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Exam 12: Accounting for Partnerships and Limited Liability Companies

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Question 31

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Use the information below to answer the questions that follow. ​ The capital accounts of Harrison and Marti have balances of $160,000 and $110,000, respectively, on January 1, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year was $264,000. The articles of partnership make no reference to the division of net income.​ -Based on this information,the statement of partners' equity would show what amount in the capital account for Marti on December 31?

A) $216,000
B) $164,000
C) $380,000
D) $52,000

E) A) and B)
F) B) and C)

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Question 32

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Gleason invested $90,000 in the James and Kirk Partnership for ownership equity of $90,000.Prior to the investment,land was revalued to a market value of $425,000 from a book value of $200,000.James and Kirk share net income in a 1:2 ratio.​ (a) Provide the journal entry for the revaluation of land. (b) Provide the journal entry to admit Gleason.

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Question 33

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For tax purposes,a limited liability company may elect to be treated as a partnership.

Benson and Orton are partners who share income in the ratio of 2:3 and have capital balances of $60,000 and $40,000,respectively.Ramsey is admitted to the partnership and is given a 10% interest by investing $20,000.What is Orton's capital balance after admitting Ramsey?

Reardon and Reese had capital balances of $140,000 and $160,000,respectively,at the beginning of the current fiscal year.The partnership agreement provides for salary allowances of $25,000 and $35,000,respectively; an allowance of interest at 12% on the capital balances at the beginning of the year; and the remaining net income divided equally.Net income for the current year was $120,000.​ ​

If a new partner is to be admitted to a partnership and a bonus is attributed to the old partnership,the bonus should be divided between the capital accounts of the original partners according to their capital balances.

Sadie and Sam share income equally.For the current year,the partnership net income is $40,000.Sadie made withdrawals of $14,000 and Sam made withdrawals of $15,000.At the beginning of the year,the capital account balances were: Sadie,Capital,$42,000; Sam,Capital,$58,000.Sam's capital account balance at the end of the year is

The statement of members' equity is used for equity reporting of a partnership.

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

Seth and Rachel have original investments of $50,000 and $100,000,respectively,in a partnership.The articles of partnership include the following provisions regarding the division of net income: interest on original investments at 15%; salary allowances of $24,000 and $20,000,respectively; and the remainder to be divided equally.How much of the net income of $90,000 is allocated to Seth?

Luke and John share income and losses in a 2:1 ratio after allowing for salaries of $48,000 to Luke and $60,000 to John.Net income for the partnership is $93,000.Income should be divided as

Henry Jones contributed equipment,inventory,and $44,000 cash to a partnership.The equipment had a book value of $35,000 and market value of $28,000.The inventory had a book value of $25,000 but only had a market value of $12,000 due to obsolescence.The partnership also assumed a $15,000 note payable owed by Henry that was originally used to purchase the equipment.​What amount should be recorded to Henry's capital account?

Tomas and Saturn are partners who share income in the ratio of 3:1.Their capital balances are $40,000 and $60,000,respectively.The partnership generated net income of $20,000.What is Saturn's capital balance after closing the revenue and expense accounts to the capital accounts?

As part of the initial investment,Jackson contributes accounts receivable that had a balance of $22,500 in the accounts of a sole proprietorship.Of this amount,$3,000 is deemed completely worthless.For the remaining accounts,the partnership will establish a provision for possible future uncollectible accounts of $1,500.The amount debited to Accounts Receivable for the new partnership is

The partnership of Miner Company began operations on January 1,with contributions as follows:​ The following additional partner transactions took place during the year:​ RequiredPrepare a statement of partnership equity for the year ended December 31.

Tucker and Titus are partners who share income in the ratio of 3:1.Their capital balances are $40,000 and $60,000,respectively.The partnership generated net income of $40,000 for the year.What is Tucker's capital balance after closing the revenue and expense accounts to the capital accounts?

Emerson and Dakota formed a partnership dividing income as follows:​ 1.Annual salary allowance to Emerson of $58,000 2.Interest of 8% on each partner's capital balance on January 1 3.Any remaining net income divided equally​Emerson and Dakota had $25,000 and $140,000,respectively,in their January 1 capital balances.Net income for the year was $220,000.​How much net income should be distributed to Dakota?

Match each statement to the appropriate term (a-h) . -When a partnership cannot pay its debts with business assets,the partners must use personal assets to meet the debt

-Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000 at the time they decide to terminate the partnership.After all noncash assets are sold and all liabilities are paid,there is a cash balance of $130,000.What amount of loss on realization should be allocated to Winston?

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