Question 1

Table 12-2
Tic, Tac, and Toe have year-end capital balances, before closing entries, of $202,000, $182,000, and $116,000, respectively. They have agreed to share profits and losses in the ratio of their capital balances.
-Refer to Table 12-2.Assuming the company earns a profit of $146,500,the balance of Tac's capital account after closing out the income summary account is:

Accepted Answer

Tac's share of the profit is calculated based on the ratio of his capital balance to the total capital balance. Tac's capital balance is $182,000, and the total capital balance is $500,000 ($202,000 + $182,000 + $116,000). Tac's share of the profit is ($182,000 / $500,000) * $146,500 = $53,326. Adding this to Tac's original capital balance gives $182,000 + $53,326 = $235,326.

Question 2

The Partnership of Raymond,Chabot and Grant divides profits in the ratio of 4:5:3.There is no provision for dividing losses.During 2014,the business experienced a loss of $40,000.Chabot's share of the loss is:

Accepted Answer

Total ratio = 4+5+3 = 12

Chabot's share of profit = 5/12
Chabot's share of loss = 5/12 * 40000 = 16667

Therefore, the answer is option D.

Question 3

Assume the partnership agreement states that net income is to be divided as follows: 20% interest on investments with the remaining net income divided in a 3:2 ratio.C has a capital balance of $55,000 and D has a capital balance of $75,000.If net income for the current year is $10,000,partner D's share would be:

Accepted Answer

First, we need to calculate the total interest on investments for both partners:

- C's interest: 20% of $55,000 = $11,000 
- D's interest: 20% of $75,000 = $15,000

The remaining net income is $10,000 - $11,000 - $15,000 = -$16,000 (negative because the interests are higher than the net income).

Since the remaining net income is negative, there is no ratio to apply. Therefore, D's share is only the interest on their investment, which is $15,000. However, since the total interest on investments is $26,000 ($11,000 + $15,000), which is higher than the net income, the partners will have a net loss for the year.

Therefore, D's share is only $15,000 (choice A) and the other options are not correct.

Question 4

If Sybil Thorton has withdrawn $60,000 cash and Amy Brown has withdrawn $75,000 cash from the partnership during the year,then the closing entry would involve a:

Accepted Answer

The closing entry for withdrawals involves debiting each partner's individual withdrawals account and crediting the main cash account for the total amount withdrawn by all partners. Therefore, Sybil Thornton's $60,000 withdrawal would be debited to her individual withdrawals account, while Amy Brown's $75,000 withdrawal would be debited to her individual withdrawals account. The total amount of $135,000 would then be credited to the cash account. Option D matches the debit of Sybil Thornton's individual withdrawals account with her withdrawal amount of $60,000.

Question 5

Assume the partnership agreement specifies net income is to be divided in the ratio of capital investments.A's capital account has a balance of $50,000 and B's capital account has a balance of $60,000.If net income for the current year is $25,000,B's distributive share of net income would be:

Accepted Answer

B's share of net income is calculated based on the ratio of their capital investment to the total capital. B's share = ($60,000 / ($50,000 + $60,000)) * $25,000 = $13,636.

Question 6

Table 12-3
Mariah and Brittney have formed a partnership and invested $140,000 and $160,000, respectively. They have agreed to share profits as follows:
1) The first $30,000 is to be allocated according to their original capital contributions to the partnership. 
2) Mariah is to receive $40,000 and Brittney is to receive $45,000 for service.
3) The remainder is to be allocated 5:3, respectively.
-Refer to Table 12-3.If the business earns a net income of $118,000,Mariah's share is:

Accepted Answer

First, allocate the first $30,000 according to their original capital contributions. Mariah's contribution is $140,000 and Brittney's is $160,000, totaling $300,000. Mariah's share of the first $30,000 is ($140,000/$300,000) * $30,000 = $14,000. Next, allocate the service amounts: Mariah receives $40,000. The total allocated so far is $30,000 + $40,000 (Mariah's service) = $70,000. Subtract this from the net income of $118,000, leaving $48,000 to be allocated 5:3. Mariah's share of the remainder is 5/8 * $48,000 = $30,000. Adding all of Mariah's shares: $14,000 (initial allocation) + $40,000 (service) + $30,000 (remainder) = $84,000. However, this calculation seems incorrect based on the provided options, indicating a mistake in the process. Correctly, after allocating the first $30,000 and service amounts ($40,000 for Mariah and $45,000 for Brittney), the remainder should be split. The correct process involves subtracting the initial $30,000 and service amounts from the net income before splitting the remainder according to the 5:3 ratio. The error in calculation led to an incorrect total that does not match the options, suggesting a reevaluation of the steps is necessary.

Question 7

If the partnership agreement does not state how profits and losses will be divided,then by law,partners must share profits and losses:

Accepted Answer

If the partnership agreement does not specify how profits and losses will be divided, partners are required to share them equally by law. This is known as the "default rule". Therefore, option A is the correct answer. Options B, C, and D are incorrect, as they suggest alternative methods of profit and loss distribution that would only apply if specified in the partnership agreement.

Question 8

Table 12-3
Mariah and Brittney have formed a partnership and invested $140,000 and $160,000, respectively. They have agreed to share profits as follows:
1) The first $30,000 is to be allocated according to their original capital contributions to the partnership. 
2) Mariah is to receive $40,000 and Brittney is to receive $45,000 for service.
3) The remainder is to be allocated 5:3, respectively.
-Refer to Table 12-3.If the partnership incurred a loss of $18,000,Mariah's capital account would be ________,and Brittney's capital account would be ________.

Accepted Answer

The partnership incurred a loss of $18,000. This means that the total amount of money in the partnership has decreased by $18,000. Mariah and Brittney's capital accounts will be decreased by their share of the loss. Mariah's share of the loss is $83,125, and Brittney's share of the loss is $49,875.

Question 9

Brittney and Cheryl formed a partnership and agreed to share profits and losses 1/3 to Brittney and 2/3 to Cheryl.If the business incurred a loss of $45,500,then the entry to close out the income summary account would include a:

Accepted Answer

Since the loss will be shared in the ratio of 1:2 (Brittney:Cheryl), Brittney's share of the loss will be
1/3 × $45,500 = $15,167.
Since the business incurred a loss, the income summary account will have a debit balance, and the entry to close out the income summary account would include a credit to income summary. Therefore, the entry would be:

Debit: Brittney, Capital $15,167
Credit: Income Summary $45,500
Credit: Cheryl, Capital $30,333

Hence, option B is the correct answer.

Question 10

If a net loss of $25,000 is divided equally between Candy Kane and Brandy Brown,the closing entry would involve a:

Accepted Answer

When a net loss is divided between partners, it is allocated based on their profit-sharing ratio. Since the net loss is divided equally between Candy Kane and Brandy Brown, their profit-sharing ratio is 1:1.

To record the allocation of the net loss, we must debit the capital account of Brandy Brown and credit the capital account of Candy Kane for $12,500 each. Therefore, the correct option is C) debit to Brown's capital account for $12,500.

The entry would be:

Dr. Brown's capital account $12,500 
Cr. Kane's capital account $12,500

Option A is incorrect because Income Summary is only used to close revenue and expenses accounts at the end of the accounting period. Option B is incorrect because it only credits one partner's capital account instead of both partners. Option D is incorrect because it assumes that the loss is paid in cash, which may not be the case.

Question 11

Table 12-2
Tic, Tac, and Toe have year-end capital balances, before closing entries, of $202,000, $182,000, and $116,000, respectively. They have agreed to share profits and losses in the ratio of their capital balances.
-Refer to Table 12-2.Assuming the partnership incurs a loss of $105,000,the balance in Tic's capital account after closing out the income summary account is:

Accepted Answer

Tic's capital balance after closing out the income summary account is $159,580. This is calculated by taking Tic's beginning capital balance of $202,000 and subtracting his share of the loss, which is $42,420.

Question 12

The Partnership of Raymond,Chabot and Grant divides profits in the ratio of 4:5:3.There is no provision for dividing losses.During 2014,the business earned $40,000.Grant's share of the income is:

Accepted Answer

Grant's share is calculated by dividing the total profit according to the given ratio. The total parts of the ratio are 4+5+3=12. Grant's share is 3 parts out of 12, so his share is (3/12) * $40,000 = $10,000.

Question 13

The Partnership of Raymond,Chabot and Grant divides profits in the ratio of 4:5:3.There is no provision for dividing losses.During 2014,the business experienced a loss of $40,000.Grant's share of the loss is:

Accepted Answer

Since there is no provision for dividing losses, the loss is divided in the same ratio as profits. Grant's share is 3/12 of the total loss, which is $40,000 * (3/12) = $10,000.

Question 14

Ross,Joey,Chandler,and Brad formed a partnership,agreeing to divide profits and losses in a 2:3:4:1 relationship,respectively.Assuming that the business earned a profit of $165,000,Ross's share is ________ and Brad's share is ________.

Accepted Answer

Ross's share is calculated as follows: The total parts are 2 + 3 + 4 + 1 = 10. Ross's part is 2, so his share is (2/10) * $165,000 = $33,000. Brad's part is 1, so his share is (1/10) * $165,000 = $16,500.

Question 15

Table 12-2
Tic, Tac, and Toe have year-end capital balances, before closing entries, of $202,000, $182,000, and $116,000, respectively. They have agreed to share profits and losses in the ratio of their capital balances.
-Refer to Table 12-2.Assuming the business incurs a loss of $87,000,Toe's share of the loss is:

Accepted Answer

Toe's share of the loss is calculated based on the ratio of his capital balance to the total capital balance. Toe's capital is $116,000, and the total capital is $500,000 ($202,000 + $182,000 + $116,000). Toe's share of the loss is $87,000 * ($116,000 / $500,000) = $20,184.

Question 16

Table 12-2
Tic, Tac, and Toe have year-end capital balances, before closing entries, of $202,000, $182,000, and $116,000, respectively. They have agreed to share profits and losses in the ratio of their capital balances.
-Refer to Table 12-2.Assuming the business earns a profit of $72,500,the amount allocated to Tic is:

Accepted Answer

To find the amount allocated to Tic, first calculate the total capital which is $202,000 + $182,000 + $116,000 = $500,000. Tic's share of the capital is $202,000/$500,000 = 40.4%. Therefore, Tic's share of the profit is 40.4% of $72,500, which is approximately $29,290.

Question 17

If the partnership agreement specifies a method for sharing profits but not losses,then loses are:

Accepted Answer

Since the partnership agreement specifies a method for sharing profits, it is reasonable to assume that it would also specify a method for sharing losses. Therefore, losses should be shared in the same method for sharing profits as specified in the partnership agreement. Choice C is the only option that reflects this logic.

Question 18

Table 12-3
Mariah and Brittney have formed a partnership and invested $140,000 and $160,000, respectively. They have agreed to share profits as follows:
1) The first $30,000 is to be allocated according to their original capital contributions to the partnership. 
2) Mariah is to receive $40,000 and Brittney is to receive $45,000 for service.
3) The remainder is to be allocated 5:3, respectively.
-Refer to Table 12-3.Assuming the business incurs a net loss of $36,000,Brittney's capital account will be:

Accepted Answer

The answer of Table 12-3
Mariah and Brittney have formed a...

Question 19

Hugh and Liz formed a partnership with capital contributions of $80,000 and $120,000,respectively.Their partnership agreement called for 1_Hugh to receive a $20,000 for service,2_each partner to receive 10% of their initial capital contributions,and 3_the remaining income or loss to be divided in a ratio of 5:3.If net income for the current year is $54,000,what amount is credited to Hugh's capital account?

Accepted Answer

First, we need to calculate the amount each partner receives based on their initial capital contributions: 
- Hugh: $80,000 x 10% = $8,000 
- Liz: $120,000 x 10% = $12,000

Next, we need to divide the remaining income in a 5:3 ratio: 
- 5 parts go to Hugh: $54,000 x 5/8 = $33,750 
- 3 parts go to Liz: $54,000 x 3/8 = $20,250

Finally, we add the $20,000 service fee to Hugh's share: 
- Hugh's total share: $8,000 + $33,750 + $20,000 = $61,750

Therefore, $36,750 is credited to Hugh's capital account ($61,750 - $25,000 already credited for initial contribution).

Question 20

If A's share of net income is $25,000 and B's share of net income is $40,000,the closing entry would involve a:

Accepted Answer

The closing entry for distributing net income to partners involves debiting the Income Summary account for the total net income ($25,000 + $40,000 = $65,000) and crediting each partner's capital account for their respective share of the net income.

Quiz 1: Partnerships