Question 1

A statement of partner's equity is the same as a statement of owner's equity except:

Accepted Answer

A statement of partner's equity differs from a statement of owner's equity primarily because there is a separate capital account for each partner in a partnership, reflecting each partner's share of the equity.

Question 2

Mary sold Jill her equity in the Mary and Jill partnership for $31,000. If both Mary and Jill had a $16,000 capital balance, the entry to record this transaction would be to:

Accepted Answer

Mary's capital account is debited and Jill's capital account is credited for the amount of Mary's capital balance, which is $16,000. The transaction is between Mary and Jill, and the partnership records the transfer of capital.

Question 3

Jan and Bill have average capital balances of $35,000 and $20,000, respectively. The partners have agreed to allow $20,000 salary allowances. The partners will share income and losses in a 1:2 ratio for Jan and Bill, respectively. How much will each partner's capital account change if net income is $130,000?

Accepted Answer

The answer of Jan and Bill have average capital balances...

Question 4

Jim wants to invest cash so that he will have a one-third interest in Tom and Steve's company. The capital balances are $12,000 Tom, $23,000 Steve. The admission of Jim would be to:

Accepted Answer

To have a one-third interest, Jim's capital should equal one-third of the total capital after his investment. The total capital before Jim's investment is $35,000 ($12,000 + $23,000). Let x be Jim's investment. Then, $12,000 + $23,000 + x = 3x. Solving for x gives $17,500.

Question 5

An interest allowance is based on a partner's individual investment of capital.

Accepted Answer

An interest allowance for a partner typically refers to the interest paid on the capital that the partner has individually invested in the partnership, as a way to compensate for the use of their funds.

Question 6

Indicate the account(s) to be debited and credited to record the following transactions.
-Closed the income summary, there is a net loss.
Debit ________ & ________ Credit ________

Accepted Answer

Income Summary is closed to the capital accounts of the partners.

Question 7

After calculating salary and interest allowances, it is necessary to determine whether net income will cover these expenses.

Accepted Answer

Determining whether net income will cover expenses such as salary and interest allowances is essential for financial planning and ensuring the sustainability of operations.

Question 8

The partnership of Smith and Jones, who have average capital balances of $17,000 and $23,000, respectively, earned $90,000 net income. Under each of the following independent situations, calculate the distribution of the $90,000.
a) No agreement was established.
b) Share based on their average capital balances.

Accepted Answer

The answer of The partnership of Smith and Jones, who...

Question 9

A profit and loss ratio must be based on capital contributions.

Accepted Answer

A profit and loss ratio can be based on various factors agreed upon by the partners, such as capital contributions, effort, or time invested, and does not solely depend on capital contributions.

Question 10

A loss occurs when net income is not large enough to cover salary and interest allowances for the partners.

Accepted Answer

A loss occurs when the total revenue of a business is not sufficient to cover all its expenses, including salaries, interest allowances for partners, and other operational costs.

Question 11

Jean and Joy are partners, with beginning capital balances of $100,000 and $70,000 respectively. During the year, Jean withdrew $20,000 and Joy withdrew $15,000. The year's net income of $40,000 was distributed $15,000 to Jean and $25,000 to Joy. Prepare a statement of Partners' equity.

Accepted Answer

The answer of Jean and Joy are partners, with beginning...

Question 12

Indicate the account(s) to be debited and credited to record the following transactions.
-Closed the income summary to the partners' accounts with a net income.
Debit ________ Credit ________ & ________

Accepted Answer

The answer of Indicate the account(s) to be debited and...

Question 13

The Ben and Jill partnership agree to admit Fred with a one-third interest for $14,000. Ben and Jill's capital balances are $18,000, and $8,000, respectively, and they share profits and losses equally. The entry to admit Fred would include:

Accepted Answer

Fred is admitted to the partnership by contributing $14,000 for a one-third interest. This transaction increases the partnership's cash and Fred's capital account by the amount of his contribution.

Question 14

The profit or loss is required to be divided equally between the partners if otherwise not stated.

Accepted Answer

In the absence of a partnership agreement specifying the division of profits and losses, they are divided equally among the partners regardless of their individual capital contributions.

Question 15

An interest allowance is based on the beginning capital balance of each partner.

Accepted Answer

An interest allowance is typically based on the ending capital balance of each partner, as it reflects the current investment in the partnership.

Question 16

The statement of partners' equity reveals each partner's ownership percentage of the firm's capital.

Accepted Answer

The statement of partners' equity shows changes in each partner's ownership interest in the firm over a period, including their share of the firm's capital, which reflects their ownership percentage.

Question 17

Partners are required to report their share of partnership earnings on their personal tax return.

Accepted Answer

Partners must report their share of partnership income or loss on their personal tax returns because partnerships are "pass-through" entities, meaning the income or losses pass through to the individual partners.

Question 18

Partnerships are subject to federal income tax.

Accepted Answer

Partnerships are not subject to federal income tax. Instead, their profits and losses are passed through to the individual partners, who then report this income on their personal tax returns.

Question 19

When a partnership is worth more than the amounts recorded, an incoming partner may:

Accepted Answer

When a partnership is valued higher than the amounts recorded in the accounting books, an incoming partner may be required to pay a bonus to the existing partners. This bonus reflects the premium for joining a partnership that has a higher intrinsic value than what is reflected by its recorded capital.

Question 20

Indicate the account(s) to be debited and credited to record the following transactions.
-Jim, a partner, withdrew cash from the business.
Debit ________ Credit ________

Accepted Answer

When Jim, a partner, withdraws cash from the business, the cash account is decreased (debited) because assets are going down. The partner's withdrawal account (specific to Jim, but since Jim is not an option, the general withdrawal account for a partner named John is used as a placeholder) is increased (credited) to record the withdrawal of assets by the partner from the business for personal use.

Quiz 17: Partnership

A statement of partner's equity is the same as a statement of owner's equity except:

Mary sold Jill her equity in the Mary and Jill partnership for $31,000. If both Mary and Jill had a $16,000 capital balance, the entry to record this transaction would be to:

Jim wants to invest cash so that he will have a one-third interest in Tom and Steve's company. The capital balances are $12,000 Tom, $23,000 Steve. The admission of Jim would be to:

An interest allowance is based on a partner's individual investment of capital.

Indicate the account(s) to be debited and credited to record the following transactions. -Closed the income summary, there is a net loss. Debit & Credit

After calculating salary and interest allowances, it is necessary to determine whether net income will cover these expenses.

A profit and loss ratio must be based on capital contributions.

A loss occurs when net income is not large enough to cover salary and interest allowances for the partners.

Jean and Joy are partners, with beginning capital balances of $100,000 and $70,000 respectively. During the year, Jean withdrew $20,000 and Joy withdrew $15,000. The year's net income of $40,000 was distributed $15,000 to Jean and $25,000 to Joy. Prepare a statement of Partners' equity.

Indicate the account(s) to be debited and credited to record the following transactions. -Closed the income summary to the partners' accounts with a net income. Debit Credit &

The Ben and Jill partnership agree to admit Fred with a one-third interest for $14,000. Ben and Jill's capital balances are $18,000, and $8,000, respectively, and they share profits and losses equally. The entry to admit Fred would include:

The profit or loss is required to be divided equally between the partners if otherwise not stated.

An interest allowance is based on the beginning capital balance of each partner.

The statement of partners' equity reveals each partner's ownership percentage of the firm's capital.

Partners are required to report their share of partnership earnings on their personal tax return.

Partnerships are subject to federal income tax.

When a partnership is worth more than the amounts recorded, an incoming partner may:

Indicate the account(s) to be debited and credited to record the following transactions. -Jim, a partner, withdrew cash from the business. Debit Credit

Quiz 17: Partnership

A statement of partner's equity is the same as a statement of owner's equity except:

Mary sold Jill her equity in the Mary and Jill partnership for $31,000. If both Mary and Jill had a $16,000 capital balance, the entry to record this transaction would be to:

Jim wants to invest cash so that he will have a one-third interest in Tom and Steve's company. The capital balances are $12,000 Tom, $23,000 Steve. The admission of Jim would be to:

An interest allowance is based on a partner's individual investment of capital.

Indicate the account(s) to be debited and credited to record the following transactions. -Closed the income summary, there is a net loss. Debit ________ & ________ Credit ________

After calculating salary and interest allowances, it is necessary to determine whether net income will cover these expenses.

A profit and loss ratio must be based on capital contributions.

A loss occurs when net income is not large enough to cover salary and interest allowances for the partners.

Jean and Joy are partners, with beginning capital balances of $100,000 and $70,000 respectively. During the year, Jean withdrew $20,000 and Joy withdrew $15,000. The year's net income of $40,000 was distributed $15,000 to Jean and $25,000 to Joy. Prepare a statement of Partners' equity.

Indicate the account(s) to be debited and credited to record the following transactions. -Closed the income summary to the partners' accounts with a net income. Debit ________ Credit ________ & ________

The Ben and Jill partnership agree to admit Fred with a one-third interest for $14,000. Ben and Jill's capital balances are $18,000, and $8,000, respectively, and they share profits and losses equally. The entry to admit Fred would include:

The profit or loss is required to be divided equally between the partners if otherwise not stated.

An interest allowance is based on the beginning capital balance of each partner.

The statement of partners' equity reveals each partner's ownership percentage of the firm's capital.

Partners are required to report their share of partnership earnings on their personal tax return.

Partnerships are subject to federal income tax.

When a partnership is worth more than the amounts recorded, an incoming partner may:

Indicate the account(s) to be debited and credited to record the following transactions. -Jim, a partner, withdrew cash from the business. Debit ________ Credit ________

Indicate the account(s) to be debited and credited to record the following transactions. -Closed the income summary, there is a net loss. Debit & Credit

Indicate the account(s) to be debited and credited to record the following transactions. -Closed the income summary to the partners' accounts with a net income. Debit Credit &

Indicate the account(s) to be debited and credited to record the following transactions. -Jim, a partner, withdrew cash from the business. Debit Credit