Question 1

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

Accepted Answer

When the partner mix changes, the old partnership ceases to exist and a new partnership begins, as partnerships are based on the specific agreement between the partners involved.

Question 2

Sarah and Jane formed a partnership with capital contributions of $210,000 and $123,000,respectively.Peter contributed $86,000 to acquire an ownership interest of 12% in the new partnership.How much is the total bonus for the existing partners?

Accepted Answer

B)Peter will get an ownership interest of 12% of ($210,000 + $123,000 + $86,000)
= 0.12 × $419,000 = $50,280.
Total bonus for the existing partners = $86,000 - $50,280 = $35,720

Question 3

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.Ramelow contributes $27,000 cash in exchange for the partnership interest.Assume that Floyd and Merriam shared profits and losses in a 3:1 ratio before the admission of Ramelow.Which of the following is the correct journal entry to record the above admission?

Accepted Answer

D)
 11ea8a42_4f55_a9f8_8b44_6f5d7acf5e11_TB5024_00 In effect,Ramelow had to buy into the partnership at a contribution of $27,000,which is above the $20,000 book value of his one-fifth interest.Ramelow's higher-than-book-value contribution creates a bonus for Floyd and Merriam,which is shared between them in their profit sharing ratio,which is 3:1.

Question 4

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 30% ownership, the total capital balance increases by $15,000 * (100/30) = $50,000.

Isaac's capital balance remains unchanged at $25,000, while Karl's capital balance increases to $20,000 + $25,000 = $45,000.

Therefore, the total equity increases by $50,000 and the assets also increase by $15,000.

So, both assets and equity increase, which is option C.

Question 5

Dominic and Morgan are partners.Dominic has a capital balance of $360,000 and Morgan has a capital balance of $225,000.Morgan sells $125,000 of his ownership to Lance.Which of the following is true of the items in balance sheet?

Accepted Answer

The sale of ownership interest from Morgan to Lance does not affect the total equity or assets of the partnership; it is simply a transfer of ownership.

Question 6

Anna and Naomi are partners.Anna has a capital balance of $49,000 and Naomi has a capital balance of $42,000.Gary invested $27,000 to acquire an ownership interest of $18,000.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

Gary invested $27,000 to acquire an ownership interest of $18,000. The partnership will record the receipt of Gary's contribution by debiting Cash for $27,000 and crediting Gary, Capital for $18,000.

Question 7

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

When Carol invests $60,000, the assets of the partnership increase by $60,000. Since Carol acquires an ownership interest of $50,000, the equity also increases by $50,000.

Question 8

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 $72,000.Which of the following is the correct journal entry to record the introduction of Ramelow as a partner?

Accepted Answer

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

Question 9

Keith and Jim are partners.Keith has a capital balance of $51,000 and Jim has a capital balance of $39,000.Bill invested a building worth $27,000 to the partnership for an ownership interest of 20%.How much is the total bonus for the existing partners?

Accepted Answer

C)Bill will get an ownership interest of 20% of ($51,000 + $39,000 + $27,000)= 0.2 × $117,000 = $23,400
Total bonus to existing partners = $27,000 - $23,400 = $3,600

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:

They agreed to admit Ramelow into the business for a one-third interest in the new partnership.Ramelow contributes $24,000 cash in exchange for the partnership interest.What is the correct capital account balance of Ramelow after he enters the business?

Accepted Answer

B)
 11ea8a42_4f55_f820_8b44_cfa2a058c08d_TB5024_00 A new partner may be so valuable that the existing partners offer a partnership share that includes a bonus to the new person.The bonus of $8,000 went to Ramelow from the other partners,Floyd and Merriam,who had to bear the $8,000 burden equally.

Question 11

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.Ramelow contributes $16,000 cash in exchange for the partnership interest.Assume 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

B)
 11ea8a42_4f55_d10e_8b44_4389ad101294_TB5024_00 *(to be borne equally by Floyd and Merriam)
A new partner may be so valuable that the existing partners offer a partnership share that includes a bonus to the new person.The bonus of $4,667 went to Ramelow from the other partners,so their capital accounts are debited for the bonus.The existing partners (Floyd and Merriam)share this decrease in capital as though it were a loss,on the basis of their profit-and-loss sharing ratio.

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 half of his share to Ramelow in exchange for $32,000 cash.Which of the following is the correct journal entry in the books of the firm for the above transfer of interest?

Accepted Answer

B)When a new partner purchases an existing partner's interest,capital is transferred by debiting the existing partner's capital account and crediting the new partner's capital account.

Question 13

Keith and Jim are partners.Keith has a capital balance of $49,000 and Jim has a capital balance of $38,000.Bill invested $33,000 to acquire an ownership interest of 30%.Which of the following statements is true of this transaction?

Accepted Answer

D)Bill's ownership in the partnership after the investment
= 0.3 × ($49,000 + $38,000 + $33,000)= $36,000
Bill's equity bonus = $36,000 - $33,000 = $3,000

Question 14

Raul and Bianca are partners.Raul has a capital balance of $50,000 and Bianca has a capital balance of $37,000.Bianca sells half of her ownership interest to Bill for $20,500.Which of the following is true of the journal entry to record this transaction?

Accepted Answer

Bianca's capital account is reduced by half of her ownership interest, which is $18,500 (half of $37,000), and Bill's capital account is credited with the same amount, reflecting his purchase of that interest.

Question 15

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

Accepted Answer

The answer of Which of the following is true when...

Question 16

Keith and Jim are partners.Keith has a capital balance of $47,000 and Jim has a capital balance of $32,000.Jim sells $15,000 of his ownership to Bill.Which of the following is true of the journal entry to admit Bill?

Accepted Answer

Jim is selling part of his ownership to Bill, so Bill's capital account will be credited for the amount he paid, which is $15,000.

Question 17

Ruby and Anita are partners.Ruby has a capital balance of $270,000 and Anita has a capital balance of $180,000.Denis invests a building with a current market value of $170,000 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

Denis is acquiring an interest in the partnership by investing a building, so the journal entry should reflect this by debiting the building and crediting Denis' capital account for the same amount. Since there is no bonus to any partner, Ruby and Anita's capital accounts should not be affected by this transaction. Therefore, the journal entry should be:

Debit Building for $170,000
Credit Denis, Capital for $170,000

Question 18

Rex and Sandy are partners.Rex has a capital balance of $370,000 and Sandy has a capital balance of $280,000.Marcus invests a building worth $220,000 in order to acquire an interest in the partnership.What is Marcus's partnership share after he makes the investment? (Assume no bonus to any partner. )

Accepted Answer

A)Marcus's share in the partnership after the investment
= $220,000 / ($370,000 + $280,000 + $220,000)= $220,000 / $870,000 = 25.3%

Question 19

Shaun and Rick are partners.Shaun has a capital balance of $12,000 and Rick has a capital balance of $10,000.Edwin invests a building with a current market value of $8,000 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

The transaction involves the acquisition of a building with a market value of $8,000. This will increase the assets of the partnership by $8,000. Since Edwin is acquiring an interest in the partnership, his investment will be recorded as equity. Therefore, the equity of the partnership will increase by $8,000 as well. There is no effect on liabilities in this transaction. Therefore, option A is correct.

Question 20

Frank and Harry are partners.Frank has a capital balance of $51,000 and Harry has a capital balance of $40,000.Bill invested a building worth $27,000 to the partnership for an ownership interest of 20%.Calculate Bill's capital in the new partnership.

Accepted Answer

D)Bill will get an ownership interest of 20% of ($51,000 + $40,000 + $27,000)
= 0.2 × $118,000 = $23,600

Quiz 12: Partnerships

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

Sarah and Jane formed a partnership with capital contributions of $210,000 and $123,000,respectively.Peter contributed $86,000 to acquire an ownership interest of 12% in the new partnership.How much is the total bonus for the existing partners?

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?

Dominic and Morgan are partners.Dominic has a capital balance of $360,000 and Morgan has a capital balance of $225,000.Morgan sells $125,000 of his ownership to Lance.Which of the following is true of the items in balance sheet?

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 $51,000 and Jim has a capital balance of $39,000.Bill invested a building worth $27,000 to the partnership for an ownership interest of 20%.How much is the total bonus for the existing partners?

Keith and Jim are partners.Keith has a capital balance of $49,000 and Jim has a capital balance of $38,000.Bill invested $33,000 to acquire an ownership interest of 30%.Which of the following statements is true of this transaction?

Raul and Bianca are partners.Raul has a capital balance of $50,000 and Bianca has a capital balance of $37,000.Bianca sells half of her ownership interest to Bill for $20,500.Which of the following is true of the journal entry to record this transaction?

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 $47,000 and Jim has a capital balance of $32,000.Jim sells $15,000 of his ownership to Bill.Which of the following is true of the journal entry to admit Bill?

Frank and Harry are partners.Frank has a capital balance of $51,000 and Harry has a capital balance of $40,000.Bill invested a building worth $27,000 to the partnership for an ownership interest of 20%.Calculate Bill's capital in the new partnership.