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Exam 19: Accounting for Partnerships

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Question 31

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Salary and interest allowances for partners are treated as expenses of the firm and are used in the determination of net income.

A) True
B) False

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Question 32

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Roy Reynolds and Mike Truesdale are partners.To expand the expertise of their business,they have agreed to admit Jennie Fellows to the partnership on January 1,2016.The capital account balances on January 1,2016,after revaluation of assets,are Reynolds,$80,000,and Truesdale,$60,000.Net income or net loss is shared equally.On page 20 of a general journal,record the admission of Fellows to the partnership on January 1,2016,assuming that Fellows invests $46,000 for 20 percent interest in the business.Omit the descriptions.

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Question 33

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Which of the following statements is correct?

The cost of merchandise withdrawn by a partner for personal use is recorded as a debit to the partner's drawing account and a credit to the Purchases account.

On November 1,Jackson and Kiln formed a partnership with Jackson contributing land valued at $100,000 and a building valued at $125,000.Kiln contributed $55,000 in cash.The partnership assumed the mortgage on Jackson's property of $85,000.Profits and losses are to be shared equally.What are the balances of the partner's capital accounts after recording these transactions?

Karen Schuler and Mary Ryan are partners.To expand the expertise of their business,they have agreed to admit Samuel Wing to the partnership on January 1,2016.The capital account balances on January 1,2016,after revaluation of assets,are Schuler,$80,000,and Ryan,$60,000.Net income or net loss is shared equally.On page 10 of a general journal,record the admission of Wing to the partnership on January 1,2016,assuming that Wing invests $58,000 for one-third interest in the business.Omit the descriptions.

Sam Sung and Mitchell Vaughn are partners,and each has a capital balance of $50,000.To gain admission to the partnership,Amanda Scott pays $35,000 directly to Vaughn for one-half of his equity.Scott's capital account will reflect an equity interest of:

The entry to record a partner's salary allowance consists of a debit to

Mary Ann Mason operates a sole proprietorship business that sells craft supplies.On January 1,2016,Mason has agreed to transfer her assets and liabilities to a partnership that will operate The Craft Company.Mason will own a one-third interest in the capital of the partnership.The agreed upon values of assets and liabilities to be transferred follow. Accounts receivable of $2,000 (of which approximately $200 is uncollectible) Merchandise inventory,$4,000 Furniture and fixtures,$6,000 Accounts payable,$1,000 Record the receipt of the assets and liabilities by the partnership on page 1 of a general journal.Omit the description.

Danny Ortiz and Angela Hufford are partners,and each has a capital balance of $25,000.To gain admission to the partnership,Derek Peters pays $15,000 directly to Ortiz for one-half of his equity.After the admission of Peters,the total partners' equity in the records of the partnership will be

The entry to record the equal distribution of net income between two partners consists of a debit to

All of the following are included on the statement of partners' equities except

If a new partner purchases an interest in a partnership firm directly from an existing partner,the Cash account is debited and the new partner's capital account is credited.

If no other method of dividing net income or net losses is specified in the partnership agreement,it is divided

The entry to record the salary and interest allowance on capital invested but not withdrawn from the partnership requires a debit to the Income Summary account and a credit to the partner's capital account.

A pool of talented professionals can form as a Not-for-Profit partnership and provide needed community services.

The characteristic of a partnership that means that any partner can make valid contracts for the partnership is known as ___________________.

The partnership ____________________ is a written contract that specifies the rights and responsibilities of the partners.

Antonio Bandala wishes to sell half of his partnership interest for $70,000 to Phillips.His capital balance is $120,000.Prepare the journal entry to record this transaction in the partnership records.

Abbott,Casper,and Costello are partners,sharing profits and losses in the ratio of 30,30,and 40 percent respectively.Their partnership agreement provides that if one of them withdraws from the partnership,the assets and liabilities are to be revalued,the gain or loss allocated to the partners,and the retiring partner paid the balance of his account.Costello withdraws from the partnership on December 31,2016.The capital account balances before recording revaluation are Abbott,$130,000;Casper $150,000;and Costello,$120,000.The effect of the revaluation is to increase Merchandise Inventory by $5,000 and the Building account balance by $20,000.How much cash will be paid to Costello?