Chapter 12--Accounting for Partnerships and LimitedLiability Companies Key

1. There are only four legal structures to form and operate a business.FALSEFALSEFALSEFALSE

2. In a general partnership, each partner is individually liable to creditors for debtsincurred by the partnership, to the extent of the partner's capital balance.FALSEFALSEFALSEFALSE

3. A partnership is a legal entity separate from its owners.FALSEFALSEFALSEFALSE

4. A partnership is subject to federal income taxes.FALSEFALSEFALSEFALSE

5. A disadvantage of partnerships is the mutual agency of all partners.TRUETRUETRUETRUE

6. A partnership requires only an agreement between two or more persons to organize.TRUETRUETRUETRUE

7. Each partner may withdraw the assets he or she contributed to the partnership at anytime.FALSEFALSEFALSEFALSE

8. When compared to a corporation, one of the major disadvantages of the partnership isits limited life.TRUETRUETRUETRUE

9. When compared to a corporation, one of the major advantages of a partnerships is itsrelative ease of formation.TRUETRUETRUETRUE

10. An advantage of the partnership form of business is that each partner’s potential lossis limited to that partner’s investment in the partnership.FALSEFALSEFALSEFALSE

11. A Limited Liability Company is a business entity form designed to overcome some ofthe disadvantages of the partnership form.TRUETRUETRUETRUE

12. For tax purposes, a Limited Liability Company may elect to be treated as apartnership.TRUETRUETRUETRUE

13. The Limited Liability Company may elect to be manager managed rather thanmember managed which means that only authorized members may legally bind thecorporation.TRUETRUETRUETRUE

14. Each partner has a separate capital and withdrawal account.TRUETRUETRUETRUE

15. The chart of accounts for a partnership, with the exception of drawing and capitalaccounts, does notnotnotnot differ from the chart of accounts for a sole proprietorship.TRUETRUETRUETRUE

16. The equity reporting for a Limited Liability Company is similar to that of apartnership but the changes in capital are shown on a statement of members' equity.TRUETRUETRUETRUE

17. When a partner invests noncash assets in a partnership, the assets are recorded at thepartner's book value.FALSEFALSEFALSEFALSE

18. Accounts receivable contributed to the partnership are recorded at their face value.TRUETRUETRUETRUE

19. A new partner contributes accounts receivable to a partnership which appear in theledger of his sole proprietorship at $20,500 and there was an allowance for doubtfulaccounts of $750. If $600 of the accounts receivables are completely worthless, thepartnership accounts receivable should be debited for $19,900.TRUETRUETRUETRUE

20. One reason that distributions of income and loss are prepared is to obtain theinformation to record a closing entry.TRUETRUETRUETRUE

21. If nothing is stated, partnership income is divided in proportion to the individualpartner's capital balance.FALSEFALSEFALSEFALSE

22. The salary allocation to partners used in dividing net income would also appear assalary expense on the partnership income statement.FALSEFALSEFALSEFALSE

23. If the articles of partnership provide for annual salary allowances of $36,000 and$18,000 to X and Y respectively and net income is $30,000, X's share of net income is$20,000.FALSEFALSEFALSEFALSE

24. If the net income of a partnership is less than the total of the allowances provided bythe partnership agreement, the difference must be divided among the partners in theincome-sharing ratio.FALSEFALSEFALSEFALSE

25. The amount that a partner withdraws as a monthly salary allowance does notnotnotnot affectthe division of net income.TRUETRUETRUETRUE

26. A devotes full time and B devotes one-half time to their partnership. If thepartnership agreement is silent concerning the division of net income, A will receive a$20,000 share of a net income of $30,000.FALSEFALSEFALSEFALSE

27. In the distribution of income, the net income is less than the salary and interestallowances granted; the remaining balance will be a negative amount that must be dividedamong the partners as though it were a loss.TRUETRUETRUETRUE

28. Details of the division of partnership income should normally be disclosed in thefinancial statements.TRUETRUETRUETRUE

29. Whenever a partnership is dissolved, the assets are liquidated.FALSEFALSEFALSEFALSE

30. When a partnership dissolves, a new partnership is formed and a new partnershipagreement should be prepared.TRUETRUETRUETRUE

31. Many partnerships provide for the admission of new partners or withdrawals ofpresent partners by amending existing partnership agreements, so that the firm maycontinue to operate without executing a new agreement.TRUETRUETRUETRUE

32. A person may be admitted to a partnership only with the consent of all the currentpartners.TRUETRUETRUETRUE

33. Partnership's asset accounts should be changed from cost to fair market value when anew partner is admitted to a firm or an existing partner withdraws and dies.TRUETRUETRUETRUE

34. In admitting a new partner, where the company chooses to use the purchase of aninterest method, the capital interest of the new partner is obtained from the currentpartners and both the total assets and total capital are increased.FALSEFALSEFALSEFALSE

35. When a new partner purchases the entire interest of an old partner, the new partner'scapital account should be credited for the amount he or she paid to the old partner.FALSEFALSEFALSEFALSE

36. If a new partner is given a 20% interest in the firm then the new partner will receive a20% interest in earnings.FALSEFALSEFALSEFALSE

37. When a new partner is admitted by making an investment in the partnership, the oldpartners' capital accounts are always credited.FALSEFALSEFALSEFALSE

38. When a new partner is admitted by making an investment of assets in the partnershipand the new partner has to pay a premium for admission, a bonus is divided among theold partners' capital accounts.TRUETRUETRUETRUE

39. Sarno has a capital balance of $42,000 after adjusting the assets to fair marketvalue. Minton contributes $22,000 to receive a 30% interest in the new partnership. Thebonus paid by Minton is $2,800.TRUETRUETRUETRUE

40. When a partner withdraws from the partnership, the partnership dissolves.TRUETRUETRUETRUE

41. If notnotnotnot enough partnership cash or other assets are available to pay the withdrawingpartner, a liability may be created for the amount owed the withdrawing partner.TRUETRUETRUETRUE

42. When a partner withdraws from the partnership by selling his or her interest back tothe partnership, the remaining partners must pay the withdrawing partner a specifiedamount from their personal assets.FALSEFALSEFALSEFALSE

43. X sells to A one-half of a partnership capital interest that totals $70,000 for$40,000. A's capital account in the partnership should be credited for $40,000.FALSEFALSEFALSEFALSE

44. When a new partner is admitted to a partnership, all partnership assets should berevised to reflect current prices.TRUETRUETRUETRUE

45. If a new partner is to be admitted to a partnership and a bonus is attributed to the oldpartnership, the bonus should be divided between the capital accounts of the originalpartners according to their capital balances.FALSEFALSEFALSEFALSE

46. When a new partner is admitted to a partnership, bonuses attributable to either the oldpartnership or to the incoming partner may be recognized in accordance with theagreement among the partners.TRUETRUETRUETRUE

47. Dissolution is the term which solely means to liquidate the partnership.FALSEFALSEFALSEFALSE

48. In a partnership liquidation, gains and losses on the sale of partnership assets aredivided among the partners' capital accounts on the basis of their capital balances.FALSEFALSEFALSEFALSE

49. If the share of losses on realization of the sale of noncash assets exceed the balance ina partner's capital account, the resulting balance is called a deficiency.TRUETRUETRUETRUE

50. In a partnership liquidation, if a partner has a debit capital balance in his or her capitalaccount, he or she is responsible for contributing personal assets sufficient to eliminatethe deficit.TRUETRUETRUETRUE

51. The process of winding up the affairs of a partnership is referred to as realization.FALSEFALSEFALSEFALSE

52. The distribution of cash, as the final process in winding up the affairs of a partnership,is based on the income-sharing ratio.FALSEFALSEFALSEFALSE

53. If a partner's capital balance is a debit after it has absorbed its share of the loss onrealization, the balance is referred to as a deficiency.TRUETRUETRUETRUE

54. In the liquidating process, any uncollected cash becomes a loss to the partnership andis divided among the remaining partners' capital balances based on their income-sharingratio.TRUETRUETRUETRUE

55. After all noncash assets have been converted to cash and all liabilities paid, A, B, andC have capital balances of $10,000 (debit), $5,000 (debit), and $25,000 (credit). Thecash available for distribution to the partners is $10,000.TRUETRUETRUETRUE

56. The statement of members’ equity is used for equity reporting of a partnership.FALSEFALSEFALSEFALSE

57. The partner capital accounts may change due to capital additions, net income, orwithdrawals.TRUETRUETRUETRUE

58. Revenue per employee may be used to measure partnership (LLC) efficiency.TRUETRUETRUETRUE

59. Which of the following is characteristic of a general partnership?A.A.A.A. The partners have co-ownership of partnership property.B. The partnership is subject to federal income tax.C. The partnership has an unlimited life.D. The partners have limited liability.

60. Which of the following is notnotnotnot a characteristic of a general partnership?A. the partnership is created by a contractB. mutual agencyC. partners share equally in net income or net losses unless an agreement statesdifferentlyD.D.D.D. dissolution occurs only when all partners agree

61. Which of the following is an advantage of a general partnership when compared to acorporation?A. The partnership is more likely have a net income.B.B.B.B. The partnership is relatively inexpensive to organize.C. Creditors to a partnership cannot attach personal assets of partners.D. The partnership usually hires professional managers.

62. Which of the following is a disadvantage of a partnership when compared to acorporation?A. The partnership is more likely to have a net loss.B. The partnership is easier to organize.C. The partnership is less expensive to organize.D.D.D.D. The partnership has limited life.

63. An advantage of the partnership form of business organization isA. unlimited liabilityB. mutual agencyC.C.C.C. ease of formationD. limited life

64. The characteristic of a partnership that gives the authority to any partner to legallybind the partnership and all other partners to business contracts is calledA. unlimited liabilityB. ease of formationC.C.C.C.mutual agencyD. dissolution

65. When a limited partnership is formedA. the partnership activities are limitedB. all partners have limited liabilityC.C.C.C. some of the partners have limited liabilityD. none of the partners have limited liability

66. Which of the following below is notnotnotnot one of the four major forms of business entitiesthat are discussed in this chapter?A. Sole proprietorshipB. CorporationC. PartnershipD.D.D.D. Subchapter S corporation

67. Which of the following below is notnotnotnot a characteristic of a Limited LiabilityCompany?A. unlimited lifeB. limited legal liabilityC.C.C.C. taxableD. moderate ability to raise capital

68. The operating agreement for a Limited Liability Company is sometimes called:A.A.A.A. articles of organizationB. articles of partnershipC. Schedule CD. the Uniform Partnership Act

69. When a partnership is formed, assets contributed by the partners should be recordedon the partnership books at theirA. book values on the partners' books prior to their being contributed to the partnershipB.B.B.B. fair market value at the time of the contributionC. original costs to the partner contributing themD. assessed values for property purposes

70. As part of the initial investment, a partner contributes equipment that had originallycost $110,000 and on which accumulated depreciation of $85,000 has been recorded. Ifsimilar equipment would cost $140,000 to replace and the partners agree on a valuationof $45,000 for the contributed equipment, what amount should be debited to theequipment account?A.A.A.A. $45,000B. $140,000C. $110,000D. $85,000

71. As part of the initial investment, Omar contributes accounts receivable that had abalance of $25,000 in the accounts of a sole proprietorship. Of this amount, $1,150 iscompletely worthless. For the remaining accounts, the partnership will establish aprovision for possible future uncollectible accounts of $750. The amount debited toAccounts Receivable for the new partnership isA. $23,100B. $25,000C. $24,250D.D.D.D. $23,850

72. Radley and Smithers share income and losses in a 2:1 ratio after allowing for salariesto Radley of $24,000 and $30,000 to Smithers. Net income for the partnership is$48,000. Income should be divided as follows:A. Radley, $24,000; Smithers, $24,000B. Radley, $21,000; Smithers, $27,000C. Radley, $32,000; Smithers, $16,000D.D.D.D. Radley, $20,000; Smithers, $28,000

73. Franco and Elisa share income equally. During the current year the partnership netincome was $40,000. Franco made withdrawals of $12,000 and Elisa made withdrawalsof $17,000. At the beginning of the year, the capital account balances were: Francocapital, $40,000; Elisa capital, $58,000. Franco’s capital account balance at the end ofthe year isA. $74,500B. $62,500C. $60,000D.D.D.D. $48,000

74. Franco and Elisa share income equally. During the current year the partnership netincome was $40,000. Franco made withdrawals of $12,000 and Elisa made withdrawalsof $17,000. At the beginning of the year, the capital account balances were: Francocapital, $42,000; Elisa capital, $58,000. Elisa’s capital account balance at the end of theyear isA. $81,000B. $50,000C.C.C.C. $61,000D. $95,000

75. Partnership income and losses are usually divided on the basis of interest, salaries,and stated ratios becauseA.A.A.A. partners seldom contribute time and resources equallyB. this method reflects the amount of time devoted to the partnership by the partnersC. it is simpler than following the legal rulesD. it prevents arguments among the partners

76. A ratio of 2:2:1 is the same asA. 20%:20%:10%B.B.B.B. 2/5:2/5:1/5C. 2/10:2/10:1/20D. both (a) and (c)

77. Compton and Danson form a partnership in which Compton contributes $50,000 inassets and agrees to devote half time to the partnership. Danson contributed $40,000 inassets and agrees to devote full time to the partnership. If no additional information isavailable, how will Compton and Danson share in the division of income?A. 5:8B. 1:2C.C.C.C. 1:1D. 5:4

78. Xavier and Yolonda have original investments of $50,000 and $100,000 respectivelyin a partnership. The articles of partnership include the following provisions regarding thedivision of net income: interest on original investment at 15%, salary allowances of$22,000 and $20,000 respectively, and the remainder equally. How much of the netincome of $90,000 is allocated to Xavier?A. $30,250B. $47,750C. $45,000D.D.D.D. $42,250

79. Xavier and Yolonda have original investments of $50,000 and $100,000 respectivelyin a partnership. The articles of partnership include the following provisions regardingthe division of net income: interest on original investment at 10%, salary allowances of$27,000 and $18,000 respectively, and the remainder equally. How much of the netincome of $40,000 is allocated to Xavier?A. $20,000B.B.B.B. $22,000C. $32,000D. $0

80. Xavier and Yolonda have original investments of $50,000 and $100,000 respectivelyin a partnership. The articles of partnership include the following provisions regardingthe division of net income: interest on original investment at 10%, salary allowances of$27,000 and $18,000 respectively, and the remainder equally. How much of the net lossof $6,000 is allocated to Xavier?A. $4,000B.B.B.B. $1,000C. $3,000D. $6,000

81. If there is no written agreement as to the way income will be divided amongpartnersA.A.A.A. they will share income and losses equallyB. they will share income and losses according to their capital balancesC. they will share income and losses according to the time devoted to the business.D. there really is no partnership agreement

82. Partner A has a capital balance of $20,000 and devotes full time to thepartnership. Partner B has a capital balance of $30,000 and devotes half time to thepartnership. If no other information is available regarding distributions, in what ratio isnet income to be divided?A. 3:5B.B.B.B. 1:1C. 2:3D. 1:2

83. Details of the division of net income for a partnership should be disclosedA. in the asset section of the balance sheetB. in the partners’ subsidiary ledgerC. in the statement of cash flowsD.D.D.D. in the partnership income statement

84. Pia and Ramona are partners who share income in the ratio of 3:2. Their capitalbalances are $80,000 and $120,000 respectively. Income Summary has a credit balanceof $40,000. What is Pia’s capital balance after closing Income Summary to Capital?A. $60,000B.B.B.B. $104,000C. $56,000D. $64,000

85. Pia and Ramona are partners who share income in the ratio of 3:2. Their capitalbalances are $80,000 and $120,000 respectively. Income Summary has a credit balanceof $40,000. What is Ramona’s capital balance after closing Income Summary toCapital?A. $140,000B.B.B.B. $136,000C. $96,000D. $144,000

86. UseUseUseUse thethethethe followingfollowingfollowingfollowing informationinformationinformationinformation totototo answeransweransweranswer thethethethe followingfollowingfollowingfollowing questions.questions.questions.questions.

Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipmentwith a book value of $5,000 and a fair market value of $15,000. Marta will invest abuilding with a book value of $30,000 and a fair market value of $35,000.

At what amount will the building be recorded?A. $20,000B. $25,000C. $30,000D.D.D.D. $35,000

87. UseUseUseUse thethethethe followingfollowingfollowingfollowing informationinformationinformationinformation totototo answeransweransweranswer thethethethe followingfollowingfollowingfollowing questions.questions.questions.questions.

Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipmentwith a book value of $5,000 and a fair market value of $15,000. Marta will invest abuilding with a book value of $30,000 and a fair market value of $35,000.

At what amount will Izabelle’s capital account be recorded?A.A.A.A. $15,000B. $5,000C. $20,000D. $50,000

88. UseUseUseUse thethethethe followingfollowingfollowingfollowing informationinformationinformationinformation totototo answeransweransweranswer thethethethe followingfollowingfollowingfollowing questions.questions.questions.questions.

Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipmentwith a book value of $5,000 and a fair market value of $15,000. Marta will invest abuilding with a book value of $30,000 and a fair market value of $35,000.

At what amount will Marta’s capital account be recorded?A. $50,000B. $15,000C. $30,000D.D.D.D. $35,000

89. Robert Johnson contributed equipment, inventory, and $42,000 cash to thepartnership. The equipment had a book value of $25,000 and market value of$28,000. The inventory has a book value of $50,000, but only had a market value of$15,000 due to obsolescence. The partnership also assumed a $12,000 note payableowed by Robert that was originally used to purchase the equipment.

What amount should Robert’s capital account be recorded?A. $85,000B.B.B.B. $73,000C. $117,000D. $105,000

90. Henry Jones contributed equipment, inventory, and $44,000 cash to thepartnership. The equipment had a book value of $35,000 and market value of$28,000. The inventory has a book value of $25,000, but only had a market value of$12,000. due to obsolescence. The partnership also assumed a $15,000 note payableowed by Henry that was originally used to purchase the equipment.

What amount should Henry’s capital account be recorded?A. $104,000B. $89,000C.C.C.C. $69,000D. $84,000

91. Ofelia and Teresa share income and losses in a 2:1 ratio after allowing for salaries toOfelia of $48,000 and $60,000 to Teresa. Net income for the partnership is$132,000. Income should be divided as follows:A. Ofelia, $56,000; Teresa, $76,000B. Ofelia, $60,000; Teresa, $72,000C. Ofelia, $72,000; Teresa, $60,000D.D.D.D. Ofelia, $64,000; Teresa, $68,000

92. Carla and Eliza share income equally. During the current year the partnership netincome was $40,000. Carla made withdrawals of $12,000 and Eliza made withdrawalsof $17,000. At the beginning of the year, the capital account balances were: Carla capital,$42,000; Eliza capital, $55,000. Eliza’s capital account balance at the end of the yearisA. $52,000B.B.B.B. $58,000C. $82,000D. $75,000

93. Xavier and Yolanda have original investments of $50,000 and $100,000 respectivelyin a partnership. The articles of partnership include the following provisions regarding thedivision of net income: interest on original investment at 20%, salary allowances of$27,000 and $18,000 respectively, and the remainder equally. How much of the netincome of $91,000 is allocated to Yolanda?A. $26,500B.B.B.B. $46,000C. $45,000D. $45,500

94. Xavier and Yolanda have original investments of $50,000 and $100,000 respectivelyin a partnership. The articles of partnership include the following provisions regardingthe division of net income: interest on original investment at 20%, salary allowances of$34,000 and $26,000 respectively, and the remainder equally. How much of the netincome of $100,000 is allocated to Yolanda?A. $49,000B.B.B.B. $51,000C. $50,000D. $56,000

95. Xavier and Yolanda have original investments of $50,000 and $100,000 respectivelyin a partnership. The articles of partnership include the following provisions regardingthe division of net income: interest on original investment at 20%, salary allowances of$34,000 and $26,000 respectively, and the remainder equally. How much of the netincome of $100,000 is allocated to Xavier?A.A.A.A. $49,000B. $51,000C. $50,000D. $56,000

96. Xavier and Yolanda have original investments of $50,000 and $100,000 respectivelyin a partnership. The articles of partnership include the following provisions regarding thedivision of net income: interest on original investment at 10%, salary allowances of$38,000 and $28,000 respectively, and the remainder equally. How much of the netincome of $75,000 is allocated to Yolanda?A. $66,000B. $40,000C.C.C.C. $35,000D. $43,000

97. Xavier and Yolanda have original investments of $50,000 and $100,000 respectivelyin a partnership. The articles of partnership include the following provisions regarding thedivision of net income: interest on original investment at 10%, salary allowances of$38,000 and $28,000 respectively, and the remainder equally. How much of the netincome of $75,000 is allocated to Xavier?A. $66,000B.B.B.B. $40,000C. $35,000D. $43,000

98. Xavier and Yolanda have original investments of $50,000 and $100,000 respectivelyin a partnership. The articles of partnership include the following provisions regardingthe division of net income: interest on original investment at 10%, salary allowances of$27,000 and $18,000 respectively, and the remainder equally. How much of the net lossof $6,000 is allocated to Yolanda?A. $1,000B. $3,000C.C.C.C. $5,000D. $0

99. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capitalbalances are $40,000 and $60,000 respectively. Income Summary has a credit balance of$20,000. What is Tomas’s capital balance after closing Income Summary to Capital?A. $45,000B.B.B.B. $55,000C. $65,000D. $75,000

100. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capitalbalances are $80,000 and $120,000 respectively. Income Summary has a credit balanceof $30,000. What is Tomas’ capital balance after closing Income Summary to Capital?A.A.A.A. $102,500B. $22,500C. $57,500D. $127,500

101. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capitalbalances are $80,000 and $120,000 respectively. Income Summary has a credit balanceof $30,000. What is Saturn’s capital balance after closing Income Summary to Capital?A. $102,500B. $120,000C. $112,500D.D.D.D. $127,500

102. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capitalbalances are $40,000 and $60,000 respectively. Income Summary has a credit balance of$20,000. What is Saturn’s capital balance after closing Income Summary to Capital?A. $55,000B. $75,000C. $45,000D.D.D.D. $65,000

103. Franco and Jason share income and losses in a 2:1 ratio after allowing for salaries toFranco of $15,000 and $30,000 to Jason. If the partnership suffers a $15,000 loss, by howmuch would Jason’s capital account increase?A.A.A.A. $10,000B. $20,000C. $40,000D. $25,000

104. Lambert invests $10,000 for a 1/3 interest in a partnership in which the otherpartners have capital totaling $26,000 before admitting Lambert. After distribution ofthe bonus, what is Lambert’s capital?A.A.A.A. $12,000B. $10,000C. $8,667D. $5,333

105. Douglas pays Selena $39,000 for her 30% interest in a partnership with total netassets of $105,000. Following this transaction, Selena’s capital account should have acredit balance ofA.A.A.A. $31,500B. $39,000C. $35,250D. more than $39,000

106. Nick is admitted to an existing partnership by investing cash. Nick agrees to pay abonus for his ownership interest because of the past success of the partnership. WhenNick’s investment in the partnership is recordedA. his capital account will be credited for more than the cash he investedB. his capital account will be credited for the amount of cash he investedC. a bonus will be credited for the amount of cash he investedD.D.D.D. a bonus will be distributed to the old partners' capital accounts.

107. Bobbi and Stuart are partners. The partnership capital of Bobbi is $40,000 andStuart is $70,000. Bobbi sells his interest in the partnership to John for $50,000. Thejournal entry to record the admission of John as a new partner would includeA.A.A.A. a credit to John’s capital for $40,000B. a credit to Stuart’s capital for $10,000C. a credit John’s capital for $50,000D. a credit to John’s capital for $40,000 and a credit to Stuart’s capital for $10,000

108. When a partner dies, the capital account balances of the remaining partnersA. will increaseB. will decreaseC. will remain the sameD.D.D.D.may increase, decrease, or remain the same

109. A partner withdraws from a partnership by selling her interest to another person whocurrently is notnotnotnot associated with the firm. As a results of this transaction, the capitalaccount balance of the other partners in the partnershipA. will increaseB. will decreaseC.C.C.C. will remain the sameD. may increase, decrease, or remain the same

110. Samuel and Darci are partners. The partnership capital for Samuel is $50,000 andfor Darci is $60,000. Josh is admitted as a new partner by investing $50,000 cash. Joshis given a 20% interest in return for his investment. The amount of the bonus to the oldpartners isA. $0B.B.B.B. $18,000C. $8,000D. $10,000

111. Abby and Bailey are partners who share income in the ratio of 2:1 and have capitalbalances of $60,000 and $30,000 respectively. With the consent of Bailey, Sandra buysone half of Abby's interest for $35,000. For what amount will Abby's capital account bedebited to record admission of Sandra to the partnership?A. $40,000B. $15,000C. $35,000D.D.D.D. $30,000

112. A new partner may be admitted to a partnership byA. inheriting a partnership interestB.B.B.B. contributing assets to the partnershipC. purchasing a specific quantity of assets from the partnershipD. the consent of the majority of the current partners

113. A change in the ownership of a partnership results in theA. consolidating of the partnershipB. liquidating of the partnershipC. realization of the partnershipD.D.D.D. dissolution of the partnership

114. When a new partner is admitted to a partnership, there should be a(n)A.A.A.A. revaluation of assetsB. realization of assetsC. allocation of assetsD. return of assets

115. When a new partner is admitted to a partnership, there should be a(n)A. increase in the total assets of the partnership.B.B.B.B. new capital account added to the ledger for the new partner.C. increase in the total owner's equity of the partnership.D. debit amount to the partner’s capital account for the cash received by the currentpartner.

116. When an additional partner is admitted to a partnership by contribution of assets tothe partnershipA. the total assets of the partnership do not changeB. no liabilities can be contributed at the same timeC. the amount of the cash contribution is the same as the amount of the debit to the newpartner's capital accountD.D.D.D. the total of the owner's equity accounts increases

117. When a new partner is admitted to a partnershipA.A.A.A. a bonus may be attributable to the old partnerB. a bonus may only result from more cash being given by the new partner than the valueof the of the assets being purchasedC. a bonus agreed upon by the partners is recorded as an asset so long as the amount iswithin the range set by the SECD. a bonus is not recorded

118. The Calvin-Dogwood Partnership owns inventory that was purchased for $65,000,has a current replacement cost of $64,500, and is priced to sell for $95,000. At whatamount should the inventory be recorded in the accounts of the new partnership if Alexisis to be admitted?A. $97,000B.B.B.B. $64,500C. $65,000D. $95,000

119. Immediately prior to the admission of Abbott, the Smith-Jones Partnership assetshad been adjusted to current market prices, and the capital balances of Smith and Joneswere $40,000 and $60,000 respectively. If the parties agree that the business is worth$120,000, what is the amount of bonus that should be recognized in the accounts at theadmission of Abbott?A. $60,000B. $80,000C. $40,000D.D.D.D. $20,000

120. Benson and Orton are partners who share income in the ratio of 2:3 and have capitalbalances of $50,000 and $30,000 respectively. Ramsey is admitted to the partnershipand is given a 40% interest by investing $20,000. What is Benson’s capital balance afteradmitting Ramsey?A. $20,000B. $25,000C.C.C.C. $42,000D. $18,000

121. Benson and Orton are partners who share income in the ratio of 2:3 and have capitalbalances of $30,000 and $50,000 respectively. Ramsey is admitted to the partnershipand is given a 10% interest by investing $20,000. What is Orton’s capital balance afteradmitting Ramsey?A.A.A.A. $56,000B. $34,000C. $20,000D. $44,000

122. Benton and Orton are partners who share income in the ratio of 1:3 and have capitalbalances of $70,000 and $30,000 respectively. Ramsey is admitted to the partnershipand is given a 40% interest by investing $20,000. What is Benson’s capital balance afteradmitting Ramsey?A. $20,000B. $7,000C. $70,000D.D.D.D. $63,000

123. Benson and Orton are partners who share income in the ratio of 1:3 and have capitalbalances of $70,000 and $30,000 respectively. Ramsey is admitted to the partnershipand is given a 40% interest by investing $20,000. What is Orton’s capital balance afteradmitting Ramsey?A. $20,000B.B.B.B. $9,000C. $70,000D. $63,000

124. Singer and McMann are partners in a business. Singer’s original capital was$40,000 and McMann’s was $60,000. They agree to salaries of $12,000 and $18,000 forSinger and McMann respectively and 10% interest on original capital. If they agree toshare remaining profits and losses on a 3:2 ratio, what will Singer’s share of the incomebe if the income for the year was $50,000?A. $24,000B.B.B.B. $22,000C. $16,000D. $23,400

125. Singer and McMann are partners in a business. Singer’s original capital was$40,000 and McMann’s was $60,000. They agree to salaries of $12,000 and $18,000 forSinger and McMann respectively and 10% interest on original capital. If they agree toshare remaining profits and losses on a 3:2 ratio, what will McMann‘s share of theincome be if the income for the year was $30,000?A.A.A.A. $20,000B. $18,000C. $18,600D. $17,400

126. Singer and McMann are partners in a business. Singer’s original capital was$40,000 and McMann’s was $60,000. They agree to salaries of $12,000 and $18,000 forSinger and McMann respectively and 10% interest on original capital. If they agree toshare remaining profits and losses on a 3:2 ratio, what will Singer’s share of the income(loss) be if the net loss for the year was $10,000?A. ($12,600)B.B.B.B. ($14,000)C. ($6,000)D. ($10,000)

127. Singer and McMann are partners in a business. Singer’s original capital was$40,000 and McMann’s was $60,000. They agree to salaries of $12,000 and $18,000 forSinger and McMann respectively and 10% interest on original capital. If they agree toshare remaining profits and losses on a 3:2 ratio, what will Singer’s share of the incomebe if the income for the year was $15,000?A. $9,000B. $2,400C.C.C.C. $1,000D. $5,600

128. Singer and McMann are partners in a business. Singer’s original capital was$40,000 and McMann’s was $60,000. They agree to salaries of $12,000 and $18,000 forSinger and McMann respectively and 10% interest on original capital. If they agree toshare remaining profits and losses on a 3:2 ratio, what will McMann’s share of theincome be if the income for the year was $15,000?A. $6,000B. $9,400C. $12,600D.D.D.D. $14,000

129. Alpha and Beta are partners who share income in the ratio of 1:2 and have capitalbalances of $40,000 and $70,000 at the time they decide to terminate thepartnership. After all noncash assets are sold and all liabilities are paid, there is a cashbalance of $50,000. What amount of loss on realization should be allocated to Alpha?A. $60,000B.B.B.B. $20,000C. $30,000D. $50,000

130. Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and$50,000 respectively. They share income in the ratio of 3:2:1. Income Summary with adebit balance of $30,000 is closed to the capital accounts. Doug withdraws from thepartnership. How much cash does he get upon withdrawal?A. $30,000B.B.B.B. $20,000C. $40,000D. $24,000

131. A partnership liquidation occurs whenA. a new partner is admittedB. a partner diesC. the ownership interest of one partner is sold to a new partnerD.D.D.D. the assets are sold, liabilities paid, and business operations terminated

132. The balance sheet of Morgan and Rockwell was as follows immediately prior to thepartnership's being liquidated: cash, $20,000; other assets, $160,000; liabilities, $40,000;Morgan capital, $60,000; Rockwell capital, $80,000. The other assets were sold for$139,000. Morgan and Rockwell share profits and losses in a 2:1 ratio. As a final cashdistribution from the liquidation, Morgan will receive cash totalingA.A.A.A. $46,000B. $51,000C. $60,000D. $49,500

133. Harriet, Mickey, and Zack decide to liquidate their partnership. All assets are soldand the liabilities are paid. Following these transactions, the capital balances and profitand loss percentages are as follows: Harriet, $27,000 and 30%; Mickey, $(12,000) and40%; Zack, $43,000 and 30%. Mickey is unable to contribute any assets to reduce thedeficit. How much cash will Harriet receive as a results of the partnership liquidation?A. $27,000B.B.B.B. $21,000C. $23,400D. $15,000

134. The remaining cash of a partnership (after creditors have been paid) upon liquidationis divided among partners according to theirA.A.A.A. capital balancesB. contribution of assetsC. drawing balancesD. income sharing ratio

135. A gain or loss on realization is divided among partners according to theirA.A.A.A. income sharing ratioB. capital balancesC. drawing balancesD. contribution of assets

136. Adriana and Belen are partners who share income in the ratio of 3:2 and have capitalbalances of $50,000 and $90,000 at the time they decide to terminate thepartnership. After all noncash assets are sold and all liabilities are paid, there is a cashbalance of $90,000. How much cash should be distributed to Adriana?A. $50,000B.B.B.B. $20,000C. $30,000D. $45,000

137. Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all ofthe assets for cash, dividing losses on realization, and paying liabilities, the balances inthe capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; andRamona, $30,000 Cr. How much cash is available for distribution to the partners?A. $120,000B. $30,000C.C.C.C. $40,000D. $90,000

138. Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all ofthe assets for cash, dividing losses on realization, and paying liabilities, the balances inthe capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; andRamona, $30,000 Cr. How much cash should be distributed to Everett assuming thatMiguel pays the deficiency?A.A.A.A. $50,000B. $20,000C. $30,000D. $40,000

139. Antonio and Barbara are partners who share income in the ratio of 1:2 and havecapital balances of $40,000 and $70,000 at the time they decide to terminate thepartnership. After all noncash assets are sold and all liabilities are paid, there is a cashbalance of $80,000. What amount of loss on realization should be allocated to Barbara?A. $80,000B. $10,000C.C.C.C. $20,000D. $30,000

140. Soledad and Winston are partners who share income in the ratio of 1:3 and havecapital balances of $100,000 and $140,000 at the time they decide to terminate thepartnership. After all noncash assets are sold and all liabilities are paid, there is a cashbalance of $130,000. What amount of loss on realization should be allocated toSoledad?A. $60,000B.B.B.B. $27,500C. $92,500D. $32,500

141. Soledad and Winston are partners who share income in the ratio of 1:3 and havecapital balances of $100,000 and $140,000 at the time they decide to terminate thepartnership. After all noncash assets are sold and all liabilities are paid, there is a cashbalance of $130,000. What amount of loss on realization should be allocated toWinston?A. $110,000B. $97,500C. $42,500D.D.D.D. $82,500

142. Partners Ken and Macki each have a $40,000 capital balance and share income andlosses in a 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal$60,000. If the noncash assets are sold for $80,000, the Macki’s capital account willA.A.A.A. decrease by $16,000.B. decrease by $24,000.C. increase by $24,000.D. decrease by $40,000.

143. Partners Ken and Macki each have a $40,000 capital balance and share income andlosses in a 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal$60,000. If the noncash assets are sold for $50,000, and each partner is personallyinsolvent, Partner Macki will eventually receive cash ofA. $0.B.B.B.B. $10,000.C. $12,000.D. $20,000.

144. Partners Ken and Macki each have a $40,000 capital balance and share income andlosses in a 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal$60,000. If the noncash assets are sold for $60,000, and both partners agree to make upan capital deficits with personal cash contributions, Partner Macki will eventually receivecash ofA. $0.B. $4,000.C.C.C.C. $16,000.D. $24,000.

145. The capital accounts of Harrison and Marti have balances of $180,000 and $130,000,respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10,Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew$96,000 and $78,000, respectively, and net income for the year was $248,000. Thearticles of partnership make no reference to the division of net income.

Based on this information, the statement of partners’ equity for 2010 would show whatamount in the capital account for Marti on December 31, 2010?A. $228,000B.B.B.B. $176,000C. $404,000D. $52,000

146. The capital accounts of Harrison and Marti have balances of $180,000 and $130,000,respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10,Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew$96,000 and $78,000, respectively, and net income for the year was $248,000. Thearticles of partnership make no reference to the division of net income.

Based on this information, the statement of partners’ equity for 2010 would show whatamount in the capital account for Harrison on December 31, 2010?A.A.A.A. $228,000B. $176,000C. $404,000D. $52,000

147. The capital accounts of Harrison and Marti have balances of $180,000 and $130,000,respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10,Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew$96,000 and $78,000, respectively, and net income for the year was $248,000. Thearticles of partnership make no reference to the division of net income.

Based on this information, the statement of partners’ equity for 2010 would show whatamount as total capital for the partnership on December 31, 2010?A. $228,000B. $176,000C.C.C.C. $404,000D. $752,000

148. The capital accounts of Hawk and Martin have balances of $160,000 and $140,000,respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10,Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew$86,000 and $68,000, respectively, and net income for the year was $258,000. Thearticles of partnership make no reference to the division of net income.

Based on this information, the statement of partners’ equity for 2010 would show whatamount in the capital account for Martin on December 31, 2010?A. $173,000B. $211,000C.C.C.C. $201,000D. $232,000

149. The capital accounts of Hawk and Martin have balances of $160,000 and $140,000,respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10,Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew$86,000 and $68,000, respectively, and net income for the year was $258,000. Thearticles of partnership make no reference to the division of net income.

Based on this information, the statement of partners’ equity for 2010 would show whatamount in the capital account for Hawk on December 31, 2010?A. $211,600B.B.B.B. $213,000C. $201,000D. $203,000

150. The capital accounts of Hawk and Martin have balances of $160,000 and $140,000,respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10,Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew$86,000 and $68,000, respectively, and net income for the year was $258,000. Thearticles of partnership make no reference to the division of net income.

Based on this information, the statement of partners’ equity for 2010 would show whatamount as total capital for the partnership on December 31, 2010?A. $384,600B. $412,600C. $404,000D.D.D.D. $414,000

151. Immediately prior to the admission of Allen, the Sanson-Jeremy Partnership assetshad been adjusted to current market prices, and the capital balances of Sanson and Jeremywere $80,000 and $120,000 respectively. If the parties agree that the business is worth$240,000, what is the amount of bonus that should be recognized in the accounts at theadmission of Allen?A. $60,000B. $80,000C.C.C.C. $40,000D. $100,000

152. The Craig-Doran Partnership owns inventory that was purchased for $85,000, has acurrent replacement cost of $54,500, and is priced to sell for $98,000. At what amountshould the inventory be recorded in the accounts of the new partnership if Alexis is to beadmitted?A. $98,000B.B.B.B. $54,500C. $85,000D. $79,167

153. Paul and Roger are partners who share income in the ratio of 3:2. Their capitalbalances are $90,000 and $130,000 respectively. Income Summary has a credit balanceof $50,000. What is Roger’s capital balance after closing Income Summary to Capital?A. $155,000B.B.B.B. $150,000C. $110,000D. $115,000

154. Paul and Roger are partners who share income in the ratio of 3:2. Their capitalbalances are $90,000 and $130,000 respectively. Income Summary has a credit balanceof $50,000. What is Paul’s capital balance after closing Income Summary to Capital?A. $108,000B.B.B.B. $120,000C. $115,000D. $180,000