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Exam 19: Accounting for Partnerships

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Question 51

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Danny Ortiz and Angela Hufford are partners, and each has a capital balance of $25,000. To gain admission to the partnership, Derek Peters pays $15,000 directly to Ortiz for one-half of his equity. After the admission of Peters, the total partners' equity in the records of the partnership will be

A) $50,000.
B) $62,500.
C) $65,000.
D) $75,000.

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

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Question 52

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The characteristic of a partnership that means that any partner can make valid contracts for the partnership is known as---------- .

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Question 53

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The dissolution of a partnership and the formation of a new partnership may have no noticeable effect on the continuing operations of the business.

Roy Reynolds and Mike Truesdale are partners. To expand the expertise of their business, they have agreed to admit Jennie Fellows to the partnership on January 1, 2019. The capital account balances on January 1, 2019, after revaluation of assets, are Reynolds, $80,000, and Truesdale, $60,000. Net income or net loss is shared equally. On page 20 of a general journal, record the admission of Fellows to the partnership on January 1, 2019, assuming that Fellows invests $46,000 for 20 percent interest in the business. Omit the descriptions.

Withdrawals of assets from a partnership that are intended to permanently reduce the invested capital are recorded as debits to the partners'--------- accounts.

Salary and interest allowances for partners are treated as expenses of the firm and are used in the calculation of net income.

Janice Miller operates a sole proprietorship business that sells camping equipment. On January 1, 2019, Miller has agreed to transfer her assets and liabilities to a partnership that will operate The Camping Company. Miller will own a two-thirds interest in the capital of the partnership. The agreed upon values of assets and liabilities to be transferred are as follows: Accounts receivable of $52,000 (of which approximately $2,500 is estimated to be uncollectible) Merchandise inventory, $110,000 Furniture and fixtures, $55,000 Accounts payable, $38,000 Record the receipt of the assets and liabilities by the partnership on page 1 of a general journal. Om the description.

Karen Schuler and Mary Ryan are partners. To expand the expertise of their business, they have agreed to admit Samuel Wing to the partnership on January 1, 2019. The capital account balances on January 1, 2019, after revaluation of assets, are Schuler, $80,000, and Ryan, $60,000. Net income or net loss is shared equally. On page 10 of a general journal, record the admission of Wing to the partnership on January 1, 2019, assuming that Wing invests $58,000 for one-third interest in the business. Omit the descriptions.

Danny Ortiz and Angela Hufford are partners, and each has a capital balance of $25,000. To gain admission to the partnership, Derek Peters pays $15,000 directly to Ortiz for one-half of his equity. After the admission of Peters, Ortiz' share of the partnership equity will be

Partnership net income of $33,000 is to be divided between two partners, Elan Chan and Roy Anderson, according to the following arrangement: There will be salary allowances of $20,000 for Chan and $10,000 for Anderson, with the remainder divided equally. How much of the net income will be distributed to Chan and Anderson, respectively?

Partnership net income of $40,000 is to be divided between two partners, Reese Row and Andrew Young, according to the following arrangement: There will be salary allowances of $25,000 for Row and $10,000 for Young, with the remainder divided 65:35. How much of the net income will be distributed to Row and Young, respectively?

Partnership net income of $132,000 is to be divided between two partners, Jessie Folk and Jessica Stephens, according to the following arrangement: There will be salary allowances of $70,000 for Folk and $30,000 for Stephens, with the remainder divided 55% for Folk and 45% for Stephens. How much of the net income will be distributed to Folk and Stephens, respectively?

Sam McGuire and Marcos Valle are partners, and each has a capital balance of $80,000. To gain admission to the partnership, Scott Jordan pays $60,000 directly to Valle for one-half of his equity. After the admission of Jordan, the total partners' equity in the records of the partnership will be

Amounts withdrawn by partners for their personal living expenses are debited to their----------accounts.

Bryce and Kendall are partners. The partnership agreement provides for salary allowances of $52,000 for Bryce and $44,000 for Kendall and for interest of 10 percent on each partner's invested capital at the beginning of the year. The balance of any remaining profits or losses is to be divided 40 percent to Bryce and 60 percent to Kendall. On January 1, 2019 , the capital account balances were Bryce, $150,000, and Kendall, $190,000. Net income for the year was $144,000. 1. On page 22 of a general journal, record the following entries on December 31, 2019. Omit descriptions. A)Record the salary allowances for the year. B)Record the interest allowances for the year. C)Record the division of the balance of net income. D)Close the drawing accounts into the capital accounts. Assume that the partners have withdrawn the full amount of their salaries. 2. Prepare a schedule showing the division of net income to the partners as it would appear on the income statement for 2019.

The financial statement that shows the division of profits and losses among partners is the --------.

All of the following are included on the statement of partners' equities except

Partnership net income of $66,000 is to be divided between two partners, Julia Hood and Brian Duffy, according to the following arrangement: There will be salary allowances of $20,000 for Hood and $20,000 for Duffy, with the remainder divided equally. How much of the net income will be distributed to Hood and Duffy, respectively?

When dividing partnership net income, the consideration given to the amount of time a partner devotes to the business is called a---------- .

If an individual invests more cash for an interest in an existing partnership than the book value of his or her interests, an entry is made to debit