Question 1

Cortney invests $80,000 for a 10 percent interest in a partnership that has total capital of $600,000 after admitting Cortney.Which of the following is true?

Accepted Answer

The answer of Cortney invests $80,000 for a 10 percent...

Question 2

The division of partnership profits on the basis of salaries,interest,and a stated ratio is usually necessary because

Accepted Answer

Partners often have different levels of contribution to a partnership in terms of time, effort, and resources. Therefore, dividing profits on the basis of salaries, interest, and a stated ratio helps to ensure that each partner receives a fair share of the profits based on their individual contributions.

Question 3

Lexi invests $80,000 for a one-fourth interest in a partnership in which the other partners have capital totaling $160,000 before admitting Lexi.After distribution of the bonus,what is Lexi's capital balance?

Accepted Answer

Before admitting Lexi, the partnership had a total capital of $160,000. Since Lexi is investing $80,000 for a one-fourth interest, this means that the remaining three-fourths interest is worth $240,000 ($80,000 x 3). Therefore, the total capital of the partnership after Lexi's admission is $400,000 ($160,000 + $240,000).
Since Lexi has a one-fourth interest, her share of the total capital is $100,000 ($400,000 ÷ 4). However, it is specified that she is only investing $80,000, so she will receive a bonus of $20,000 ($100,000 - $80,000) to make her capital balance equal to her investment. Therefore, Lexi's capital balance after distribution of the bonus is $80,000 + $20,000 = $100,000. However, the given options do not include $100,000, and the closest option is C, $60,000.

Question 4

Partners K and R receive an interest allowance of $20,000 and $30,000,respectively,and divide the remaining profits and losses in a 3:1 ratio.If the company sustained a net loss of $22,000 during the year,the entry to close the income or loss into their capital accounts is:

Accepted Answer

The answer of Partners K and R receive an interest...

Question 5

A partner invests into a partnership a building with a $50,000 carrying value and $80,000 fair market value.The related mortgage payable of $25,000 is not assumed by the partnership.The entry to record the investment in partnership is:

Accepted Answer

The entry to record the investment in partnership would be to debit the partnership's building account for its fair market value of $80,000 and credit the partner's capital account for the total investment of $80,000. Therefore, the correct entry is 11ed7616_750e_4233_a7a2_518598839cfb_TB2176_11. Choice A is incorrect because it only records the carrying value of the building, which does not reflect the fair market value that the partner is contributing to the partnership. Choice C is incorrect because it assumes that the partnership also assumes the mortgage payable, which is not stated in the problem. Choice D is incorrect because it debits the partner's capital account for only the carrying value of the building and not the fair market value that the partner is contributing.

Question 6

Partners A and B receive a salary of $30,000 and $60,000,respectively,and share income and losses in a 2:1 ratio,respectively.If the partnership suffers a $30,000 net loss in 20x5,the entry to close the income or loss into their capital accounts is:

Accepted Answer

The answer of Partners A and B receive a salary...

Question 7

Alex,Clinton,and Evan are in a partnership.Evan decides to withdraw from the partnership by selling his interest to Linsey.Alex and Clinton agree to this.Alex's Capital account and Clinton's Capital account

Accepted Answer

When Linsey is admitted into the partnership by purchasing Evan's interest, Alex's and Clinton's capital accounts remain unaffected. The transaction involves Evan and Linsey, altering Evan's capital account to zero and establishing Linsey's capital account with the amount paid for Evan's interest. Alex's and Clinton's capital accounts do not change as a result of this transaction.

Question 8

Which of the following methods of distributing income and losses cannot be accomplished (cannot stand alone)?

Accepted Answer

Salary alone cannot be used to distribute income and losses because it does not account for the remaining profit or loss after salaries are allocated. It needs to be combined with other methods to ensure the entire income or loss is distributed.

Question 9

Which of the following statements is correct regarding partnerships?

Accepted Answer

A) The statement is correct as partnerships are not separate legal entities and the accounting treatment is similar to a sole proprietorship. 
B) The statement is also correct as the partnership assumes the liability related to the asset, and the accounting entries follow the same principle. 
C) The statement is also correct as each partner's capital and withdrawals need to be separately maintained to determine their share of profits/losses in the partnership. 
Therefore, all of the choices are correct.

Question 10

Which of the following will not result in dissolution of a partnership?

Accepted Answer

While incapacitation, bankruptcy, and admission of a new partner can all result in dissolution of a partnership, a negative capital balance of a partner alone is not enough to dissolve a partnership. However, it may lead to the partner being required to make additional contributions to the partnership to cover the negative balance.

Question 11

Partners B and I receive a salary allowance of $6,000 and $14,000,respectively,and share the remainder equally.If the company earned $8,000 during the period,the entry to close the income or loss into their capital accounts is:

Accepted Answer

The total salary allowance is $20,000 ($6,000 + $14,000). The company earned $8,000 during the period, so the total income is $28,000. The partners' share of the remainder is ($28,000 - $20,000)/2 = $4,000 each.

The entry to close the income or loss into their capital accounts would be:
Partner B Capital Account: 
- Salary Allowance: $14,000 
- Share of Profit: $4,000 
= $18,000

Partner A Capital Account:
- Salary Allowance: $6,000 
- Share of Profit: $4,000 
= $10,000

The journal entry would be:
Debit 
Partner B Capital Account: $18,000 
Partner A Capital Account: $10,000

Credit 
Income Summary Account: $28,000

Question 12

Joan contributes cash of $48,000,and Jamie contributes office equipment that cost $40,000 but is valued at $32,000 to the formation of a new partnership.The entry to record the investments in the partnership is:

Accepted Answer

The entry to record Joan's cash contribution is to debit Cash for $48,000, and credit Joan's Capital account for $48,000. The entry to record Jamie's contribution is to debit Office Equipment for $32,000 (fair market value), debit Loss on Valuation for $8,000 ($40,000 cost - $32,000 fair market value), and credit Jamie's Capital account for $40,000. Therefore, the entry to record the investments in the partnership is:

Debit Cash $48,000
Debit Office Equipment $32,000
Debit Loss on Valuation $8,000
Credit Joan's Capital $48,000
Credit Jamie's Capital $40,000

This is the entry shown in option B.

Question 13

Chad invests $20,000 for a one-third interest in a partnership in which the other partners have capital totaling $52,000 before admitting Chad.After distribution of the bonus,what is Chad's capital?

Accepted Answer

Before Chad's admission, the total capital of the partnership was $52000. Chad invests $20,000 to buy a one-third interest, which means the total value of the partnership is $20,000 ÷ (1/3) = $60,000. 
After distribution of the bonus, we don't know the exact amount of the bonus or how it is distributed, but we do know that it does not affect the relative ownership percentages of the partners. 
Therefore, Chad's one-third interest is still worth $60,000 ÷ 3 = $20,000, which is his capital contribution.

Question 14

Which of the following statements is correct regarding partnerships?

Accepted Answer

In a partnership, it is necessary to maintain separate Capital and Withdrawals accounts for each partner to accurately track each partner's contributions and withdrawals.

Question 15

Partners A and B receive a salary of $16,000 and $14,000,respectively.They agree to share income and losses equally.If the partnership has income of $280,000 in 20x5,the entry to close the income into their capital accounts is:

Accepted Answer

Since the partnership income is $280,000, the total income to be distributed is $30,000 (equal share of $280,000). Partner A's share will be $15,000 ($16,000 salary + $15,000 share of income) and Partner B's share will be $15,000 ($14,000 salary + $15,000 share of income). To close the income into their capital accounts, we need to credit the Income Summary account for $30,000 and debit Partner A's capital account for $15,000 and Partner B's capital account for $15,000. Therefore, the correct entry is:

Income Summary     30,000
    Partner A, Capital     15,000
    Partner B, Capital     15,000

The entry in choice B matches this format.

Question 16

Sara invests $120,000 for a 30 percent interest in a partnership in which the other partners have capital totaling $200,000 before admitting Sara.After distribution of the bonus,what is Sara's capital balance?

Accepted Answer

Sara's capital balance is 30% of the total capital after her investment, which is $200,000 + $120,000 = $320,000. Therefore, Sara's capital balance is $320,000 x 30% = $96,000.

Question 17

Joan pays Eva $60,000 for her $40,000 interest in a partnership.The entry to record the sale on the partnership books is:

Accepted Answer

The answer of Joan pays Eva $60,000 for her $40,000...

Question 18

Stuart had a $100,000 capital balance for eight months and a $130,000 balance for four months.Cathy had a $76,000 capital balance for five months and a $100,000 balance for seven months.If the net income of the year is $160,000,and income is distributed based on average capital balances,the entry to show the distribution of income to each partner is:

Accepted Answer

To calculate the average capital balance for each partner, we need to multiply the balance by the number of months it was held, add those values and then divide by the total number of months. 
Stuart's average capital balance = [(100,000 x 8) + (130,000 x 4)] / 12 = 108,333.33
Cathy's average capital balance = [(76,000 x 5) + (100,000 x 7)] / 12 = 90,333.33
To distribute the net income of $160,000, we need to calculate each partner's share based on their average capital balance as a percentage of the total average capital balance: 
Stuart's share = (108,333.33 / 198,666.67) x 160,000 = $87,437.50
Cathy's share = (90,333.33 / 198,666.67) x 160,000 = $72,562.50
Entry to distribute income: 
Stuart Capital Account 87,437.50
Cathy Capital Account 72,562.50
Retained Earnings 0 (since all income has been distributed)

Question 19

A partner has a capital balance of $40,000 for five months,$50,000 for six months,and $60,000 for one month.The average capital balance is

Accepted Answer

The answer of A partner has a capital balance of...

Question 20

Which of the following will not result in dissolution of a partnership?

Accepted Answer

The sale of partnership assets will not result in dissolution of a partnership. It may result in a change in the partnership's business operations, but the partnership itself will continue to exist. Death or withdrawal of a partner, and admission of a new partner, may result in dissolution or reformation of a partnership.

Quiz 12: Accounting for Partnerships

Cortney invests $80,000 for a 10 percent interest in a partnership that has total capital of $600,000 after admitting Cortney.Which of the following is true?

The division of partnership profits on the basis of salaries,interest,and a stated ratio is usually necessary because

Lexi invests $80,000 for a one-fourth interest in a partnership in which the other partners have capital totaling $160,000 before admitting Lexi.After distribution of the bonus,what is Lexi's capital balance?

Partners K and R receive an interest allowance of $20,000 and $30,000,respectively,and divide the remaining profits and losses in a 3:1 ratio.If the company sustained a net loss of $22,000 during the year,the entry to close the income or loss into their capital accounts is:

A partner invests into a partnership a building with a $50,000 carrying value and $80,000 fair market value.The related mortgage payable of $25,000 is not assumed by the partnership.The entry to record the investment in partnership is:

Partners A and B receive a salary of $30,000 and $60,000,respectively,and share income and losses in a 2:1 ratio,respectively.If the partnership suffers a $30,000 net loss in 20x5,the entry to close the income or loss into their capital accounts is:

Alex,Clinton,and Evan are in a partnership.Evan decides to withdraw from the partnership by selling his interest to Linsey.Alex and Clinton agree to this.Alex's Capital account and Clinton's Capital account

Which of the following methods of distributing income and losses cannot be accomplished (cannot stand alone) ?

Which of the following statements is correct regarding partnerships?

Which of the following will not result in dissolution of a partnership?

Partners B and I receive a salary allowance of $6,000 and $14,000,respectively,and share the remainder equally.If the company earned $8,000 during the period,the entry to close the income or loss into their capital accounts is:

Joan contributes cash of $48,000,and Jamie contributes office equipment that cost $40,000 but is valued at $32,000 to the formation of a new partnership.The entry to record the investments in the partnership is:

Chad invests $20,000 for a one-third interest in a partnership in which the other partners have capital totaling $52,000 before admitting Chad.After distribution of the bonus,what is Chad's capital?

Which of the following statements is correct regarding partnerships?

Partners A and B receive a salary of $16,000 and $14,000,respectively.They agree to share income and losses equally.If the partnership has income of $280,000 in 20x5,the entry to close the income into their capital accounts is:

Sara invests $120,000 for a 30 percent interest in a partnership in which the other partners have capital totaling $200,000 before admitting Sara.After distribution of the bonus,what is Sara's capital balance?

Joan pays Eva $60,000 for her $40,000 interest in a partnership.The entry to record the sale on the partnership books is:

A partner has a capital balance of $40,000 for five months,$50,000 for six months,and $60,000 for one month.The average capital balance is

Which of the following will not result in dissolution of a partnership?