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Exam 17: Partnership

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Question 41

Multiple Choice

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The journal entry to close net income to the partners is to:

A) debit Income Summary; credit the capital accounts.
B) debit the capital accounts; credit Income Summary.
C) debit the capital accounts; credit Net Loss.
D) debit Net Loss; credit the capital accounts.

E) B) and C)
F) None of the above

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Question 42

Multiple Choice

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The original investment balances of partners Bridget and Emily are $9,000 and $19,000, respectively. Bridget and Emily work full time in the business. The business earned net income of $20,000 for the period. The partners have agreed to share earnings based upon the percentage of original investment. Bridget's share of the net income is: (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

A) $9,474.
B) $10,000.
C) $6,400.
D) indeterminable.

E) A) and B)
F) A) and C)

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Question 43

Essay

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After several years of business, Abel, Barney, and Cole are liquidating. The following are post-closing account balances. Non-cash assets are sold for $305,000. Profits and losses are shared equally. After all liabilities are paid, divide the remaining cash amongst the partners.

When a partnership is liquidated, the journal entry to pay the claims of creditors would include:

Allan and Rick are partners who share profits and losses in the ratio of 3:2 for Allan and Rick, respectively. They have capital balances of $40,000 and $47,000, respectively. If Tammy invests $32,000 for one-third interest, Tammy's capital balance will be: (Round your answer to the nearest dollar.)

After several years of business, Abel, Barney, and Cole are liquidating. The following are post-closing account balances. Non-cash assets are sold for $270,000. Profits and losses are shared equally. Record the sale of the noncash items.

A partnership can be joined by:

After all liabilities have been paid, the remaining assets are distributed based on equal share to partners.

Partners Eric and Jeremy each have $7,000 capital balances and share income and losses in a 2:1 ratio for Eric and Jeremy, respectively. Cash equals $3,000, noncash assets are $16,000, and liabilities are $5,000. If all the noncash assets are sold for $2,000, and each partner is personally insolvent, Jeremy eventually will receive cash of:

Joan and Helen are partners who have agreed to allow Carol to purchase Helen's share for a direct payment of $36,000 to Helen. Joan and Helen's previous capital balances were $10,000 and $17,000, respectively. What will be the amount in Carol's capital account?

Dissolution of a partnership can occur under the limited life characteristic if a partner:

Jan and Ben are partners, with beginning capital balances of $70,000 and $62,000 respectively. During the year, Jan withdrew $12,000 and Ben withdrew $23,000. The year's net income of $48,000 was distributed $19,000 to Jan and $29,000 to Ben. Calculate the ending balances in the capital accounts.

Which method of allocation of profits and losses is based on a percent of initial investment of the partners?

The partnership of Brandon and Ryan is being liquidated. All gains and losses are shared in a 3:1 ratio, respectively. Before liquidation, their balance sheet balances are as follows: a) If the Other Assets are sold for $10,000, how much capital will each partner receive have before paying liabilities and distributing the remaining assets? b) If the Other Assets are sold for $7,000, how much capital will each partner have before paying liabilities and distributing remaining assets?

The last step taken in liquidating a partnership is to:

Mary sold Jill her equity in the Mary and Jill partnership for $31,000. If both Mary and Jill had a $16,000 capital balance, the entry to record this transaction would be to:

When two proprietors decide to combine their businesses and form a partnership, GAAP usually requires that noncash assets be taken over at their:

Allison and Josh are partners in a business. Allison's capital is $120,000 and Josh's capital is $120,000. Profits for the year are $80,000. They agree to share profits and losses as follows: Allison's share of the profits before paying salaries and interest on capital is: (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

Partners Randy and Mary each have $3,000 capital balances and share income and losses in a 2:1 ratio for Randy and Mary, respectively. Cash equals $5,000, noncash assets total $13,000, and liabilities are $5,000. If all the noncash assets are sold for $10,000, Mary's capital account will: (Round your answer to the nearest dollar.)

Partners are required to report their share of partnership earnings on their personal tax return.