Question 1

Cornish and Duffee form a partnership by investing $120,000 and $130,000 respectively.Their partnership agreement stipulates that Cornish will receive an annual salary allowance of $12,000,and both partners will receive an interest allowance of 5% on their capital investment.Any profit remaining is to be allocated 45% to Cornish,and 55% to Duffee.Profit for their first year of operations is $80,000.Prepare the entry to close Income Summary.

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Question 2

Matrix and Bentley invested $40,000 and $50,000,respectively,in a partnership they began one year ago.Assuming the partnership's profit was $140,000 for this year; calculate the share of the profit each partner should receive under the following assumptions.(1)The partnership agreement specifies a salary allowance of $25,000 to Matrix and $30,000 to Bentley,and the balance shared equally.(2)The partnership agreement specifies a salary allowance of $25,000 to Matrix and $30,000 to Bentley,10% interest on their investments,and the balance shared equally.

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Question 3

Graeme,Bella and Anne are partners with capital balances of $90,000,$70,000,and $50,000,respectively.The partners agreed to share profits and losses as follows: Salary allowances of $7,000 to Graeme,$8,000 to Bella and $14,000 to Anne.Interest allowances of 10% on beginning-of-year capital balances Balance to be divided equally.If profit for the year is $220,000,calculate each partner's share and prepare the appropriate journal entry to close the Income Summary to the capital accounts.
 $\begin{array}{|l|r|r|r|r|}
\hline & \text { Graeme } & \text { Bella } & \text { Anne } & \text { Total } \
\hline \text { Profit to be Divided } & & & & 220,000 \
\hline \text { Salary Allowance } & 7,000 & 8,000 & 14,000 & \
\hline \text { Interest Allowance } & 9,000 & 7,000 & 5,000 & 50,000 \
\hline \text { Profit Remaining } & & & & 170,000 \
\hline \text { Ratio } & 56,667 & 56,667 & 56,667 & \
\hline \text { Share of Profit } & 72,667 & 71,667 & 75,667 & \
\hline
\end{array}$

Accepted Answer

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Question 4

The partners of the Blue Tooth Partnership agree to liquidate.After all liabilities of $100,000 are paid,the partnership's cash balance is $110,000,and the capital account balances are: Peters,$60,000; Winslow,$40,000; and Wong,$10,000.Prepare the journal entry to distribute the ending cash.

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Question 5

Chante and Olivia decide to accept Sherwood into the partnership.Sherwood will contribute $25,000 in cash,which will also be the amount to be credited to his capital account.Prepare the journal entry to record the transaction.

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Question 6

Craig and Smith formed a partnership on December 31,2020.Craig contributed $60,000 cash.Justin's investment consisted of cash,$8,000; inventory,$24,000; and supplies,$8,000-all at fair market values.Profit for 2020 and 2021 was $75,000 and $85,000,respectively.Calculate the allocation of profit for 2020 and 2021,assuming profits are divided as follows: (A)The partners have no agreement.(B)Based on a 1:3 ratio.(C)Based on the ratio of the partners' original investments.(D)Interest allowances of 10% on their original investments,salary allowances to Craig of $14,000 and Simpson of $11,000,and the remainder to be divided equally.

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Question 7

Reed is anxious to leave the RD Partnership.At this time her capital account is $52,000.The remaining partners,Tool and June,agree to pay Reed $50,000 in cash.Prepare the journal entry to record the withdrawal.Assume the partners have no agreement for sharing profits and losses.

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Question 8

Mung and Long allow Kang to join their partnership for $50,000 cash.The recorded value of the equity being purchased is $40,000.Prepare the journal entry to record the admission of Kang to the partnership.Assume the partners have no agreement for sharing profits and losses.

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Question 9

Phillip and Herbert formed a partnership.Phillip contributed $40,000 cash and accounts receivable worth $12,000.Herbert's investment included cash,$3,000; inventory,$10,000; and supplies,$4,000.(All values are current fair market values).Prepare the journal entry to record the formation of the partnership.

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Question 10

Schneider withdraws from the SST Partnership.At this time her capital account is $45,000.The remaining partners agree to pay her $45,000 for her interest.Prepare the journal entry to record the withdrawal.

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Question 11

With the consent of the other partners,Frank decides to sell one half of his $50,000 interest in the DDB Partnership to Bob privately for $22,500.Prepare the journal entry to record the transaction.

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Question 12

Slosky invested $60,000 and Karhut invested $80,000 in a partnership and agreed to share income and losses by allowing a $6,000 annual salary allowance to Slosky and an $1,000 annual salary allowance to Karhut.As well,each partner is to receive a share of profit equal to a 10% return on capital investments,and the balance is to be divided 1/3 to Slosky and 2/3 to Karhut.Under this agreement,what are the shares of the partners if the partnership income is $85,000?

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Question 13

Cook and Parker formed a partnership with capital contributions of $50,000 and $60,000 respectively.Their partnership agreement called for Cook to receive a $9,000 annual salary allowance,and each partner to receive a share of profit equal to a 5% return on capital investments.The remaining income or loss is to be divided 50% to Cook and 50% to Parker.If the profit for the year is $105,000,what are Cook and Parson's respective shares? Prepare the required closing entry.

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Question 14

On August 1,Nola and Verna decide to form an engineering and design partnership.Of the following items shown below,Nola invested the assets and the partnership assumed the liabilities:
 $\begin{array}{|l|r|}
\hline & \text { Fair Value } \
\hline \text { Accounts receivable } & 12,500 \
\hline \text { Land } & 160,000 \
\hline \text { Building } & 9,000 \
\hline \text { Accounts payable } & 6,000 \
\hline \text { Notes payable } & 110,000 \
\hline
\end{array}$

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Question 15

Explain the steps involved in the liquidation of a partnership.

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Question 16

Discuss the accounting issues involved in the admission or withdrawal of a partner from a partnership.

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Question 17

Armstrong plans to leave the JT Partnership.At this time her capital account is $48,000.The remaining partners,Tanner and Jackson,agree to pay Armstrong $58,000.Prepare the journal entry to record the withdrawal.Assume the partners have no agreement for sharing profits and losses.

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Question 18

Rachel,Jenna and Lauren are partners with capital balances of $80,000,$10,000,and $10,000,respectively.Profit for the year is $150,000.Prepare the necessary journal entries to close Income Summary to the capital accounts if:(a)The partners agree to divide income based on their beginning-of-year capital balances.(b)The partners agree to divide income based on the ratio of 5:3:2,respectively.(c)The partnership agreement is silent as to division of income.

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Question 19

Yee,Young,and Kong form a partnership.Yee contributes $50,000 cash,Young contributes $10,000 in cash and equipment with and fair value of $32,000 and Kong contributes cash of $15,000.Prepare the journal entry to record the formation of the partnership.

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Question 20

Discuss the options for the allocation of income and loss among partners.

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Quiz 3: Partnerships