Accounting for Partnerships – Chapter 12 | Test Bank with Answers 24th

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Fundamental Accounting Principles, 24e (Wild)

Chapter 12 Accounting for Partnerships

1) A partnership has a limited life.

2) A partnership is an incorporated association of two or more people to pursue a business for profit as co-owners.

3) A partnership does not pay a business income tax. The income or loss of a partnership is allocated to the partners and is taxed on each partner's return.

4) Any one partner can end a partnership for any reason.

5) Unlimited liability means that when a partnership cannot pay its debts, creditors usually can take partners' personal assets.

6) Partners are taxed on their withdrawals, not on their share of partnership income.

7) The income or loss of a partnership is allocated to the partners according to the partnership agreement, and it is included in determining the taxable income for each partner's tax return.

8) Mutual agency means each partner can bind the partnership to contracts.

9) Accounting procedures for income tax expense and liabilities are the same for C corporations and S corporations.

10) Partners in a partnership are taxed on the partnership income, not the amounts they withdraw from the partnership.

11) Limited liability partnerships are designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.

12) A partnership may allocate salary allowances to the partners who spend more time working for the business.

13) In a limited partnership the general partner has unlimited liability.

14) Partner return on equity can be used by each partner to help evaluate the success of a partnership compared to other investments.

15) Feldt is a partner in Feldt & Dodson Company. Feldt's share of the partnership income is $18,600 and her average partnership equity is $155,000. Her partner return on equity equals 8.33.

16) When a partner invests in a partnership, her partnership capital account is debited for the amount invested.

17) Partners' withdrawals are debited to their separate withdrawals accounts.

18) Partners can invest assets but not liabilities into a partnership.

19) The withdrawals account of each partner is closed to income summary at the end of the accounting period.

20) Certain corporations with 100 or fewer stockholders can elect to be treated as a partnership for income tax purposes. These corporations are called S corporations.

21) In a Limited Partnership, there must be more than one general partner.

22) A Limited Liability Partnership (LLP) protects innocent partners from malpractice or negligence claims resulting from the acts of another partner.

23) The owners of a limited liability company (LLC), who are called members, are protected with the limited liability feature.

24) In closing the accounts at the end of a period, the partners' capital accounts are credited for their share of the partnership net income or debited for their share of the partnership loss.

25) In the absence of a partnership agreement, income of a partnership will be shared equally by the partners.

26) Salary allowances are reported as salaries expense on a partnership income statement.

27) The statement of partners' equity shows the beginning balance in retained earnings, plus current assets, less current liabilities, plus the income (or less the loss) and the ending balance in retained earnings.

28) The equity section of the balance sheet of a partnership reports the separate capital account balances of each partner.

29) Even if partners devote their time and services to their partnership, any salary allowances are not expenses on the income statement.

30) Interest allowances are given to partners who made larger capital contributions.

31) Assume that the M & L partnership agreement gave March 60% and Ludwig 40% of partnership income and losses. The partnership lost $27,000 in the current period. This implies that March's share of the loss equals $16,200, and Ludwig's share equals $10,800.

32) A new partner is admitted either by purchasing an interest from one or more current partners or by investing cash or other assets in the partnership. 

33) When a partner is admitted through purchasing an interest from one or more current partners, the partnership's assets, liabilities, and total equity are unaffected.

34) When the current value of a partnership is greater than the recorded amounts of equity, the partners will not permit a new partner to be admitted into the partnership.

35) Assets invested by a partner into a partnership become the property of the business.

36) Admitting a partner by accepting assets invested into the partnership is a personal transaction between one or more current partners and the new partner.

37) Current partners usually require any new partner to pay a bonus for the privilege of joining when the current value of a partnership is greater than the recorded amounts of equity.

38) When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

39) When a partnership is liquidated, its business is ended.

40) A capital deficiency exists when a partner has a debit balance in their capital account at the point of final cash distribution during liquidation.

41) A capital deficiency comes from liquidation losses, withdrawals before liquidation, or recurring losses in prior periods.

42) If a partner is unable to cover a deficiency, the other partners absorb the deficiency.

43) If at the time of partnership liquidation, a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency, then that partner is entitled to share in the final distribution of cash.

44) An unincorporated association of two or more persons to pursue a business for profit as co-owners is a:

A) Partnership.

B) Proprietorship.

C) Contractual company.

D) Mutual agency.

E) Voluntary organization.

45) Characteristics of a general partnership include all of the following except:

A) Limited life.

B) Mutual agency.

C) Unlimited liability.

D) A corporate business income tax.

E) Voluntary association.

46) A partnership agreement:

A) Is not binding unless it is in writing.

B) Is the same as a limited liability partnership.

C) Is binding even if it is not in writing.

D) Does not generally address the issue of the rights and duties of the partners.

E) Is also called the articles of incorporation.

47) Mutual agency means

A) Creditors can apply their claims to partners' personal assets.

B) Partners are taxed on partnership withdrawals.

C) All partners must agree before the partnership can act.

D) The partnership has a limited life.

E) A partner can bind the partnership to contracts.

48) A partnership that has general and limited partners, where the limited partners have no personal liability beyond the amounts they invest in the partnership is a:

A) Mutual agency partnership.

B) Limited partnership.

C) Limited liability partnership.

D) General partnership.

E) Limited liability company.

49) A partnership which protects innocent partners from malpractice or negligence claims resulting from acts of another partner is a(n):

A) Partnership.

B) Sole proprietorship.

C) Limited liability partnership.

D) General partnership.

E) Unlimited liability company.

50) Mutual agency means that each partner in a partnership can bind the partnership to contracts. Which of the following statements is correct regarding this authority?

A) The partner's authority must be derived from the partnership agreement.

B) The partner's authority may be effectively limited by a formal resolution of the other partners, even if third parties are not aware of that limitation.

C) Only a partner with a majority interest in a partnership has the authority to represent the partnership to third parties.

D) A partner has authority to deal with third parties on the behalf of the other partners only if he has written permission to do so.

E) A partner may be able to legally bind the partnership to actions even if the other partners are unaware of his actions.

51) Pat and Nicole formed Here & There as a limited liability company. The Internal Revenue Service will tax the LLC as:

A) An S corporation.

B) A C corporation.

C) A foreign entity.

D) A joint venture.

E) A partnership.

52) A partnership in which all partners have mutual agency and unlimited liability is called:

A) Limited partnership.

B) Limited liability partnership.

C) General partnership.

D) S corporation.

E) Limited liability company.

53) Carter Pearson is a partner in Event Promoters. His beginning partnership capital balance for the current year is $55,000, and his ending partnership capital balance for the current year is $62,000. His share of this year's partnership income was $6,250. What is his partner return on equity?

A) 5.34%

B) 8.93%

C) 10.08%

D) 11.36%

E) 10.68%

54) Design Services is organized as a limited partnership, with Miko Toori as one of its partners. Miko's capital account began the year with a balance of $35,000. During the year, Miko's share of the partnership income was $7,500, and Miko received $4,000 in distributions from the partnership. What is Miko's partner return on equity?

A) 10.2%

B) 22.7%

C) 19.5%

D) 20.4%

E) 21.4%

55) The following information is available regarding Grace Smit's capital account in Enterprise Consulting Group, a general partnership, for a recent year:

What is Smit's partner return on equity during the year in question?

A) 36.6%

B) 34.7%

C) 10.8%

D) 11.4%

E) 55.7%

56) Partnership accounting does not:

A) Use a capital account for each partner.

B) Use a withdrawals account for each partner.

C) Allocate net income to each partner according to the partnership agreement.

D) Allocate net loss to each partner according to the partnership agreement.

E) Tax the business entity.

57) Partnership accounting is the same as accounting for:

A) A foreign entity.

B) A C corporation.

C) A sole proprietorship, except that separate capital and withdrawal accounts are kept for each partner.

D) An S corporation.

E) A corporation, except that retained earnings is used to keep track of partners' withdrawals.

58) Partners' withdrawals of assets are:

A) Credited to their withdrawals accounts.

B) Debited to their withdrawals accounts.

C) Credited to their retained earnings.

D) Debited to their retained earnings.

E) Debited to their asset accounts.

59) The withdrawals account of each partner is:

A) Closed to that partner's capital account.

B) Closed to the Income Summary account.

C) A permanent account that is not closed.

D) Credited with that partner's share of net income.

E) Debited with that partner's share of net loss.

60) R. Stetson contributed $14,000 in cash plus office equipment valued at $7,000 to the SJ Partnership. The journal entry to record the transaction for the partnership is:

A) Debit Cash $14,000; debit Office Equipment $7,000; credit R Stetson, Capital $21,000.

B) Debit Cash $14,000; debit Office Equipment $7,000; credit SJ Partnership, Capital $21,000.

C) Debit SJ Partnership $21,000; credit R. Stetson, Capital $21,000.

D) Debit R. Stetson, Capital $21,000; credit SJ Partnership, Capital $21,000.

E) Debit Cash $14,000; debit Office Equipment $7,000; credit Common Stock $21,000.

61) T. Andrews contributed $14,000 in to the T & B Partnership. The journal entry to record the transaction for the partnership is:

A) Debit Cash $14,000; credit T & B Partnership, Capital $14,000.

B) Debit Cash $14,000; credit T. Andrews, Capital $14,000.

C) Debit T & B Partnership $14,000; credit T. Andrews, Capital $14,000.

D) Debit T. Andrews, Capital $14,000; credit T & B Partnership, Capital $14,000.

E) Debit Cash $14,000; credit Common Stock $14,000.

62) Forman and Berry are forming a partnership. Forman will invest a building that currently is being used by another business owned by Forman. The building has a market value of $80,000. Also, the partnership will assume responsibility for a $20,000 note secured by a mortgage on that building. Berry will invest $50,000 cash. For the partnership, the amounts to be recorded for the building and for Forman's Capital account are:

A) Building, $80,000 and Forman, Capital, $80,000.

B) Building, $60,000 and Forman, Capital, $60,000.

C) Building, $60,000 and Forman, Capital, $50,000.

D) Building, $80,000 and Forman, Capital, $60,000.

E) Building, $60,000 and Forman, Capital, $80,000.

63) Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $180,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Smart is investing $120,000 cash. The balance of Maxwell's Capital account will be:

A) $180,000.

B) $124,000.

C) $56,000.

D) $64,000.

E) $60,000.

64) Harvey and Quick have decided to form a partnership. Harvey is going to contribute a depreciable asset to the partnership as his equity contribution to the partnership. The following information regarding the asset to be contributed by Harvey is available:

 *will be assumed by the partnership

Based on this information, Harvey's beginning equity balance in the partnership will be:

A) $76,000

B) $36,000

C) $18,000

D) $27,000

E) $45,000

65) Dalworth and Minor have decided to form a partnership. Minor is going to contribute a depreciable asset to the partnership as her equity contribution to the partnership. The following information regarding the asset to be contributed by Minor is available:

Based on this information, Minor's beginning equity balance in the partnership will be:

A) $276,000

B) $158,000

C) $136,000

D) $127,000

E) $18,000

66) In the absence of a partnership agreement, income (and loss) should be allocated based on:

A) A fractional basis.

B) The ratio of capital investments.

C) Salary allowances.

D) Equal shares.

E) Interest allowances.

67) In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance:

A) Is ignored when earnings are not sufficient to pay interest.

B) Can make up for unequal capital contributions.

C) Is an expense of the business.

D) Must be paid because the partnership contract has unlimited life.

E) Legally becomes a liability of the general partner.

68) Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Singer's capital account?

A) $20,000.

B) $25,000.

C) $30,000.

D) $40,000.

E) $75,000.

69) Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Wheadon's capital account?

A) $20,000.

B) $25,000.

C) $30,000.

D) $40,000.

E) $75,000.

70) Christie and Jergens formed a partnership with capital contributions of $300,000 and $400,000, respectively. Their partnership agreement calls for Christie to receive a $60,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Christie and Jergens's respective shares are:

A) $67,500; $67,500.

B) $92,500; $42,500.

C) $57,857; $77,143.

D) $90,000; $40,000.

E) $35,000; $100,000.

71) Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000, respectively. Their partnership agreement calls for Farmer to receive a $70,000 per year salary. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Farmer and Taylor's respective shares are:

A) $67,500; $67,500.

B) $130,000; $5,000.

C) $106,140; $28,860.

D) $90,000; $45,000.

E) $102,500; $32,500.

72) Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000, respectively. Their partnership agreement calls for Farmer to receive a $70,000 per year salary. The remaining income or loss is to be divided equally. Assuming net income for the current year is $135,000, the journal entry to allocate net income is:

A) Debit Income Summary, $135,000; Credit Farmer, Capital, $67,500; Credit Taylor, Capital, $67,500.

B) Debit Income Summary, $135,000; Credit Farmer, Capital, $130,000; Credit Taylor, Capital, $5,000.

C) Debit Income Summary, $135,000; Credit Farmer, Capital, $106,140; Credit Taylor, Capital, $28,860.

D) Debit Income Summary, $135,000; Credit Farmer, Capital, $102,500; Credit Taylor, Capital, $32,500.

E) Debit Income Summary, $130,000; Credit Taylor, Capital, $102,500; Credit Farmer, Capital, $32,500.

73) Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000, respectively. Their partnership agreement calls for Farmer to receive a $70,000 per year salary. The remaining income or loss is to be divided equally. Assuming net loss for the current year is $15,000, the journal entry to allocate the net loss is:

A) Debit Income Summary, $15,000; Debit Farmer, Capital, $27,500; Credit Taylor, Capital, $42,500.

B) Debit Income Summary, $15,000; Credit Farmer, Capital, $7,500; Credit Taylor, Capital, $7,500.

C) Debit Taylor, Capital, $42,500; Credit Income Summary, $15,000; Credit Farmer, Capital, $27,500.

D) Debit Income Summary, $15,000; Debit Taylor, Capital, $27,500; Credit Farmer, Capital, $42,500.

E) Debit Income Summary, $15,000; Credit Taylor, Capital, $7,500; Credit Farmer, Capital, $7,500.

74) Which of the following statements is true?

A) Partners are employees of the partnership.

B) Salaries to partners are expenses on the partnership income statement.

C) Salary allowances usually reflect the relative value of services provided by partners.

D) Salary allowances are expenses.

E) Interest allowances are expenses.

75) Zheng invested $100,000 and Murray invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per year salary allowance to Murray, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns $105,000 in income are:

A) $52,500 to Zheng; $52,500 to Murray.

B) $35,000 to Zheng; $70,000 to Murray.

C) $57,500 to Zheng; $47,500 to Murray.

D) $42,500 to Zheng; $62,500 to Murray.

E) $70,000 to Zheng; $60,000 to Murray.

76) Zheng invested $100,000 and Murray invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per year salary allowance to Murray, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Assuming net income for the current year is $105,000, the journal entry to allocate net income is:

A) Debit Income Summary, $105,000; Credit Zheng, Capital, $52,500, Credit Murray, Capital, $52,500.

B) Debit Income Summary, $105,000; Credit Zheng, Capital, $35,000, Credit Murray, Capital, $70,000.

C) Debit Income Summary, $105,000; Credit Zheng, Capital, $57,500, Credit Murray, Capital, $47,500.

D) Debit Income Summary, $105,000; Credit Zheng, Capital, $42,500, Credit Murray, Capital, $62,500.

E) Debit Zheng, Capital, $57,500, Debit Murray, Capital, $47,500; Credit Income Summary, $105,000;

77) Brown invested $200,000 and Freeman invested $150,000 in a partnership. They agreed to an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns $205,000 in income are:

A) $102,500 to Brown; $102,500 to Freeman.

B) $117,143 to Brown; $87,857 to Freeman.

C) $122,500 to Brown; $82,500 to Freeman.

D) $105,000 to Brown; $100,000 to Freeman.

E) $112,750 to Brown; $92,250 to Freeman.

78) The partnership agreement for Wilson, Pickett & Nelson, a general partnership, provided that profits or losses be shared between the partners in the ratio of their financial contributions to the partnership. Wilson contributed $100,000, Pickett contributed $50,000 and Nelson contributed $50,000. In the partnership's first year of operation, it incurred a loss of $110,000. What amount of the partnership's loss, rounded to the nearest dollar, should be absorbed by Nelson?

A) $50,000

B) $27,500

C) $36,667

D) $0

E) $40,000

79) Olivia Greer is a partner in Made for You. An analysis of Greer's capital account indicates that during the most recent year, she withdrew $30,000 from the partnership. Her share of the partnership's net loss was $16,000 and she made an additional equity contribution of $10,000. Her capital account ended the year at $150,000. What was her capital balance at the beginning of the year?

A) $154,000

B) $170,000

C) $180,000

D) $186,000

E) $196,000

80) The following information is available on TGR Enterprises, a partnership, for the most recent fiscal year:

There are three partners in TGR Enterprises: Tracey, Gregory and Rodgers. At the end of the year, the partners' capital accounts were in the ratio of 2:1:2, respectively. Compute the ending capital balances of the three partners.

A) Tracey = $108,000; Gregory = $54,000; Rodgers = $108,000.

B) Tracey = $90,000; Gregory = $90,000; Rodgers = $90,000.

C) Tracey = $204,000; Gregory = $102,000; Rodgers = $204,000.

D) Tracey = $84,000; Gregory = $102,000; Rodgers = $84,000.

E) Tracey = $60,000; Gregory = $30,000; Rodgers = $60,000.

81) The following information is available on PDC Enterprises, a partnership, for the most recent fiscal year:

There are three partners in TGR Enterprises: Pearson, Darling and Cathay. At the end of the year, the partners' capital accounts were in the ratio of 2:2:1, respectively. Compute the ending capital balances of Cathay.

A) $466,000.

B) $402,000.

C) $416,000.

D) $544,000.

E) $388,000.

82) A partner can withdraw from a partnership by any of the following means except:

A) Selling his/her interest to another person for cash.

B) Selling his/her interest to another person in exchange for assets.

C) Receiving cash from the partnership in the amount of his/her interest.

D) Receiving assets from the partnership in the amount of his/her interest.

E) Close the business and liquidate the assets under the mutual agency principle.

83) A bonus may be paid in all of the following situations except:

A) By a new partner when the current value of a partnership is greater than the recorded amounts of equity.

B) By a withdrawing partner to remaining partners if the recorded value of the equity is overstated.

C) To a new partner with exceptional talents.

D) By remaining partners to a withdrawing partner if the recorded equity is understated.

E) By an existing partner to him or herself when in need of personal cash flow.

84) When a partner is added to a partnership:

A) The previous partnership ends.

B) The underlying business operations end.

C) The underlying business operations must close and then re-open.

D) The partnership must continue.

E) The partnership equity always increases.

85) A partnership recorded the following journal entry:

This entry reflects:

A) Acceptance of a new partner who invests $60,000 and receives a $20,000 bonus.

B) Withdrawal of a partner who pays a $10,000 bonus to each of the other partners.

C) Addition of a partner who pays a bonus to each of the other partners.

D) Additional investment into the partnership by Founder and Aqui.

E) Withdrawal of $10,000 each by Founder and Aqui upon the admission of a new partner.

86) Wright, Bell, and Edison are partners and share income in a 2:5:3 ratio. The partnership's capital balances are as follows: Wright, $33,000, Bell $27,000 and Edison $40,000. Edison decides to withdraw from the partnership, and the partners agree not to revalue the assets upon Edison's retirement. The journal entry to record Edison's June 1 withdrawal from the partnership if Edison sells his interest to Whitney for $45,000 after the other two partners approve Whitney as partner is:

A) Debit Edison, Capital $45,000; credit Whitney, Capital $45,000.

B) Debit Edison, Capital $40,000; credit Cash $40,000.

C) Debit Edison, Capital $40,000; debit Wright, Capital $2,500; debit Bell, Capital $2,500; credit Whitney, Capital $45,000.

D) Debit Edison, Capital $40,000; credit Whitney, Capital $40,000.

E) Debit Edison, Capital $40,000; debit Cash $5,000; credit Whitney, Capital $45,000.

87) Wright, Bell, and Edison are partners and share income in a 2:5:3 ratio. The partnership's capital balances are as follows: Wright, $33,000, Bell $27,000 and Edison $40,000. Edison decides to withdraw from the partnership, and the partners agree not to revalue the assets upon Edison's retirement. The journal entry to record Edison's June 1 withdrawal from the partnership if Edison is paid $40,000 for his equity is:

A) Debit Edison, Capital $40,000; credit Cash $40,000.

B) Debit Wright, Capital $20,000; Debit Bell, Capital $20,000; credit Cash $40,000.

C) Debit Wright, Capital $20,000; Debit Bell, Capital $20,000; credit Edison, Capital $40,000.

D) Debit Edison, Capital $40,000; credit Wright, Capital $20,000; credit Bell, Capital $20,000.

E) Debit Cash $40,000; credit Edison, Capital $40,000.

88) Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $64,000, and Martin's capital balance $67,000. Hewlett and Martin have agreed to share equally in income or loss. The existing partners agree to accept Black with a 20% interest. Black will invest $35,000 in the partnership. The bonus that is granted to Hewlett and Martin equals:

A) $900 each.

B) $1,500 each.

C) $600 each.

D) 600 to Hewlett; $900 to Martin.

E) $0, because Hewlett and Martin actually grant a bonus to Black.

89) Hewlett and Martin are partners. Hewlett's capital balance in the partnership is $64,000, and Martin's capital balance $61,000. Hewlett and Martin have agreed to share equally in income or loss. Hewlett and Martin agree to accept Black with a 25% interest. Black will invest $35,000 in the partnership. The bonus that is granted to Black equals:

A) $5,000.

B) $2,500.

C) $6,667.

D) $3,333.

E) $0, because Black must actually grant a bonus to Hewlett and Martin.

90) Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Masters, $15,000; Hardy, $15,000; Rowen, $(2,000). After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $28,000 in cash to be distributed. Rowen pays $2,000 to cover the deficiency in his account. The general journal entry to record the final distribution would be:

A) Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Cash $30,000.

B) Debit Masters, Capital $14,000; debit Hardy, Capital $14,000; credit Cash $28,000.

C) Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Rowen, Capital $2,000; credit Cash $28,000.

D) Debit Cash $28,000; debit Rowen, Capital $2,000; credit Masters, Capital $15,000; credit Hardy, Capital $15,000.

E) Debit Masters, Capital $9,334; debit Hardy, Capital $9,333; debit Rowen, Capital $9,333; credit Cash $28,000.

91) Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Masters, $15,000; Hardy, $15,000; Rowen, $30,000. After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $54,000 in cash to be distributed. The general journal entry to record the final distribution would be:

A) Debit Masters, Capital $13,500; debit Hardy, Capital $13,500; debit Rowen, Capital $27,000; credit Cash $54,000.

B) Debit Masters, Capital $13,000; debit Hardy, Capital $13,000; debit Rowen, Capital $28,000; credit Cash $54,000.

C) Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; debit Rowen, Capital $30,000; credit Gain from Liquidation $6,000; credit Cash $54,000.

D) Debit Cash $54,000; credit Rowen, Capital $13,500; credit Masters, Capital $13,500; credit Hardy, Capital $27,000.

E) Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; debit Rowen, Capital $30,000; credit Loss from Liquidation $6,000; credit Cash $54,000.

92) When a partnership is liquidated:

A) Noncash assets are distributed to partners.

B) Any gain or loss on liquidation is allocated to the partner with the highest capital account balance.

C) Liabilities are paid or settled.

D) Any remaining cash is distributed to the partners equally.

E) The business may continue to operate.

93) A capital deficiency means that:

A) The partnership has a loss.

B) The partnership has more liabilities than assets.

C) A partner has a debit balance in her capital account.

D) A partner has a credit balance in her capital account.

E) The partnership has been sold at a loss.

94) When a partner is unable to pay a capital deficiency:

A) The partner must take out a loan to cover the deficient balance.

B) The deficiency is absorbed by the remaining partners.

C) The partnership ends before distribution of cash.

D) The deficient partner is relieved of the liability.

E) The remaining partners must wait for the deficiency to be paid before cash is distributed.

95) Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage, $(5,000). After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency. The journal entry to record the distribution should be:

A) Debit Henry, Capital $25,667; debit Luther, Capital $25,667; debit Gage, Capital $25,666; credit Cash $77,000.

B) Debit Henry, Capital $42,500; debit Luther, Capital $34,500; credit Cash $77,000.

C) Debit Henry, Capital $45,000; debit Luther, Capital $37,000; credit Gage, Capital $5,000; credit Cash $77,000.

D) Debit Cash $77,000, debit Gage, Capital $5,000, credit Henry, Capital $45,000, credit Luther, Capital $37,000.

E) Debit Cash $77,000; credit Henry, Capital $25,667; credit Luther, Capital $25,667; credit Gage, Capital $25,666.

96) Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage, $(5,000). After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency. What amount of cash will Gage receive upon liquidation?

A) $25,667.

B) $20,667.

C) $30,667.

D) Gage will be invoiced for $5,000.

E) $0.

97) Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000. For the partnership, the amounts recorded for the building and for Fontaine's Capital account are:

A) Building $250,000; Fontaine, Capital $250,000.

B) Building $175,000; Fontaine, Capital $175,000.

C) Building $250,000; Fontaine, Capital $75,000.

D) Building $250,000; Fontaine, Capital $175,000.

E) Building $175,000; Fontaine, Capital $75,000.

98) Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000. For the partnership, the amounts recorded for Fontaine's Capital account and for Monroe's Capital account are:

A) Fontaine, Capital $175,000; Monroe, Capital $45,000.

B) Fontaine, Capital $0; Monroe, Capital $100,000.

C) Fontaine, Capital $250,000; Monroe, Capital $100,000.

D) Fontaine, Capital $250,000; Monroe, Capital $155,000.

E) Fontaine, Capital $175,000; Monroe, Capital $155,000.

99) Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000. For the partnership, the amounts recorded for total assets and for total capital account are:

A) Total assets $405,000; total capital $330,000.

B) Total assets $350,000; total capital $350,000.

C) Total assets $350,000; total capital $275,000.

D) Total assets $305,000; total capital $230,000.

E) Total assets $405,000; total capital $305,000.

100) Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $150,000 for its first year, what amount of income is credited to Cox's capital account?

A) $50,000.

B) $64,286.

C) $45,000.

D) $36,000.

E) $60,000.

101) Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $150,000 for its first year, what amount of income is credited to Lee's capital account? (Do not round your intermediate calculations.)

A) $50,000.

B) $67,500.

C) $45,000.

D) $54,000.

E) $60,000.

102) Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $150,000 for its first year, what amount of income is credited to North's capital account?

A) $50,000.

B) $63,500.

C) $61,500.

D) $47,500.

E) $45,000.

103) Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $174,000 for its first year, what amount of income is credited to Lee's capital account?

A) $58,000.

B) $57,000.

C) $61,500.

D) $55,500.

E) $48,000.

104) Mace and Bowen are partners and share equally in income or loss. Mace's current capital balance is $135,000 and Bowen's is $120,000. Mace and Bowen agree to accept Kent with a 30% interest in the partnership. Kent invests $115,000 in the partnership. The amount credited to Kent's capital account is:

A) $111,000.

B) $115,000.

C) $92,500.

D) $120,000.

E) $119,000.

105) Mace and Bowen are partners and share equally in income or loss. Mace's current capital balance is $135,000 and Bowen's is $120,000. Mace and Bowen agree to accept Kent with a 30% interest in the partnership. Kent invests $115,000 in the partnership. The balances in Mace's and Bowen's capital accounts after admission of the new partner equal:

A) Mace $135,000; Bowen $120,000.

B) Mace $137,000; Bowen $122,000.

C) Mace $133,000; Bowen $118,000.

D) Mace $139,000; Bowen $120,000.

E) Mace $135,000; Bowen $124,000.

106) Peters and Chong are partners and share equally in income or loss. Peters' current capital balance is $140,000 and Chong's is $130,000. Peters and Chong agree to accept Aaron with a 30% interest in the partnership. Aaron invests $98,000 in the partnership. The balances in Peters's and Chong's capital accounts after admission of the new partner equal:

A) Peters $140,000; Chong $130,000.

B) Peters $146,200; Chong $136,200.

C) Peters $145,000; Chong $135,000.

D) Peters $133,800; Chong $123,800.

E) Peters $166,027; Chong $156,027.

107) Peters and Chong are partners and share equally in income or loss. Peters' current capital balance is $140,000 and Chong's is $130,000. Peters and Chong agree to accept Aaron with a 30% interest in the partnership. Aaron invests $98,000 in the partnership. The amount credited to Aaron's capital account is:

A) $81,000.

B) $102,600.

C) $110,400.

D) $98,000.

E) $114,533.

108) Peters, Chong, and Aaron are dissolving their partnership. Their partnership agreement allocates each partner an equal share of all income and losses. The current period's ending capital account balances are Peters, $54,000; Chong, $42,000; and Aaron, $(2,000). After all assets are sold and liabilities are paid, there is $94,000 in cash to be distributed. Aaron is unable to pay the deficiency. The journal entry to record the distribution should be:

A) Debit Peters, Capital $54,000; debit Chong, Capital $40,000; credit Cash $94,000.

B) Debit Peters, Capital $54,000; debit Chong, Capital $42,000; credit Cash $96,000.

C) Debit Peters, Capital $53,000; debit Chong, Capital $41,000; credit Cash $94,000.

D) Debit Cash $94,000, debit Aaron, Capital $2,000, credit Peters, Capital $54,000, credit Chong, Capital $42,000.

E) Debit Cash $94,000; credit Peters, Capital $47,000; credit Chong, Capital $47,000.

109) Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $285,000, and Atkins's beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. Barber withdrew $90,000 during the year and Atkins withdrew $100,000. What is Barber's ending equity?

A) $357,500

B) $362,500

C) $445,000

D) $320,000

E) $195,000

110) Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $285,000, and Atkins's beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. Barber withdrew $90,000 during the year and Atkins withdrew $100,000. What is Barber's return on equity?

A) 41.3%

B) 43.9%

C) 32.7%

D) 33.8%

E) 36.5%

111) Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $285,000, and Atkins's beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. Barber withdrew $90,000 during the year and Atkins withdrew $100,000. What is Atkins's return on equity?

A) 41.3%

B) 43.9%

C) 32.7%

D) 33.8%

E) 36.5%

112) Fellows and Marshall are partners in an accounting firm and share net income and loss equally. Fellows's beginning partnership capital balance for the current year is $185,000, and Marshall's beginning partnership capital balance for the current year is $260,000. The partnership had net income of $350,000 for the year. Fellows withdrew $80,000 during the year and Marshall withdrew $70,000. What is Marshall's return on equity?

A) 67.3%

B) 60.3%

C) 78.7%

D) 54.3%

E) 56.0%

113) If a company wants to protect its three investors against personal liability risk, which of the following business forms would not be a suitable option?

A) C Corporation

B) S Corporation

C) Limited liability partnership

D) Partnership

E) Limited liability company

114) Reno contributed $104,000 in cash plus equipment valued at $27,000 to the RD Partnership. The journal entry to record the transaction for the partnership is:

A) Debit Cash $104,000; debit Equipment $27,000; credit RD Partnership, Capital $131,000.

B) Debit Cash $104,000; debit Equipment $27,000; credit Common Stock $131,000.

C) Debit Cash $104,000; debit Equipment $27,000; credit Reno, Capital $131,000.

D) Debit Reno, Capital $131,000; credit RD Partnership, Capital $131,000.

E) Debit RD Partnership, Capital $131,000; credit Reno, Capital $131,000.

115) Bloom and Plant organize a partnership on January 1. Bloom's initial investment consists of $800 cash, $1,700 equipment and a $500 note payable reflecting a bank loan for the new business. Plant's initial investment is cash of $2,000. These amounts are the values agreed on by both partners. The journal entry to record Bloom's investment is:

A) Debit Cash $800; debit Equipment $1,700; credit Note Payable $500; credit Bloom, Capital $2,000.

B) Debit Cash $2,000; credit Bloom, Capital $2,000.

C) Debit Cash $800; debit Equipment $1,700; credit Bloom, Capital $2,500.

D) Debit Cash $800; debit Equipment $1,200; credit Bloom, Capital $2,000.

E) Debit Bloom, Capital $3,000; credit Common Stock $3,000.

116) Bloom and Plant organize a partnership on January 1. Bloom's initial investment consists of $800 cash, $1,700 equipment and a $500 note payable reflecting a bank loan for the new business. Plant's initial investment is cash of $2,000. These amounts are the values agreed on by both partners. The journal entry to record Plant's investment is:

A) Debit Cash $1,500; debit Note Payable $500; credit Plant, Capital $2,000.

B) Debit Cash $2,000; credit Note Payable $500, credit Plant, Capital $1,500.

C) Debit Bloom, Capital $2,000; credit Cash $2,000.

D) Debit Cash $2,500; credit Note Payable $500; credit Plant, Capital $2,500.

E) Debit Cash $2,000; credit Plant, Capital $2,000.

117) Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. The partnership had income of $150,000 for its first year of operation. When the Income Summary is closed, the journal entry to allocate partner income is:

A) Debit Income Summary $150,000; credit Wallace, Capital $75,000; credit Simpson, Capital $75,000.

B) Debit Wallace, Capital $75,000; debit Simpson, Capital $75,000; credit Income Summary $150,000.

C) Debit Income Summary $150,000; credit Wallace, Capital $90,000; credit Simpson, Capital $60,000.

D) Debit Cash $150,000; credit Wallace, Capital $90,000; credit Simpson, Capital $60,000.

E) Debit Wallace, Capital $90,000; debit Simpson, Capital $60,000; credit Cash $150,000.

118) Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. Wallace sold one-half of his partnership interest to Prince for $55,000 when his capital balance was $78,000. The partnership would record the admission of Prince into the partnership as:

A) Debit Wallace, Capital $55,000; credit Prince, Capital $55,000.

B) Debit Wallace, Capital $39,000; credit Prince, Capital $39,000.

C) Debit Prince, Capital $55,000; credit Wallace, Capital $55,000.

D) Debit Wallace, Capital $30,000; credit Prince, Capital $30,000.

E) Debit Wallace, Capital $39,000; debit Cash $16,000; credit Prince, Capital $55,000.

119) Wallace, Simpson, and Prince are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Wallace, $68,000; Simpson, $90,000; and Prince, $42,000. Royal is admitted to the partnership on July 1 with a 20% equity and invests $50,000. The partnership would record the admission of Royal into the partnership as:

A) Debit Wallace, Capital $15,000; debit Simpson, Capital, $20,000; debit Prince, Capital $15,000; credit Royal, Capital $50,000.

B) Debit Cash $20,000; credit Prince, Capital $20,000.

C) Debit Cash $40,000; debit Wallace, Capital $3,000; debit Simpson, Capital, $4,000; debit Prince, Capital $3,000; credit Royal, Capital $50,000.

D) Debit Cash $50,000; credit Royal, Capital $50,000.

E) Debit Cash $50,000; credit Simpson, Capital $10,000, credit Royal, Capital $40,000.

120) Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Caitlin, $120,000; Chris, $80,000; and Molly, $100,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $160,000. The balance in Paul's capital account immediately after his admission is:

A) $160,000

B) $460,000

C) $92,000

D) $68,000

E) $300,000

121) Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Caitlin, $120,000; Chris, $80,000; and Molly, $100,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $160,000. The balance in Caitlin's capital account immediately after Paul's admission is:

A) $160,000

B) $140,400

C) $107,200

D) $120,400

E) $99,600

122) Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Caitlin, $120,000; Chris, $80,000; and Molly, $100,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $60,000. The balance in Paul's capital account immediately after his admission is:

A) $160,000

B) $72,000

C) $92,000

D) $68,000

E) $300,000

123) Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Caitlin, $120,000; Chris, $80,000; and Molly, $100,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $60,000. The balance in Caitlin's capital account immediately after Paul's admission is:

A) $120,000

B) $116,400

C) $123,600

D) $72,000

E) $60,000

124) Match each of the following terms with the appropriate definitions.

A. S corporation

B. Mutual agency

C. Partnership

D. Unlimited liability of partners

E. Partnership contract

F. C corporation

G. General partner

H. Limited liability partnership

I. Statement of partners' equity

J. Limited partnership

125) Identify and discuss the key characteristics of partnerships. Also, identify other organizations that possess partnership characteristics.

126) Define the partner return on equity ratio and explain how a specific partner would use this ratio.

127) How are partners' investments in a partnership recorded?

128) Discuss the options for the allocation of income and loss among partners, including with and without a partnership agreement.

129) What are the ways that a new partner can be admitted to an existing partnership? Explain how to account for the admission of the new partner under each of these circumstances.

130) What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.

131) Explain the steps involved in the liquidation of a partnership.

132) What factors should be considered before establishing a partnership?

133) Cinema Products LP is organized as a limited partnership that sells movie props. Information related to capital balances is given below. Compute the partner return on equity for each limited partner. How would each partner evaluate the success of the partnership? What would you recommend the partners do with respect to additional investments or withdrawals?

134) Cinema Products LP is organized as a limited partnership that sells movie props. Information related to the capital balances is given below. Compute the partnership return on equity.

135) Caroline Meeks and Charlie Fox decide to form a partnership on August 1. Meeks invests the following assets and liabilities in the new partnership:

The note payable is associated with the building and the partnership will assume responsibility for the loan. Fox invested $100,000 in cash and $95,000 in equipment in the new partnership. Prepare the journal entries to record the two partners' original investments in the new partnership.

136) Montez and Flair formed a partnership. Montez contributed $15,000 cash and accounts receivable worth $11,000. Flair contributed cash of $5,000; inventory valued at $16,000; and supplies valued at $2,000. Prepare the journal entries to record each partner's investment in the new partnership.

137) MacArthur, Strong, and Viet form a partnership. MacArthur contributes $190,000 cash and Strong contributes $200,000 in cash. Viet contributes equipment worth $215,000. Prepare the single journal entry to record the formation of this partnership.

138) Ranger and Sol formed a partnership with capital contributions of $150,000 and $180,000, respectively. Their partnership agreement called for Ranger to receive a $60,000 annual salary allowance. They also agreed to allow each partner a share of income equal to 10% of their initial capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $110,000, what are Ranger's and Sol's respective shares?

139) Bannister invested $110,000 and Wilder invested $99,500 in a new partnership. They agreed to an annual interest allowance of 10% on the partners' beginning-year capital balance, with the balance of income or loss to be divided equally. Under this agreement, what are the income or loss shares of the partners if the annual partnership income is $202,000?

140) Bannister invested $110,000 and Wilder invested $99,000 in a new partnership. Their partnership agreement called for Wilder to receive a $70,000 annual salary allowance. They also agreed to an annual interest allowance of 5% on the partners' beginning-year capital balance, with the balance of income or loss to be divided equally. Under this agreement, what are the income or loss shares of the partners if the annual partnership income is $82,000?

141) Bannister invested $110,000 and Wilder invested $99,000 in a new partnership. Their partnership agreement called for Wilder to receive a $70,000 annual salary allowance. Under this agreement, what are the income or loss shares of the partners if the annual partnership income is $90,000?

142) Fallon and Springer formed a partnership on January 1. Fallon contributed $90,000 cash and equipment with a market value of $60,000. Springer's investment consisted of: cash, $30,000; inventory, $20,000; all at market values. Partnership net income for Year 1 and Year 2 was $75,000 and $120,000, respectively.

1. Determine each partner's share of the net income for each year, assuming each of the following independent situations:

(a) Income is divided based on the partners' failure to sign an agreement.

(b) Income is divided based on a 2:1 ratio (Fallon : Springer).

(c) Income is divided based on the ratio of the partners' original capital investments.

(d) Income is divided based on interest allowance of 12% on the original capital investments; salary allowance to Fallon of $30,000 and Springer of $25,000; and the remainder to be divided equally.

2. Prepare the journal entry to record the allocation of the Year 1 income under alternative (d) above.

143) Lin and Coral invested $99,000 and $126,000, respectively, in a partnership they began one year ago. Assuming the partnership earned $120,000 during the current year; compute the share of the net income each partner should receive under each of these independent assumptions.

1. The partnership contract specifies salary allowances of $45,000 to Lin and $60,000 to Coral, and any balance shared equally.

2. The partnership contract specifies salary allowances of $45,000 to Lin and $60,000 to Coral, interest allowance of 10% on the partners' beginning capital balance for the year.

144) Glade, Marker, and Walters are partners with beginning-year capital balances of $100,000, $50,000, and $50,000, respectively. Partnership net income for the year is $84,000. Make the necessary journal entry to close Income Summary to the capital accounts if:

a. Partners agree to divide income based on their beginning-year capital balances.

b. Partners agree to divide income based on the ratio of 5:3:2 (Glade:Marker:Walters), respectively.

c. Partners agree to divide income equally.

145) Glade, Marker, and Walters are partners with beginning-year capital balances of $250,000, $150,000, and $100,000, respectively. Partnership net income for the year is $192,000. Make the necessary journal entry to close Income Summary to the capital accounts if partners agree to divide income based on their beginning-year capital balances.

146) Jakobs, Penn, and Lundt are partners with beginning-of-year capital balances of $400,000, $320,000, and $160,000, respectively. The partners agreed to share income and loss as follows: Salary of $30,000 to Jakobs, $50,000 to Penn, and $36,000 to Lundt. An interest allowance of 8% on beginning-of-year capital balances. Any remaining balance is to be divided equally. If partnership net income for the year is $190,000, determine each partner's share and make the appropriate journal entry to close the Income Summary to the capital accounts.

147) Darien and Hayden agree to accept Kevin into their partnership. Kevin will contribute $22,000 in cash. Prepare the journal entry to record this transaction.

148) Palmer withdraws from the FAP Partnership. The remaining partners agree to buy out her share for her capital balance of $65,000. Prepare the journal entry to record the withdrawal from the partnership.

149) Lemon and Parks are partners. On October 1, Lemon's capital balance is $75,000, and Parks' capital balance is $125,000. With the partnership's approval, Parks sells ½ of his partnership interest to Tambling for $70,000. Prepare the journal entry to record this transaction in the partnership records.

150) Leto and Duncan allow Gunner to purchase a 25% interest in their partnership for $30,000 cash. Gunner has exceptional talents that will enhance the partnership. Leto's and Duncan's capital account balances are $55,000 each. The partners have agreed to share income or loss equally. Prepare the general journal entry to record the admission of Gunner to the partnership.

151) Conklin plans to leave the CAP Partnership. The recorded value of his capital account is $48,000. The remaining partners Arthurs and Preston agree to pay Conklin $40,000 cash and Conklin accepts. The partners share income and loss equally. Prepare the general journal entry to record the withdrawal from the partnership.

152) Conklin plans to leave the CAP Partnership. The recorded balance in her capital account is $48,000. The remaining partners, Arthurs and Preston, agree to pay Conklin $58,000 cash and Conklin accepts. The partners share income and loss equally. Prepare the journal entry to record the transaction.

153) Kramer and Jones allow Sanders to purchase a 25% interest in their partnership for $50,000 cash. Kramer and Jones both have capital balances of $55,000 each, and have agreed to share income and loss equally. Prepare the journal entry to record the admission of Sanders to the partnership.

154) The Redtail Partnership agrees to dissolve. The remaining cash balance after liquidating partnership assets and liabilities is $70,000. The final capital account balances are: Paulson, $35,000; Gray, $25,000; and Chang, $10,000. Prepare the journal entry to distribute the remaining cash to the partners.

155) The Redtail Partnership agrees to dissolve. The cash balance after selling all assets and paying all liabilities is $56,000. The final capital account balances are: Paulson, $33,000; Gray, $27,000; and Chang, ($4,000). Chang agrees to pay $4,000 cash from personal funds to settle his deficiency. Prepare the journal entries to record the transactions required to dissolve this partnership.

156) The Redtail Partnership agrees to dissolve. The cash balance after selling all assets and paying all liabilities is $60,000. The final capital account balances are: Paulson, $35,000; Gray, $29,000; and Chang, ($4,000). Chang is unable to pay the capital deficiency. Prepare the journal entries to record the transactions required to dissolve this partnership.

157) Sharon and Nancy formed a partnership by making capital contributions of $130,000 and $195,000 respectively. They predict annual partnership income of $230,000 and are considering the following alternative plans of sharing income and loss: (a) in the ratio of their initial capital investments; or (b) salary allowances of $40,000 to Sharon and $35,000 to Nancy; interest allowances of 12% on their initial capital investments; and the balance shared equally. Assuming that both partners put about the same amount of time into the business, which method of allocating income would be best?

158) Sharon and Nancy formed a partnership by making capital contributions of $130,000 and $195,000 respectively. The annual partnership income of $230,000 is to be allocated assuming a salary allowance of $40,000 to Sharon and $35,000 to Nancy; interest allowances of 12% on their initial capital investments; and the balance shared equally. Prepare the entries to record the initial capital investments, the allocation of net income, and close the partner's withdrawal accounts assuming that Sharon withdrew $50,000 and Nancy withdrew $45,000.

159) Kramer and Feldman Company is organized as a partnership. At the prior year-end, Kramer's equity balance was $352,000 and Feldman's was $256,000. For the current year, partnership net income is $137,000 ($77,000 allocated to Kramer and $60,000 allocated to Feldman); withdrawals are $87,000 ($45,000 for Kramer and $42,000 for Feldman). Compute the total partnership return on equity and the individual partner return on equity ratios.

160) Masco, Short, and Henderson who are partners in the MSH Company share income and loss in a 2:2:1 ratio. They plan to liquidate their partnership. At liquidation, their balance sheet appears as follows. Prepare journal entries for (a) the sale of land and equipment sold as a package for $500,000, (b) the allocation of the gain or loss, (c) the payment of the liabilities, and (d) the distribution of cash to the individual partners.

MSH Company

Balance Sheet

January 31

161) Tower, Knight, and Spears are partners who share income and loss in a 3:2:2 ratio. The partnership's capital balances are as follows: Tower, $332,000; Knight, $124,000; and Spears, $214,000. Spears decides to withdraw from the partnership, and the partners agree not to have the assets revalued upon Spears' retirement. Prepare journal entries to record Spears' withdrawal from the partnership under each of the following separate assumptions: Spears (a) sells his interest to Conner for $200,000 after Tower and Knight approve the entry of Conner as a partner; (b) is paid $214,000 in partnership cash for his equity; (c) is paid $205,000 in partnership cash for his equity; (d) is paid $220,000 in partnership cash for his equity.

162) Tower, Knight, and Spears are partners who share income and loss in a 4:2:2 ratio. The partnership's capital balances are as follows: Tower, $292,000; Knight, $114,000; and Spears, $194,000. Dan is admitted to the partnership on March 1 with a 25% equity. Prepare the journal entries to record Dan's entry into the partnership under each of the following separate assumptions: Dan invests (a) $200,000; (b) $180,000; and (c) $240,000.

163) On May 1, Gosworth and Jordan formed a partnership. Gosworth contributed cash of $100,000 and equipment valued at $142,000. Jordan contributed land valued at $130,000 and a building valued at $250,000. The partnership also assumed responsibility for Jordan's $120,000 long-term note payable associated with the land and building. The partners agreed to share income as follows: Gosworth is to receive a salary allowance of $38,000, both are to receive an annual interest allowance of 8% of their beginning-year capital investments, and any remaining income or loss is to be shared equally. During the year, Gosworth withdrew $40,000 and Jordan withdrew $42,000 cash. After the adjusting and closing entries are made to the revenue and expense accounts at the end of the year, the Income Summary account had a credit balance of $140,000. Prepare the journal entries to record (a) the partners' initial capital investments, (b) their cash withdrawals, and (c) closing of both the Withdrawals and Income Summary accounts.

164) Mesner's and Sanchez's company is organized as a partnership. At the prior year-end, Mesner's equity balance was $258,000 and Sanchez's was $212,000. For the current year, partnership net income is $125,000 ($75,000 allocated to Mesner and $50,000 allocated to Sanchez); withdrawals are $77,000 ($40,000 for Mesner and $37,000 for Sanchez). Compute the total partnership return on equity and the individual partner return on equity ratios.

165) The life of a partnership is ________ in duration.

166) A ________ is an unincorporated association of two or more people to pursue a business for profit as co-owners.

167) ________ means that partners can bind the partnership to contracts.

168) ________ implies that each partner in a partnership can be called on to personally pay a partnership's debts.

169) A partnership that has general and limited partners and allows the limited partners to have no personal liability beyond the amounts they invest in the partnership is a ________ partnership.

170) A partnership which protects all innocent partners from malpractice or negligence claims resulting from the acts of other partners is a ________ partnership.

171) A form of business organization that protects its owners, called members, with limited liability and is taxed as a partnership is a ________

172) Partners in a partnership are not taxed on their withdrawals, but rather on their ________.

173) Partner net income divided by average partner equity equals ________.

174) When a partner invests in a partnership, her capital account is ________ for the invested amount.

175) During the closing process, partner's capital accounts are ________ for their share of net income and ________ for their share of net loss.

176) During the closing process, each partner's withdrawals account is closed to ________.

177) If partners do not agree on how to share income and losses, they are shared ________.

178) A partner can be admitted into a partnership by ________ or by ________.

179) If a partner withdraws from a partnership and the recorded value of his or her equity is overstated, then a bonus goes to ________; if the recorded value of the withdrawing partner's equity is understated, then a bonus goes to ________.

180) A debit balance in a partner's capital account at the point of the final distribution of cash is known as a ________.