Question 1

Frank and Harry are partners. Frank has a capital balance of $50,000 and Harry has a capital balance of $40,000. Bill invested a building worth $30,000 to the partnership for an ownership interest of 20%. Calculate Bill's capital in the new partnership.

Accepted Answer

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Question 2

Raul and Bianca are partners. Raul has a capital balance of $50,000 and Bianca has a capital balance of $36,000. Bianca sells half of her ownership interest to Bill and Bianca accepts $20,000 from Bill. Which of the following is true of the journal entry to record this transaction?

Accepted Answer

Bianca sold half of her ownership interest to Bill for $20,000, so her capital balance would decrease by half, or $18,000 (36,000/2). Bill is not buying any of Raul's ownership interest, so Raul's capital balance should remain the same. Therefore, the journal entry should be a credit to Bill, Capital for $18,000 and a debit to Bianca, Capital for $18,000.

Question 3

Dominic and Morgan are partners. Dominic has a capital balance of $350,000 and Morgan has a capital balance of $245,000. Morgan sells $105,000 of his ownership to Lance. Which of the following is true of the items in balance sheet?

Accepted Answer

When Morgan sells $105,000 of his ownership to Lance, Morgan's capital balance decreases by $105,000 but Lance's capital balance increases by $105,000. Therefore, the total equity remains unchanged as the increase in Lance's capital balance offsets the decrease in Morgan's capital balance. The assets and liabilities of the business are not affected by this transaction.

Question 4

Shaun and Rick are partners. Shaun has a capital balance of $10,000 and Rick has a capital balance of $8,000. Edwin invests a building with a current market value of $6,000 to acquire an interest in the new partnership. Which of the following is true of the effect of the transaction on the balance sheet? (Assume no bonus to any partner.)

Accepted Answer

When Edwin invests the building, it becomes a new asset for the partnership, and its market value of $6,000 is added to the total assets on the balance sheet. Edwin also acquires an interest in the partnership, which increases the equity of the partnership by $6,000. Therefore, both assets and equity will increase by $6,000, making option A the correct answer. There is no mention of any liabilities being affected by this transaction, so option B and D are incorrect. Option C is also incorrect as it states that both assets and equity will decrease, which is not the case.

Question 5

Issac and Karl are partners. Issac has a capital balance of $25,000 and Karl has a capital balance of $20,000. Bill invested $15,000 to acquire an ownership interest of 30%. How does this transaction affect the balance sheet items?

Accepted Answer

When Bill invests $15,000 to acquire a 30% ownership interest, the partnership's total capital increases by $50,000 ($15,000 / 0.30).

Isaac's capital balance increases to $30,000 ($25,000 + $5,000), and Karl's capital balance increases to $25,000 ($20,000 + $5,000).

Therefore, both assets (cash) and equity (total capital) increase by $50,000.

Question 6

Allan and Ralph are partners. Allan has a capital balance of $92,000 and Ralph has a capital balance of $75,000. Carol invested $60,000 to acquire an ownership interest of $50,000. Which of the following is true of the impact of the transaction on the balance sheet?

Accepted Answer

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Question 7

Keith and Jim are partners. Keith has a capital balance of $50,000 and Jim has a capital balance of $40,000. Bill invested a building worth $30,000 to the partnership for an ownership interest of 20%. How much is the total bonus for the existing partners?

Accepted Answer

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Question 8

Sarah and Jane formed a partnership with capital of $210,000 and $126,000, respectively. Peter contributed $84,000 to acquire an ownership interest of 14% in the new partnership. How much is the total bonus for the existing partners?

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Question 9

Anna and Naomi are partners. Anna has a capital balance of $50,000 and Naomi has a capital balance of $40,000. Gary invested $30,000 to acquire an ownership interest of $20,000. Which of the following is true of the partnership journal entry to record the receipt of Gary's contribution? (Assume the existing partners equally divide the bonus)

Accepted Answer

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Question 10

Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows:  Floyd and Merriam share profits and losses equally. They agreed to dissolve the partnership and start a new one, admitting Ramelow for one-half share in the capital in exchange for land and equipment having a total market value of $70,000. Which of the following is the correct journal entry to record the introduction of Ramelow as a partner?

Accepted Answer

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Question 11

Ruby and Anita are partners. Ruby has a capital balance of $250,000 and Anita has a capital balance of $200,000. Denis invests a building with a current market value of $150,000 to acquire an interest in the new partnership. Which of the following is true of the journal entry to record this transaction? (Assume no bonus to any partner.)

Accepted Answer

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Question 12

Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows:  Floyd agrees to sell off half of his share to Ramelow in exchange for $30,000 cash. Which of the following is the correct journal entry in the books of the firm for the above transfer of interest?

Accepted Answer

Since Floyd is selling off half of his share to Ramelow, his capital account will decrease by half of the original balance, which is $80,000/2=$40,000. Ramelow is giving $30,000 cash in exchange for half of Floyd's share, so his capital account will increase by $30,000.

The journal entry to record this transfer is:
Debit: Cash $30,000
Credit: Floyd's Capital Account $40,000
Credit: Ramelow's Capital Account $30,000

Option B is the correct journal entry to record this transfer.

Question 13

Which of the following is true of ownership changes in a partnership?

Accepted Answer

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Question 14

Rex and Sandy are partners. Rex has a capital balance of $350,000 and Sandy has a capital balance of $280,000. Marcus invests a building worth $210,000 to acquire interest in the new partnership. How much will be the partnership share of Marcus after he makes the investment? (Assume no bonus to any partner.)

Accepted Answer

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Question 15

Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows:  They agreed to admit Ramelow into the business for a one-third interest in the new partnership. He had to bring in a cash contribution of $20,000 for the same. Assuming that Floyd and Merriam shared profits and losses equally before the admission of Ramelow. Which of the following is the correct journal entry to record the above admission?

Accepted Answer

To record the admission of a new partner, we need to credit the capital accounts of the existing partners in their old profit-sharing ratio and debit the new partner's capital account for their contribution.

For Ramelow's admission, we need to credit Floyd and Merriam's capital accounts in their old profit-sharing ratio (which is 1:1) and debit Ramelow's capital account for $20,000.

The correct journal entry is:
Debit: Ramelow's Capital Account $20,000
Credit: Floyd's Capital Account $26,000 (1/2 of $52,000)
Credit: Merriam's Capital Account $26,000 (1/2 of $52,000)

Option B shows the correct journal entry.

Question 16

Keith and Jim are partners. Keith has a capital balance of $50,000 and Jim has a capital balance of $35,000. Jim sells $15,000 of his ownership to Bill. Which of the following is true of the journal entry to admit Bill?

Accepted Answer

Bill is buying $15,000 of Jim's ownership, so Bill's capital account will be credited for $15,000 to reflect his new ownership interest.

Question 17

Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows:  They agreed to admit Ramelow into the business for a one-fifth interest in the new partnership. He had to bring in a cash contribution of $30,000 for the same. Assuming that Floyd and Merriam shared profits and losses in the ratio 3:1 before the admission of Ramelow. Which of the following is the correct journal entry to record the above admission?

Accepted Answer

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Question 18

Which of the following is true when a new partner is admitted by purchasing an existing partner's interest?

Accepted Answer

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Question 19

Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows:  They agreed to admit Ramelow into the business for a one-third interest in the new partnership. He had to bring in a cash contribution of $20,000 for the same. Which of the following is the correct capital account balance of Ramelow after he enters the business?

Accepted Answer

The answer of Floyd and Merriam start a partnership business...

Question 20

Keith and Jim are partners. Keith has a capital balance of $50,000 and Jim has a capital balance of $40,000. Bill invested $30,000 to acquire an ownership interest of 30%. Which of the following statements is true of this transaction?

Accepted Answer

Bill received a bonus of $6,000 because his investment of $30,000 for a 30% interest implies a total partnership value of $100,000. However, the existing capital was $90,000 ($50,000 + $40,000), so Bill's investment effectively increased the partnership value, resulting in a bonus to him.

Quiz 12: Partnerships

Frank and Harry are partners. Frank has a capital balance of $50,000 and Harry has a capital balance of $40,000. Bill invested a building worth $30,000 to the partnership for an ownership interest of 20%. Calculate Bill's capital in the new partnership.

Raul and Bianca are partners. Raul has a capital balance of $50,000 and Bianca has a capital balance of $36,000. Bianca sells half of her ownership interest to Bill and Bianca accepts $20,000 from Bill. Which of the following is true of the journal entry to record this transaction?

Dominic and Morgan are partners. Dominic has a capital balance of $350,000 and Morgan has a capital balance of $245,000. Morgan sells $105,000 of his ownership to Lance. Which of the following is true of the items in balance sheet?

Issac and Karl are partners. Issac has a capital balance of $25,000 and Karl has a capital balance of $20,000. Bill invested $15,000 to acquire an ownership interest of 30%. How does this transaction affect the balance sheet items?

Allan and Ralph are partners. Allan has a capital balance of $92,000 and Ralph has a capital balance of $75,000. Carol invested $60,000 to acquire an ownership interest of $50,000. Which of the following is true of the impact of the transaction on the balance sheet?

Keith and Jim are partners. Keith has a capital balance of $50,000 and Jim has a capital balance of $40,000. Bill invested a building worth $30,000 to the partnership for an ownership interest of 20%. How much is the total bonus for the existing partners?

Sarah and Jane formed a partnership with capital of $210,000 and $126,000, respectively. Peter contributed $84,000 to acquire an ownership interest of 14% in the new partnership. How much is the total bonus for the existing partners?

Which of the following is true of ownership changes in a partnership?

Keith and Jim are partners. Keith has a capital balance of $50,000 and Jim has a capital balance of $35,000. Jim sells $15,000 of his ownership to Bill. Which of the following is true of the journal entry to admit Bill?

Which of the following is true when a new partner is admitted by purchasing an existing partner's interest?

Keith and Jim are partners. Keith has a capital balance of $50,000 and Jim has a capital balance of $40,000. Bill invested $30,000 to acquire an ownership interest of 30%. Which of the following statements is true of this transaction?