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Exam 12: Accounting for Partnerships and Limited Liability Companies

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Question 81

True/False

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A person may be admitted to a partnership only with the consent of all the current partners.

A) True
B) False

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Question 82

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In the distribution of income, the net income is less than the salary and interest allowances granted; the remaining balance will be a negative amount that must be divided among the partners as though it were a loss.

A) True
B) False

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Question 83

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The operating agreement for a Limited Liability Company is sometimes called:

When a new partner is admitted to a partnership

Many partnerships provide for the admission of new partners or withdrawals of present partners by amending existing partnership agreements, so that the firm may continue to operate without executing a new agreement.

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

Top Notch, LLC provides repair services for oil rigs. The firm has 5 members in the LLC, which did not change between 2011 and 2012. During 2012, the business expanded into three new regions of the country. The following revenue and employee information is provided: Required: a. For 2011 and 2012, determine the revenue per employee (excluding members). b. Interpret the trend between the two years.

Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $120,000 of net income under each of the following assumptions:

Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann's was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will Singer's share of the income be if the income for the year was $15,000?

If nothing is stated, partnership income is divided in proportion to the individual partner's capital balance.

When a new partner is admitted to a partnership, there should be a(n)

The Calvin-Dogwood Partnership owns inventory that was purchased for $90,000, has a current replacement cost of $85,900, and is priced to sell for $125,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted?

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

A partnership liquidation occurs when

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. New income for the year was $220,000. How much net income should be distributed to Dakota?

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

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

The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is called

The capital accounts of Hawk and Martin have balances of $160,000 and $140,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income for the year was $258,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners' equity for 2010 would show what amount as total capital for the partnership on December 31, 2010?

Ofelia and Teresa share income and losses in a 2:1 ratio after allowing for salaries to Ofelia of $48,000 and $60,000 to Teresa. Net income for the partnership is $132,000. Income should be divided as follows: