Ch14 Partnerships Formation and Operation Full Test Bank

Student name:__________

MULTIPLE CHOICE - Choose the one alternative that best completes the statement or answers the question.
1) Cherryhill and Hace had been partners for several years, and they decided to admit Quincy to the partnership. The accountant for the partnership believed that the dissolved partnership and the newly formed partnership were two separate entities. What method would the accountant have used for recording the admission of Quincy to the partnership?

A) The bonus method.
B) The equity method.
C) The goodwill method.
D) The proportionate method.
E) The cost method.

2) When the hybrid method is used to record the withdrawal of a partner, the partnership

A) revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner.
B) revalues liabilities but not assets, and no goodwill is recorded.
C) can recognize goodwill but does not revalue assets and liabilities.
D) revalues assets but not liabilities, and records goodwill to the continuing partner but not to the withdrawing partner.
E) revalues assets and liabilities but does not record goodwill.

3) The disadvantages of the partnership form of business organization, compared to corporations, include

A) the legal requirements for formation.
B) unlimited liability for the partners.
C) the requirement for the partnership to pay income taxes.
D) the extent of governmental regulation.
E) the complexity of operations.

4) The advantages of the partnership form of business organization, compared to corporations, include which of the following?

A) Single taxation.
B) Ease of raising capital.
C) Mutual agency.
D) Limited liability.
E) Difficulty of formation.

5) The dissolution of a partnership occurs

A) only when the partnership sells its assets and permanently closes its books.
B) only when a partner leaves the partnership.
C) at the end of each year, when income is allocated to the partners.
D) only when a new partner is admitted to the partnership.
E) when there is any change in the individuals who make up the partnership.

6) The partnership of Clapton, Seidel, and Thomas is insolvent and will be unable to pay $30,000 in liabilities that are currently due.What recourse is available to the partnership's creditors?

A) They must present equal claims to the three partners as individuals.
B) They must try to obtain payment from the partner with the largest capital account balance.
C) They cannot seek remuneration from the partners as individuals.
D) They may seek remuneration from any partner they choose.
E) They must present their claims to the three partners in descending order based on the partners' capital account balances.

7) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was Pinkman’s total share of net income for 2020?

A) $84,500.
B) $70,000.
C) $87,500.
D) $52,000.
E) $77,000.

8) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was White’s total share of net income for 2020?

A) $95,000.
B) $84,500.
C) $77,000.
D) $25,000.
E) $52,000.

9) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was Goodman’s total share of net income for 2020?

A) $41,500.
B) $35,000.
C) $26,000.
D) $38,500.
E) $47,500.

10) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was White’s capital balance at the end of 2020?

A) $327,000.
B) $191,000.
C) $345,000.
D) $309,000.
E) $259,000.

11) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was Pinkman’s capital balance at the end of 2020?

A) $259,500.
B) $190,000.
C) $211,500.
D) $260,000.
E) $241,500.

12) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was Goodman’s capital balance at the end of 2020?

A) $133,000.
B) $145,500.
C) $163,500.
D) $107,000.
E) $181,500.

13) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was the total capital balance for the partnership at December 31, 2020?

A) $804,000.
B) $696,000.
C) $750,000.
D) $604,000.
E) $496,000.

14) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was the amount of interest attributed to Pinkman in the income distribution for 2021?

A) $20,750.
B) $17,450.
C) $24,150.
D) $17,500.
E) $25,950.

15) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was Pinkman’s total share of net income for 2021?

A) $62,160.
B) $101,310.
C) $135,150.
D) $96,000.
E) $111,000.

16) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was the remainder portion of net income allocated to White for 2021?

A) $62,160.
B) $96,000.
C) $68,160.
D) $90,000.
E) $74,160.

17) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was White’s total share of net income for 2021?

A) $99,060.
B) $126,900.
C) $62,160.
D) $93,060.
E) $96,000.

18) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was Goodman’s total share of net income for 2021?

A) $45,630.
B) $31,080.
C) $62,550.
D) $48,000.
E) $60,630.

19) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was White’s capital balance at the end of 2021?

A) $402,060.
B) $417,900.
C) $405,000.
D) $390,060.
E) $384,060.

20) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was Pinkman’s capital balance at the end of 2021?

A) $342,810.
B) $361,650.
C) $324,810.
D) $337,500.
E) $300,660.

21) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was Goodman’s capital account balance at the end of 2021?

A) $191,130.
B) $142,050.
C) $173,130.
D) $190,050.
E) $193,500.

22) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What was the total capital balance for the partnership at December 31, 2021?

A) $936,000.
B) $805,000.
C) $924,000.
D) $882,000.
E) $860,000.

23) Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.What will be the amount of interest attributed to Goodman in the income distribution for 2022?

A) $19,113.
B) $17,313.
C) $19,005.
D) $14,205.
E) $24,000.

24) Jell and Dell were partners with capital balances of $600 and $800, and an income-sharing ratio of 2:3. They admitted Zell with a 30% interest in the partnership, and the total amount of goodwill credited to the original partners was $700. What amount did Zell contribute to the business?

A) $900.
B) $560.
C) $600.
D) $590.
E) $630.

25) Jerry, a partner in the JSK partnership, begins the year on January 1, 2021 with a capital balance of $20,000. The JSK partnership agreement states that Jerry receives 6% interest on his monthly weighted average capital balance without regard to normal drawings. Each partner draws $5,000 in cash from the business every quarter. Any withdrawal in excess of that will be accounted for as a direct reduction of the partner’s capital balance.On March 1, 2021, when the partnership tax return for 2020 was completed, Jerry’s capital account was credited for his share of 2020 profit of $120,000.Jerry withdrew $5,000 quarterly, beginning March 31st.On September 1, Jerry’s capital account was credited with a special bonus of $60,000 for business he brought to the partnership.What amount of interest will be attributed to Jerry for the year 2021 that will go toward his profitdistribution for the year?

A) $6,000.
B) $6,250.
C) $7,950.
D) $8,400.
E) None of these answer choices is correct.

26) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was Young's total share of net loss for the first year?

A) $3,900 loss.
B) $11,700 loss.
C) $10,400 loss.
D) $24,700 loss.
E) $9,100 loss.

27) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was Eaton's total share of net loss for the first year?

A) $3,900 loss.
B) $11,700 loss.
C) $10,400 loss.
D) $24,700 loss.
E) $9,100 loss.

28) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was Thurman's total share of net loss for the first year?

A) $3,900 loss.
B) $11,700 loss.
C) $10,400 loss.
D) $24,700 loss.
E) $9,100 loss.

29) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was the balance in Young's Capital account at the end of the first year?

A) $120,900.
B) $118,300.
C) $126,100.
D) $80,600.
E) $111,500.

30) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was the balance in Eaton's Capital account at the end of the first year?

A) $120,900.
B) $118,300.
C) $126,100.
D) $80,600.
E) $111,500.

31) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was the balance in Thurman's Capital account at the end of the first year?

A) $120,900.
B) $118,300.
C) $126,100.
D) $80,600.
E) $111,500.

32) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was Young's total share of net income for the second year?

A) $17,160 income.
B) $4,160 income.
C) $19,760 income.
D) $17,290 income.
E) $28,080 income.

33) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was Eaton's total share of net income for the second year?

A) $17,160 income.
B) $4,160 income.
C) $19,760 income.
D) $17,290 income.
E) $28,080 income.

34) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was Thurman's total share of net income for the second year?

A) $17,160 income.
B) $4,160 income.
C) $19,760 income.
D) $17,290 income.
E) $28,080 income.

35) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was the balance in Young's Capital account at the end of the second year?

A) $133,380.
B) $84,760.
C) $105,690.
D) $132,860.
E) $71,760.

36) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was the balance in Eaton's Capital account at the end of the second year?

A) $133,380.
B) $84,760.
C) $105,690.
D) $132,860.
E) $71,760.

37) A partnership began its first year of operations with the following capital balances:

The Articles of Partnership stipulated that profits and losses be assigned in the following manner:Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.Each partner withdrew $13,000 per year.Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.What was the balance in Thurman's Capital account at the end of the second year?

A) $133,380.
B) $84,760.
C) $105,690.
D) $132,860.
E) $71,760.

38) Which of the following is not a characteristic of a partnership?

A) The partnership itself pays no income taxes.
B) It is easy to form a partnership.
C) Any partner can be held personally liable for all debts of the business.
D) A partnership requires written Articles of Partnership.
E) Each partner has the power to obligate the partnership for liabilities.

39) Partnerships have alternative legal forms including all of the following except which of the following?

A) General Partnership.
B) Limited Partnership.
C) Subchapter S Partnership.
D) Limited Liability Partnership.
E) Limited Liability Company.

40) Which of the following type of organization is classified as a partnership, or similar to a partnership, for tax purposes?(I.) Limited Liability Company(II.) Limited Liability Partnership(III.) Subchapter S Corporation

A) II only.
B) II and III.
C) I and II.
D) I and III.
E) I, II, and III.

41) Which of the following statements is correct regarding the admission of a new partner?

A) A new partner must purchase a partnership interest directly from the business.
B) The right of co-ownership in the business property can be transferred to a new partner without the consent of other existing partners.
C) The right to participate in management of the business cannot be conveyed without the consent of other existing partners.
D) The right to share in profits and losses can be sold to a new partner without the consent of other existing partners.
E) A new partner always pays book value.

42) Withdrawals from the partnership capital accounts are typically not used in which of the following situations?

A) To reward partners for work performed in the business.
B) To reduce the partners' capital account balances at the end of an accounting period.
C) To record interest earned on a partner’s capital balance.
D) To reduce the basic investment that has been made in the business.
E) To record the partnership’s payment of a partner’s personal expense such as income tax.

43) The partnership contract for Hanes and Jones LLP provides that Hanes is to receive a bonus of 20% of net income (after the bonus) and that the remaining net income is to be divided equally. If the partnership income before the bonus for the year is $57,600, Hanes’ share of this pre-bonus income is:

A) $28,800.
B) $33,600.
C) $34,560.
D) $35,520.
E) $38,400.

44) The partners of Apple, Bere, and Carroll LLP share net income and losses in a 5:3:2 ratio, respectively. The capital account balances on January 1, 2021, were as follows:

The carrying amounts of the assets and liabilities of the partnership are the same as their current fair values. Dorr will be admitted to the partnership with a 20% capital interest and a 20% share of net income and losses in exchange for a cash investment. The amount of cash that Dorr should invest in the partnership is:

A) $25,000.
B) $30,000.
C) $37,500.
D) $75,000.
E) $90,000.

45) The appropriate format of the December 31, 2020closing entry for John & Hope Limited Liability Partnership, whose two partners had withdrawn their salaries from the partnership during the year, is:

A) Option A.
B) Option B.
C) Option C.
D) Option D.
E) Option E.

46) When Danny withdrew from John, Daniel, Harry, and Danny, LLP, he was paid $80,000, although his capital account balance was only $60,000. The four partners shared net income and losses equally, and no revaluation will take place. The journal entry to record the effect on John’s capital due to Danny's withdrawal would include:

A) $6,667 debit to John, Capital.
B) $6,667 credit to John, Capital.
C) $20,000 debit to John, Capital.
D) $5,000 debit to John, Capital.
E) $5,000 credit to John, Capital.

47) Max, Jones and Waters shared profits and losses 20%, 40%, and 40% respectively and their partnership capital balance is $10,000, $30,000 and $50,000 respectively. Max has decided to withdraw from the partnership. An appraisal of the business and its property estimates the fair value to be $200,000. Land with a book value of $30,000 has a fair value of $45,000. Max has agreed to receive $20,000 in exchange for her partnership interest after revaluation. At what amount should land be recorded on the partnership books?

A) $20,000.
B) $30,000.
C) $45,000.
D) $50,000.
E) $200,000.

48) The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows:

Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.What is the balance of May’s capital account after the new partnership is created?

A) $84,000.
B) $100,000.
C) $140,000.
D) $176,000.
E) $200,000.

49) The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows:

Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.What is the balance of Donald’s capital account after the new partnership is created?

A) $84,000.
B) $100,000.
C) $140,000.
D) $176,000.
E) $200,000.

50) The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows:

Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.What is the balance of Hanes’s capital account after the new partnership is created?

A) $84,000.
B) $100,000.
C) $140,000.
D) $176,000.
E) $200,000.

51) The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows:

Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.What is the new total balance of the partnership accounts?

A) $84,000.
B) $140,000.
C) $176,000.
D) $200,000.
E) $400,000.

52) Which of the following could be used as a basis to allocate profits among partners who are active in the management of the partnership?1) Allocation of salaries.2) The number of years with the partnership.3) The amount of time each partner works.4) The average capital invested.

A) 1 and 2.
B) 1 and 3.
C) 1, 2, and 4.
D) 1, 3, and 4.
E) 1, 2, 3, and 4.

53) P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest.If C is to contribute an amount equal to his book value share of the new partnership, how much should C contribute?

A) $22,000
B) $20,000
C) $25,000
D) $18,000
E) $10,000

54) P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest.C contributes $38,000 to the partnership and the bonus method is used. What amount will be credited for C’s beginning capital balance?

A) $20,000
B) $25,000
C) $27,600
D) $32,600
E) $38,000

55) P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest.If C contributes $40,000 to the partnership and the goodwill method is used, what amount will be debited for goodwill?

A) $15,000
B) $20,000
C) $25,000
D) $28,000
E) $60,000

56) P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest.C contributes $10,000 to the partnership and the goodwill method is used.What will be the result of the goodwill calculation?

A) Goodwill of $15,000; split among the original partners.
B) Goodwill of $15,000; all to C.
C) Goodwill of $15,000; split among all four partners: P, L, O, and C.
D) Goodwill of $12,000; all to C.
E) Goodwill of $12,000; split among original partners.

57) Peter, Roberts, and Dana have the following capital balances; $80,000, $100,000 and $60,000, respectively.The partners share profits and losses 20%, 40%, and 40% respectively.Roberts retires and is paid $160,000 based on an independent appraisal of the business.If the goodwill method is used, what is the capital balance of Peter?

A) $20,000.
B) $60,000.
C) $110,000.
D) $120,000.
E) $230,000.

58) Peter, Roberts, and Dana have the following capital balances; $80,000, $100,000 and $60,000, respectively.The partners share profits and losses 20%, 40%, and 40% respectively.Roberts retires and is paid $160,000 based on an independent appraisal of the business.If the goodwill method is used, what is the capital balance of Dana?

A) $ 20,000.
B) $ 60,000.
C) $110,000.
D) $120,000.
E) $230,000.

59) Peter, Roberts, and Dana have the following capital balances; $80,000, $100,000 and $60,000, respectively.The partners share profits and losses 20%, 40%, and 40% respectively.What is the total partnership capital after Roberts retires receiving $160,000 and using the goodwill method?

A) $290,000.
B) $176,000.
C) $ 80,000.
D) $120,000.
E) $230,000.

60) Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively.The partners share profits and losses 20%, 40%, and 40% respectively.Anne retires and is paid $80,000 based on an independent appraisal of the business.If the goodwill method is used, what is the capital of the remaining partners?

A) Donald, $55,000; Todd, $60,000
B) Donald, $40,000; Todd, $30,000
C) Donald, $65,000; Todd, $55,000
D) Donald, $15,000; Todd, $30,000
E) Donald, $25,000; Todd, $0

61) Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively.The partners share profits and losses 20%, 40%, and 40% respectively.Anne retires and is paid $80,000 based on the terms of the original partnership agreement.If the bonus method is used, what is the capital of the remaining partners?

A) Donald, $40,000; Todd, $30,000.
B) Donald, $30,000; Todd, $10,000.
C) Donald, $50,000; Todd, $50,000.
D) Donald, $24,000; Todd, $18,000.
E) Donald, $70,000; Todd, $40,000.

62) Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively.The partners share profits and losses 20%, 40%, and 40% respectively.What is the total partnership capital after Anne retires receiving $80,000 and using the bonus method?

A) $70,000.
B) $40,000.
C) $60,000.
D) $80,000.
E) $42,000.

63) Which of the following is a type of investment designed primarily for individuals who want the tax benefits of a partnership but who do not wish to work in a partnership or have unlimited liability?

A) General Partnership.
B) Limited Partnership.
C) Subchapter S Partnership.
D) Limited Liability Partnership.
E) Limited Liability Company.

64) Which of the following has most of the characteristics of a general partnership except that it significantly reduces the partners’ liability?

A) General Partnership.
B) Limited Partnership.
C) Subchapter S Partnership.
D) Limited Liability Partnership.
E) Limited Liability Company.

65) A local partnership has two partners, Jim and Pam. Jim has a capital balance of $150,000 and Pam has a capital balance of $125,000. These two partners share profits and losses 60 percent (Jim) and 40 percent (Pam). Cece invests $75,000 in cash in the partnership for a 25 percent ownership. The bonus method will be used. What is Jim’s capital balance after this new investment?

A) $87,500.
B) $157,500.
C) $142,500.
D) $120,000.
E) $130,000.

66) A local partnership has two partners, Jim and Pam. Jim has a capital balance of $150,000 and Pam has a capital balance of $125,000. These two partners share profits and losses 60 percent (Jim) and 40 percent (Pam). Cece invests $75,000 in cash in the partnership for a 25 percent ownership. The bonus method will be used. What is Pam’s capital balance after this new investment?

A) $87,500.
B) $157,500.
C) $142,500.
D) $120,000.
E) $130,000.

67) A local partnership has two partners, Jim and Pam. Jim has a capital balance of $150,000 and Pam has a capital balance of $125,000. These two partners share profits and losses 60 percent (Jim) and 40 percent (Pam). Cece invests $75,000 in cash in the partnership for a 25 percent ownership. The bonus method will be used. What is Cece’s capital balance after this new investment?

A) $87,500.
B) $157,500.
C) $142,500.
D) $120,000.
E) $130,000.

SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.
68) Reed, Sharp, and Tucker were partners with capital account balances of $80,000, $100,000, and $70,000, respectively. They agreed to admit Upton to the partnership. Upton purchased 30% of each partner's interest, with payments directly to Reed, Sharp, and Tucker of $32,000, $40,000, and $28,000, respectively. Before the admission of Upton, the profit and loss sharing ratio was 2:3:2. The partners agreed to use the book value method to account for the admission of Upton to the partnership.Required:Prepare the journal entry to record the admission of Upton to the partnership.

69) Jipsom and Klark were partners with capital account balances of $80,000 and $100,000, respectively. Looney directly paid $32,000 to Jipsom and $40,000 to Klark for 30% of their interests in the partnership. Jipsom and Klark shared income in the ratio of 2:3. They believed that revaluation of the partnership was appropriate when a new partner was admitted.Required:Prepare the journal entries to record the admission of Looney to the partnership.

70) Norr and Caylor established a partnership on January 1, 2020.Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000.For both partners, the beginning capital balance was to equal the initial investment.Norr and Caylor agreed to the following procedure for sharing profits and losses:- 12% interest on the yearly beginning capital balance- $10 per hour of work that can be billed to the partnership's clients- the remainder allocated ona 3:2 ratioThe Articles of Partnership specified that each partner should withdraw no more than $1,000 per month, which is accounted as direct reduction of that partner’s capital balance.For 2020, the partnership's income was $70,000.Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours.In 2021, the partnership's income was $24,000, and Norr and Caylor worked 800 and 1,200 billable hours respectively.Each partner withdrew $1,000 per month throughout 2020and 2021.Determine the amount of net income allocated to each partner for 2020.

71) Norr and Caylor established a partnership on January 1, 2020.Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000.For both partners, the beginning capital balance was to equal the initial investment.Norr and Caylor agreed to the following procedure for sharing profits and losses:- 12% interest on the yearly beginning capital balance- $10 per hour of work that can be billed to the partnership's clients- the remainder allocated ona 3:2 ratioThe Articles of Partnership specified that each partner should withdraw no more than $1,000 per month, which is accounted as direct reduction of that partner’s capital balance.For 2020, the partnership's income was $70,000.Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours.In 2021, the partnership's income was $24,000, and Norr and Caylor worked 800 and 1,200 billable hours respectively.Each partner withdrew $1,000 per month throughout 2020and 2021.Determine the balance in both capital accounts at the end of 2020.

72) Norr and Caylor established a partnership on January 1, 2020.Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000.For both partners, the beginning capital balance was to equal the initial investment.Norr and Caylor agreed to the following procedure for sharing profits and losses:- 12% interest on the yearly beginning capital balance- $10 per hour of work that can be billed to the partnership's clients- the remainder allocated ona 3:2 ratioThe Articles of Partnership specified that each partner should withdraw no more than $1,000 per month, which is accounted as direct reduction of that partner’s capital balance.For 2020, the partnership's income was $70,000.Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours.In 2021, the partnership's income was $24,000, and Norr and Caylor worked 800 and 1,200 billable hours respectively.Each partner withdrew $1,000 per month throughout 2020and 2021.Determine the amount of net income allocated to each partner for 2021. (Round all calculations to the nearest whole dollar.)

73) Norr and Caylor established a partnership on January 1, 2020.Norr invested cash of $100,000 and Caylor invested $30,000 in cash and equipment with a book value of $40,000 and fair value of $50,000.For both partners, the beginning capital balance was to equal the initial investment.Norr and Caylor agreed to the following procedure for sharing profits and losses:- 12% interest on the yearly beginning capital balance- $10 per hour of work that can be billed to the partnership's clients- the remainder allocated ona 3:2 ratioThe Articles of Partnership specified that each partner should withdraw no more than $1,000 per month, which is accounted as direct reduction of that partner’s capital balance.For 2020, the partnership's income was $70,000.Norr had 1,000 billable hours, and Caylor worked 1,400 billable hours.In 2021, the partnership's income was $24,000, and Norr and Caylor worked 800 and 1,200 billable hours respectively.Each partner withdrew $1,000 per month throughout 2020and 2021.Determine the balance in both capital accounts at the end of 2021to the nearest dollar.

74) The ABCD Partnership has the following balance sheet at January 1, 2020, prior to the admission of new partner, Eden.

Eden contributes $49,000 into the partnership for a 25% interest.The four original partners share profits and losses equally.Using the bonus method, determine the balances for each of the five partners after Eden joins the partnership.

75) The ABCD Partnership has the following balance sheet at January 1, 2020, prior to the admission of new partner, Eden.

Eden contributed $124,000 in cash to the business to receive a 20% interest in the partnership.Goodwill was to be recorded.The four original partners shared all profits and losses equally.After Eden made his investment, what were the individual capital balances?

76) The ABCD Partnership has the following balance sheet at January 1, 2020, prior to the admission of new partner, Eden.

Eden acquired a 20% interest in the partnership by contributing a total of $71,500 directly to the other four partners. No goodwill is to be recorded.Profits and losses have previously been split according to the following percentages: Adams, 15%, Barnes, 35%, Cordas, 30%, and Davis, 20%.After Eden made his investment, what were the individual capital balances?

77) The ABCD Partnership has the following balance sheet at January 1, 2020, prior to the admission of new partner, Eden.

Eden acquired a 20% interest in the partnership by contributing a total of $71,500 directly to the other four partners. Goodwill is to be recorded.Profits and losses have previously been split according to the following percentages: Adams, 15%; Barnes, 35%; Cordas, 30%; and Davis, 20%.After Eden made his investment, what were the individual capital balances?

78) Assume the partnership of Dean, Hardin, and Roth has been in existence for a number of years.Dean decides to withdraw from the partnership when the partners' capital balances are as follows:

An appraisal of the business and its property estimates the fair value to be $ 100,000. Dean has agreed to receive $64,000 in exchange for his partnership interest.Prepare the journal entry for the payment to Dean in the dissolution of his partnership interest, assuming the bonus method is to be applied.

79) Assume the partnership of Dean, Hardin, and Roth has been in existence for a number of years.Dean decides to withdraw from the partnership when the partners' capital balances are as follows:

An appraisal of the business and its property estimates the fair value to be $ 100,000. Dean has agreed to receive $64,000 in exchange for his partnership interest.What are the remaining partners' capital balances after Dean's interest is dissolved, assuming the bonus method is applied?

80) Assume the partnership of Howell, Madrid, and Waldrop has been in existence for a number of years.Howell decides to withdraw from the partnership when the partners' capital balances are as follows:

An appraisal of the business and its net assets estimates the fair value to be $154,000. Land with a book value of $20,000 has a fair value of $35,000.Howell has agreed to receive $84,000 in exchange for her partnership interest.Prepare the journal entries for the dissolution of Howell's partnership interest, assuming the goodwill method is to be applied.

81) Assume the partnership of Howell, Madrid, and Waldrop has been in existence for a number of years.Howell decides to withdraw from the partnership when the partners' capital balances are as follows:

An appraisal of the business and its net assets estimates the fair value to be $154,000. Land with a book value of $20,000 has a fair value of $35,000.Howell has agreed to receive $84,000 in exchange for her partnership interest.What are the remaining partners' capital balances after Howell's interest is dissolved, assuming the goodwill method is applied?

82) On January 1, 2021, Lamb and Mona LLP admitted Norris to a 20% interest in net assets for an investment of $50,000 cash. Prior to the admission of Norris, Lamb and Mona had net assets of $100,000 and an income-sharing ratio of 25% to Lamb and 75% to Mona. After the admission of Norris, the partnership contract included the following provisions:Salary of $40,000 a year to Norris.Remaining net income in ratio Lamb 20%, Mona 60%, Norris 20%.During the fiscal year ended December 31, 2021, the partnership had income of $90,000 prior to recognition of salary to Norris.Record the journal entry for the admission of Norris. Goodwill is not to be recorded.

83) On January 1, 2021, Lamb and Mona LLP admitted Norris to a 20% interest in net assets for an investment of $50,000 cash. Prior to the admission of Norris, Lamb and Mona had net assets of $100,000 and an income-sharing ratio of 25% to Lamb and 75% to Mona. After the admission of Norris, the partnership contract included the following provisions:Salary of $40,000 a year to Norris.Remaining net income in ratio Lamb 20%, Mona 60%, Norris 20%.During the fiscal year ended December 31, 2021, the partnership had income of $90,000 prior to recognition of salary to Norris.Record the journal entry to allocate the salary of Norris.

84) On January 1, 2021, Lamb and Mona LLP admitted Norris to a 20% interest in net assets for an investment of $50,000 cash. Prior to the admission of Norris, Lamb and Mona had net assets of $100,000 and an income-sharing ratio of 25% to Lamb and 75% to Mona. After the admission of Norris, the partnership contract included the following provisions:Salary of $40,000 a year to Norris.Remaining net income in ratio Lamb 20%, Mona 60%, Norris 20%.During the fiscal year ended December 31, 2021, the partnership had income of $90,000 prior to recognition of salary to Norris.Record the journal entry to record the remainder of net income to the capital accounts.

85) James, Keller, and Rivers have the following capital balances; $48,000, $70,000 and $90,000, respectively. Because of a cash shortage James invests an additional $12,000 on June 1st. Each partner withdraws $1,000 per month. James, Keller, and Rivers receive a salary of $13,000, $15,000 and $20,000, respectively, for work done during the year. Each partner receives interest of 8% on that partner’s monthly weighted average capital balance without regard to normal drawings. Any remaining profits are split 20%, 30%, and 50% respectively. The net income for the year is $30,000. What are the ending capital balances for each partner?

ESSAY. Write your answer in the space provided or on a separate sheet of paper.
86) What is the dissolution of a partnership?

87) By what methods can a person gain admittance to a partnership?

88) What events cause the dissolution of a partnership?

89) For what events or conditions should the Articles of Partnership make provision?

90) How is accounting for a partnership different from accounting for a corporation?

91) Why are the terms of the Articles of Partnership important to partners?

92) Brown and Green are forming a business as partners.If they do not create a formal written partnership agreement, what risks are they exposing themselves to?

93) What theoretical argument could be made against the recognition of goodwill when there is a change in the ownership of a partnership?

94) Under what circumstances does a partner's balance in his or her capital account have practical consequences for the partner?