 0 0 Casey 45,000 Capit a @ Hope 92, 9 0 India 71 na 25 0 Clint 46 15 0 Casey $5, 00 0172. Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in the year’s net income of $200,000 under each of the following independent assumptions: @ No agreement concerning division of nt income: © Divided inthe ratio of original capital investment © Taterest a the rate of 15% allowed on original investments and the remainder divided in the ratio of 2:3 @ Salary allowances of $50,000 and $70,000, respectively, and the balance divided equally ©) Allowance of interest a the rate of 15% on original investments, salary allowances of $50,000 and $70,000, respectively, and the remainder divided equally. Fil cake [Fava fa_Netincome (hi) 100,000 100,000 [5200.00 Netincome (3:1) 150,000 550,000 $200,000. Tnterest allowance + Remaining income [36,000 + $60,500 12,000-F $91 200= ST05,200 fS48,000 + $157,000 = $200,000 ka.) = Net Income 96,800 [i Salary allowance + Remaining income ki) = Net ine 50,000 + $40,000 = 590,000 70000 + $40,000 = $110,000 IS130,000 + $80,000 = SDOOLD00 Interest allowance + Salary allowance + WRemaining income (1:1) = Net Income 36,000 + $50,000 > 16,000 = $102,000, 12,000 + $70,000 + S16 000 = 598,000 [548,000 + $120,000 + $32,000 | 200,000 173. Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in the year's net income of $380,000 under each of the following independent assumptions: @ No agreement concerning division of net income; ©) Divided in the ratio of original capital investment © Interest atthe rate of 15% allowed on original investments and the remainder divided in the ratio of 2:3 @ Salary allowances of $50,000 and $70,000, respectively, and the balance divided equally © Allowance of interest tthe rate of 15% on original investasens, salary allowances of $50,000 and $70,000, respectively, andthe remainder divided equally ial ae Fou ka Net income (i) 190,000 [5190,000, fs300,000 Nevincome G:1) 285.000 [395.000 f3390,000 Tnterest allowance + Remaining income k2:3) = Net Income 36,000 + $132,800 = 168,800 fs12,000 + $199,300 = 211,200 fs 48,000 + $332,000 = S380 000 Salary allowance + Remaining income Net Income 50,000 + $130 000 180,000 [570,000 + $150,000 = $200,000 [5120,000 + $260,000 = $380.00 Interest allowance + Salary allowance + Hemaining income (1:1) = Net Income 36,000 + $50,000 > 106,000 = $192,000 [512,000 + $70,000 + $106,000 = fs188,000 [548,000 + $120,000 + $212,000 $380,000174, Benson contributed land, inventory, and $22,000 cash to a partnership. The land had a book value of $65,000 and a market value of $111,000. The inventory had a book value of $60,000 and a market value of $58,000. The partnership also assumed a $52,000 note payable owned by Benson that was used originally to purchase the land. Required: Provide the journal entry for Benson's contribution to the partnership. ash 22,000 Inven 58,000 tory Land 111,000 Notes Payable 52,000 Benson, Capital 139,000 175. Prior to liquidating their partnership, Porter and Robert had capital accounts of $160,000 and $100,000 respectively. Prior to liquidation, the partnership had no cash assets other than what was realized from the sale of the partnership assets, These partnership assets were sold for $250,000. The partnership had $10,000 of liabilities. Porter and Robert share income and losses equally. Required: Determine the amount received by Porter as a final distribution from liquidation of the partnership. Porter's equity prior to liquidation $160,000 Realization of aset sales $250,000 Book value of assets ($160,000 + $100,000 + $10,000) 270.000 Loss oa liquidation $20,000 Porter's share of loss (50% “ $20,000) 10,000) Porter's cath distibution $150,000176. Prior to liquidating their partnership, Samuel and Brian had capital accounts of $60,000 and $240,000, respectively. The partnership assets were sold for $120,000. The partnership had no liabilities. Samuel and Brian share income and losses equally. Required: a. Determine the amount of Samuel's deficiency. b, Determine the amount distributed to Brian, assuming Samuel is unable to satisfy the deficiency. a, Samuel’s equity prior to liquidation $ 60,000 Realization of asset sale $ 120,000 Book value of assets ($60,000 + $240,000)........ .....4..- 300,000 Loss on liquidation (S 180,000) Samuel's share of loss (50% “ $180,000). (90,000) Samuel’s deficiency ..... --- $(30,000) 'b, $120,000 = $240,000 - $90,000 share of loss - $30,000 Samuel's deficiency, also equals the amount of cash realized from sale of the partnership assets. 177. Easy Sailing, LLC provides repair services for commercially-owned boats and yachts. The firm has 5 members in the LLC, which did not change between 2011 and 2012. During 2012, the business expanded into three new regions of the country. The following revenue and employee information is provided: pa ia jnues in thousands) 50.685 57.150 [Number of employees 2s, lis Required a For 2011 and 2012, determine the revenue per employee (excluding members) Interpret the tend between the two years a Revenue per employee, 2011: $50,625,000/125 = $405,000 Revenue per employee, 2012: $57,750,000/175 = $330,000 » Revenues increased between the two yeuts; however, the number of employees has increased ata faster rate, Thus, the revenue pet ‘employee declined from $405,000 in 2011 to $330,000 in 2012. This indicates tat the efficiency ofthe fem has declined in the two years. Tis is likely the result ofthe expansion. That is, the large increase in the employment base isthe Likely result ofthe ‘expansion into the thee new regions. These new employees may need tobe trained and thus are not as efficient in their jobs asthe more experienced employees in the existing regions, Often, a business will suffer productivity losses inthe midst of significant ‘expansion because of the inexperience ofthe new employees.178. Gleason invested $90,000 in the James and Kirk partnership for ownership equity of $90,000. Prior to the investment land was revalued to a market value of $425,000 from a book value of $200,000. James and Kirk share net income in a 1:2 ratio. a, Provide the journal entry for the revaluation of land. b. Provide the journal entry (o admit Gleason. a Land 205, 00 James, 150 Capital Co) Kirk, 150, Capital 900 b Cash 90,000 Gleason, 90,000 Capital 179. Top Notch, LLC. provides repair services for oil rigs. The firm has 5 members in the LLC, which did not change between 2011 and 2012. During 2012, the business expanded into three new regions of the country. The following revenue and employee information is provided: DL bors creaues Gn owen) 60.505 58.500 [Number of employees zo hso Required For 2011 and 2012, determine the revenue per employee (excluding members) Interpret the tend between the two years a Revenue per employee, 2011: $60,525,000/120 = $504,375, Revenue per employee, 2012: $58,500,000/160 365,605 » ‘Revenues increased between the two yeats; however, the number of employees has increased ata faster rate. Thus, the revenue pet ‘employee declined from $504,375 in 2011 to $365,625 in 2012. Ths indicates tat the efficiency ofthe fim has declined inthe wo ‘years. This is likely the result of the expansion. That is, the large increas inthe employment bas is the likely result ofthe ‘expansion into the three new regions. These new employees may need tobe trained and thus are not as efficient in their jobs asthe more experienced employees in the existing regions. Often, a business will suffer productivity losses inthe midst of significant ‘expansion because of the inexperience ofthe new employees.180. Match each statement to the item listed below. 1. Simple to form. 2. Place where changes in partner capital accounts for a period of time are reported. 3. A step during liquidation when partnership assets are sold. 4, Where the share of loss on realization is greater than the balance in partner capital. 5. Each partner may act on behalf of the entire partnership so that the liabilities created by one partner become the liabilities of all partners. 6. An association of two or more persons to own and manage a business for profit 7. Used to divide the excess of allowances over loss when net losses occur. 8. The winding up process of a partnership. 181, Match the term with the appropriate definition 1, Without an agreement, the law will stipulate this, method of sharing profits and losses 2. When a partnership cannot pay its debts with business assets, the partners must use personal assets to meet the debt 3. Agreement that is the contract between partners 4. Causes the dissolution of a partnership 5. The final step in the liquidation of a partnership 6, Every partner can bind the business to a contract, within the scope of the partnership's regular business operations 7. A voluntary association of two or more persons who co-own a business for profit 8. The process of going out of business by selling the entity’ s assets and paying its liabilities 182, Gentry, sole proprietor of a hardware business, decides to form a partnership with Noel. accounts are as follows: cash ‘Accounts Receivable (net) Inventory Land Building (neo) ‘Accounts Payable Mortgage Payable statement of partnership equity deficiency mutual agency partnership proprietorship realization income sharing ratio liquidation unlimited liability articles of partnership partnership mutual agency liquidation equally distribution of remaining cash to partners death of a partner S 25,000 45.000 125,000 100,000 3.40,000 25,000 185,000 oe Ia te oo ie liane ie[Noel agrees to contribute $80,000 fora 20% interest. Journalize the entis to record (a) Gentey's investment and (b) Cash ‘Accounts Receivable Tventory Land Building ‘Accounts Payable Mortgage Payable Geaty, Capital ©) Cah Gentey, Capital ‘Noel, Capital 25,000 45,000 125,000 100,000 340,000, 80,000 29,000 Noel's investment 25,000 145,000 495,000 109,000 183. Jeff Layton, sole proprietor of a hardware business, decides to form a partnership with Nicholas Fell. Jeff's accounts are as follows: Book Value cash $30,000 ‘Accounts Receivable (net) 55,000 Inventory 112,000 Land 40,000 Building (net) 00,000 ‘Accounts Payable 25,000 Mortgage Payable 125,000 Market Value S 30,000 145,000 135,000 100,000 $40,000 25,000 125,000 Nicholas agrees to contribute $120,000 for 820% interest. Journalize the entries to record (a) Jet's investment and (b) Nicholas” investment. (a) Cash ‘Accounts Receivable Inventory Land Building ‘Accounts Payable Mortgage Payable elf Layton, Capital Cash Jeff Layton, Capital ‘Nicholas Fell, Cepital 30,000 45,000 135,000, 100,000 540,000 120,000 44,000 25,000 125,000 700,000 164,000184. Sharp and Townson had capital balances of $60,000 and $90,000 respectively at the beginning of the current fiscal year. The articles of partnership provide for salary allowances of $25,000 and $30,000 respectively, an allowance of interest at 12% on the capital balances at the beginning of the year, with the remaining net income divided equally. Net income for the current year was $110,000. (2) Present the income division section of the income statement for the current year {b) Assuming thatthe net income had been $55,000 instead of $110,000, present the income division section ofthe income statement for the current year @ Net income 110,000 Share Towsson Tata) Division of net income: Salary allowance $25,000 $30,000 S 35,000 Interest allowance 7.200 10,800 18,000 Remaining income 1s.s00 18,500 37,000 Net income 350,700 3595300 310,000. © Net income $55,000 Division of net income: Salary allowance $25,000 $30,000 $55,000 Inxerext allowance 7200 18,000 Total 332,200 573,000 xcess of allowances over net income 9,000) 18,000) Net income 323,200 355,000. 185. Sharp and Townson had capital balances of $60,000 and $120,000 respectively on January 1 of the current year. On May 8, Sharp invested an additional $10,000 in the partnership. During the year, Sharp and Townson withdrew $25,000 and $45,000 respectively. After closing all expense and revenue accounts at the end of the year, Income Summary has a credit balance of $90,000, that Sharp and Townson have agreed to split on a 2:1 basis, respectively. (a) Jouralize the entries to close the income summary account and the drawing accounts () Prepare the statement of owner's equity forthe current year.(@) Tome Suramary 90,000 ‘Shatp, Capital ‘Townson, Capital 25,000 45,000 Sharp, Drawing 25,000 ‘Townson, Drawing 45,000 wo) [Sharp and Townson [statement of Owner's Equity Wor Year Ended December 31 ap Frownson Ffoat (Capital Tanvaay 1 IS 60,000 f5120,000. 180.000, ditional investment during the year 10,000) = 10,000 70,000 120,000, 15190.000 [Net income forthe year 0,000 30,000 ‘9.000 130,000 280,000 Vihdvawale during he your 25,000 70,000 (Capital, December 31 705,000 [5210.00 186, .Daja and Whitnee had capital balances of $140,000 and $160,000 respectively at the beginning of the current fiscal year. The articles of partnership provide for salary allowances of $25,000 and $35,000 respectively, an allowance of interest at 12% on the capital balances at the beginning of the year, with the remaining net income divided equally. Net income for the current year was $120,000. (a) Present the income division section of the income statement fr the current year (b) Assuming thatthe net income had been $50,000 instead of $120,000, present the income division section ofthe income statement for the current year, @ Net income $120,000 Daa White Total Division of net income: Salary allowance $25,000 $35,000 $ 60,000 Inxeres allowance 16,800 19.200 36,000 Remaining income 12.000 12.000 Net ineome 353,800 366,200 $120,000 oo Net income $50,000Division of net income: Salary allowance $25,000 $35,000 $60,000 Interest allowance 16.600 19,200 36,000 Total $41,800 354,200, 52,000 Excess of allowances over net income. 23,00) 23,000) 46,00 Net income 318,800 331.200. $50,000 187. Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income under each of the following assumptions: (2) No agreement as to division of net income () __ Inratioof capital balances. (6) Ta zatio of tine devoted o business Jackson Compustions @ $75,000 Tackson: 50% ° $150,000 Campbell: 50% “$150,000 ©) $37,500 112,500 Jackson: 1/4 “$150,000 ‘Campbell: 34 ° $150,000 (© $100,000 $50,000 Jackson: 2/3 “$150,000, Campbell: 1/3 ° $150,000 188. Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $120,000 of net income under each of the following assumptions: (2) No agreement as to division of net income () —__ Inratioof capital balances (6) Taatio of tine devoted o business (@) Interest of 10% on capital balances and remainder equally. fe) Interest of 10% on capital balances, slates of $40,000 to Jackson and $20,000 to Camphell, and the remainder equally@ o © © © Jackson Campbell Computations 360,000 $60,000 Tackson: 505% °$120,000 Campbell: 50% °$120,000 $30,000 90,000 Jackson: 18 $120,000 Campbell: 3/4 “$120,000 80,000 $40,000 Jackson: 2/3 “$120,000 Campbell: 1/3 “$120,000 $50,000 $70,000 Tackson: (103° $100,000) + (1/2 ° $80,000) Campbell: (10% ° $300,000) +1/2°$80,000)} $60,000 $60,000 Tackson: (10% “$100,000 + $40,000 + (1/2 “(20.0009 Campbell: [(10% °$300,00) + $20,000 + (172 “$120,000 189, Derek and Hailey, partners sharing net income in the ratio of 2:1, admit Ben to the partnership in accordance with the following agreement: w 2 a Merchandise inventory recorded in the partnership accounts at $62,500 isto be revalued at its current replacement price of $68,500. Ben sto invest $48,000 in cash fora 30% interest in the partnership, which has total net assets (assets minus Habilties) of $130,000, alter the inventory is tevalued ‘The income-sharing ratio of Derek, Hailey, and Ben isto be 2:1: Required: @ o @ o “Journalize the entries to record the revaluation of merchandise inventory, ad the admission of Ben tothe partnership ‘A few years later, the capital balances of Detek, Hailey, and Ben were $150,000, $90,000, and $55,000 respectively, At tis time ‘Kacy is admitted to the partnership by the purchase of one-half of Derek's interest for $80,000. Journalize the entry to record the sadmission of Kacy tothe partnership, Merchandise Inventory 6,000 Derek. Capital 4,000 Miley, Capital 2,000 Cash 48,000 Derek, Capital 6.000 Hailey, Capital 3,000 Ben, Capital 39,000 Derek, Capital 75,000 Kacy, Capital 75,000190, Kala and Leah, partners in Best Designs, have capital balances of $40,000 and $60,000 respectively. Adam joins the partnership by buying one-half of Kala’s interest for $30,000. In addition, because of Adam’s outstanding sales skills, the partners agree to increase his interest to 40% if he invests another $10,000. The income-sharing ratio of Kala, Leah, and Adam is 4:3:1 (a) Journalize the entries to record the admission of Adam tothe partnership. (b) __Immedistely ater Adam's admission tothe partnership, Leah sells one-fourth of her interest to Denton for $35,000. Journalize the entry to record this transaction (@) Kala, Capital 20,000 ‘Adam, Capital 20,000 Cash 10,000 Kala, Capital 8,000 Leah, Capital 6,000 ‘Adam, Capital 24,000 (b) Leah, Capital, 13,500 Denton, Capital 13,500 191, Immediately prior to the process of liquidation, partners Micco, Niccum, and Orwell have capital balances of $70,000, $20,000, and $30,000 respectively. There is a cash balance of $10,000, noncash assets total $160,000, and liabilities total $50,000. The partners share net income and losses in the ratio of 2:2:1. Journalize the entries to record the liquidation outlined below, using Assets as the account title for the noneash assets and Liabilities as the account title for all creditors’ claims, (a) Sold the noncash asses for $80,000 in ash, (©) Divided the loss on realization. (©) Paid the Liabilities (@) Received eash from the partner withthe deficiency fe) Distributed the cash to the parters@) Cash 80,000 [Loss on Realization 80,000 ‘Assets 160,000 () Mieco, Capita 32,000 Niceur, Capital 32,000 Orwell, Capital 16.000 Loss on Realization 80,000 (©) Liabilities 0,000 Cash 50,000 Cash 12,000 ‘Niceum, Capita 12.000 (©) Miceo, Capita 38,000 Oxwell, Capital 14.000 Cash 52,000 192, After discontinuing the ordinary business operations and closing the accounts on May 7, the ledger of the partnership of Anna, Brian, and Cole indicated the following: cash $7500 Noncash Assets 105,000 Liabilities $ 27500 ‘Anna, Capital 445,000 Brian, Capital 15,000 Cole, Capital 25,000 as Si2-so0 ‘The partners share net income and losses in the ratio of 32:1. Between May 7-30, the noncash assets were sold for $150,000, the liabilities were paid, and the remaining cash was distributed tothe partaers (a) Prepare a statement of partnership Liquidation, () Assume the same fats as in (a), except thatthe noncash assets were sold fr $45,000 and any partner with a capital deficiency ays the amount ofthe deficiency tothe partnership, Prepare a statement of partnership liquidationa) [iaiement of Parmersip] iguidation For Period May 7-30 pial INoncash Fama ia ole (Cash [havens = iisbilies 519. (oa 1 [Balances before is 7500 105,000 827,500 fs45,000 Bis,000 325.000 alization [Sale of asset & division) 150,000 T0s000 22500 is 000 cI] ft gain [Balances afer ISi57.500 P Is27.500 7500 1530.00 1532,500 alization payment of abilities — [27,500 soo BBalances after payment [130,000 P 67,500 1530.00 532,500 lof tiabiites Distribution aFeash to [130,000 1500 30,000 3500 al balances 2 2 2 2 2 2 » (Anna, Brian, and Cole [Statement of Parmersip] Iiquidation For Period May 7.30, Kei Conca ama ian Cale [cash + nae = Liabilities + 3/6 (TSS 7 [Balances Before iS 7.500 105,000 527,500 5,000 B5,000 is25,000 alization [Sale of asses & division 43.000 T0500 oa lf lose fsalanoes ater 1552.50 Is27,500 15,000 B5,000n%. 515,000 kealization ayment of Habilites [27500 27,500 [Balances after paymeat [525.000 15,000 15,000Dr. Is15,000 lt liabilities RReceipt of deicieney [e500 S000 Hnalances 1S30,000. p o 15,000 D 515,000 [Distribution of cash to 30,000 15,000 15.000 Final balances z z a z z a193. Barker invested $128,000 in the Granger and Monroe partnership for ownership equity of $128,000, Prior to the investment, equipment was revalued to a market value of $90,000 from a book value of $66,000. Granger and Montoe share net income in a 2:1 ratio. Required: a. Provide the journal entry for the revaluation of equipment b. Provide the journal entry to admit Barker. a Bqul 240 pme 00 at oe, 0 co pit194, Watson purchased one-half of Dalton’s interest in the Patton and Dalton partnership for $45,000, Prior to the investment, land was revalued to a market value of $135,000 from a book value of $93,000. Patton and Dalton share net income equally. Dalton had a capital balance of $35,000 prior to these transactions. Required: a. Provide the journal entry for the revaluation of land, . Provide the journal entry to admit Watson. a Land 42,000 Patton, Capital 21,000 Dalton, Capital 21,000 b alto 28,000 Capit Watson, Capital 28,000" 135 000 $210 00) 50% 195. Wonder purchased one-half of Darwin's interest in the Todd and Darwin's partnership for $50,000. Prior to the investment, land was revalued to a market value of $175,000 from a book value of $100,000. Todd and Darwin share net income equally. Darwin had a capital balance of $40,000 prior to these transactions, Required: a. Provide the journal entry for the revaluation of land. . Provide the journal entry to admit Wonder. a Land 75,000 Todd, Capital 37,500 Darwin, Capital 37.500 b Darw 38.750 Capit Wonder, Capita 38,750 +840 000 3375 00) 50%196. Describe the items which should be covered in a partnership agreement, ‘The articles of partnership should include the following points: a. name, location, and nature of the business . name, capital investment, and duties of each partner , method of sharing profits and losses among the partners d. withdrawals of assets allowed to the partners e. procedures for settling disputes between the partners £. procedures for admitting new partners g. procedures for settling up with a partner who withdraws from the business h, procedures for liquidating the partnership 197, What is a partnership? List three advantages and three disadvantages of the partnership form of business organization, A partnership is a voluntary association of two or more persons who co-own a business for profit. Advantages: Unlike a corporation, a partnership is easy to form, involves no legal procedures, and is less expensive to form. A partnership brings together capital and expertise of two or more individuals. Finally, partnerships pay no income taxes as corporations do. Disadvantages: Some disadvantages of a partnership are mutual agency, which allows each partner to sign contracts in the name of the partnership, and unlimited liability, which makes each partner individually liable for all the debts of the partnership. Additionally, the limited life of a partnership requires a new agreement whenever there is a change to the existing partnership.