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21 Cards in this Set
- Front
- Back
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. Shelby and Mortonson formed a partnership with capital contributions of $300,000 and $400,000, respectively. Their partnership agreement calls for Shelby 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 Shelby and Mortonson'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. |
B
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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. |
B
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Rice, Hepburn, and DiMarco formed a partnership with Rice contributing $60,000, Hepburn contributing $50,000 and DiMarco 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 DiMarco's capital account?
A. $20,000. B. $25,000. C. $30,000. D. $40,000. E. $75,000. |
A
$75,000 x ($40,000/($60,000 + $50,000 + $40,000)) = $20,000 |
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Regina Harrison is a partner in Pressed for Time. An analysis of Regina Harrison's capital account indicates that during the most recent year, she withdrew $20,000 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. $124,000 B. $144,000 C. $192,000 D. $176,000 E. $134,000 |
D
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Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes $150,000, and Krug 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 $175,000 for its first year, what amount of income is credited to Krug's capital account?
A. $43,750. B. $78,750. C. $52,500. D. $58,333. E. $60,000. |
C
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Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes
$150,000, and Krug 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 $175,000 for its first year, what amount of income is credited to Krug's capital account? A. $43,750. B. $78,750. C. $52,500. D. $58,333. E. $60,000. |
B
$270,000/$600,000 = .45 x $175,000 = $78,750 |
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Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes
$150,000, and Krug 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 West's capital account? A. $58,000. B. $57,000. C. $61,500. D. $55,500. E. $48,000. |
D
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Nguyen invested $100,000 and Hansen invested $200,000 in a partnership. They agreed to
share incomes and losses by allowing a $60,000 per year salary allowance to Nguyen and a $40,000 per year salary allowance to Hansen, 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 Nguyen; $52,500 to Hansen. B. $35,000 to Nguyen; $70,000 to Hansen. C. $57,500 to Nguyen; $47,500 to Hansen. D. $42,500 to Nguyen; $62,500 to Hansen. E. $70,000 to Nguyen; $60,000 to Hansen. |
C
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In the absence of a partnership agreement, the law says that 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. |
D
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The partnership agreement for Smith Wesson & Davis, a general partnership, provided
that profits be shared between the partners in the ratio of their financial contributions to the partnership. Smith contributed $100,000, Wesson contributed $60,000 and Davis contributed $20,000. In the partnership's first year of operation, it incurred a loss of $210,000. What amount of the partnership's loss, rounded to the nearest dollar, should be absorbed by Smith? A. $70,000 B. $116,667 C. $23,333 D. $105,000 E. $52,500 |
B
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Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes
$150,000, and Krug 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 $175,000 for its first year, what amount of income is credited to Smith's capital account? A. $43,750. B. $78,750. C. $52,500. D. $58,333. E. $60,000. |
C
$180,000/$600,000 = .30 x $175,000 = $52,500 |
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Smith, West, and Krug form a partnership. Smith contributes $180,000, West contributes
$150,000, and Krug 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 Krug's capital account? A. $58,000. B. $57,000. C. $61,500. D. $55,500. E. $48,000. |
C
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A partner can withdraw from a partnership by:
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. All of these. |
E
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A bonus may be paid:
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. All of these. |
E
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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. |
A
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Jane and Castle are partners and share equally in income or loss. Jane's current capital
balance is $140,000 and Castle's is $130,000. Jane and Castle agree to accept Sean with a 30% interest in the partnership. Sean invests $108,000 in the partnership. The amount credited to Sean's capital account is: A. $108,000. B. $102,600. C. $110,500. D. $115,000. E. $113,400. |
E
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A partnership recorded the following journal entry: This entry reflects:
A. Acceptance of a new partner who invests $70,000 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 Tanner and Jackson. E. Withdrawal of $10,000 each by Tanner and Jackson upon the admission of a new partner. |
A
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Groh and Jackson are partners. Groh's capital balance in the partnership is $64,000, and
Jackson's capital balance $61,000. Groh and Jackson have agreed to share equally in income or loss. Groh and Jackson agree to accept Block with a 20% interest. Block will invest $35,000 in the partnership. The bonus that is granted to Groh and Jackson equals: A. $1,500 each. B. $1,875 each. C. $3,750 each. D. 1,920 to Groh; $1,830 to Jackson. E. $0, because Groh and Jackson actually grant a bonus to Block. |
A
Total partnership equity = $64,000 + $61,000 + $35,000 = $160,000 Equity of Block = $160,000 x 0.20 = $32,000 Bonus to old partners = $35,000 - $32,000 = $3,000, split equally |
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Groh and Jackson are partners. Groh's capital balance in the partnership is $64,000, and Jackson's capital balance $61,000. Groh and Jackson have agreed to share equally in income or loss. Groh and Jackson agree to accept Block with a 25% interest. Block will invest $35,000 in the partnership. The bonus that is granted to Block equals:
A. $5,000. B. $2,500. C. $6,667. D. $3,333. E. $0, because Block must actually grant a bonus to Groh and Jackson. |
A
Total partnership equity = $64,000 + $61,000 + $35,000 = $160,000 Equity of Block = $160,000 x 0.20 = $32,000 Bonus to old partners = $35,000 - $32,000 = $3,000, split equally |
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Chase and Hatch are partners and share equally in income or loss. Chase's current capital
balance is $135,000 and Hatch's is $120,000. Chase and Hatch agree to accept Flax with a 30% interest in the partnership. Flax invests $115,000 in the partnership. The balances in Chase's and Hatch's capital accounts after admission of the new partner equal: A. Chase $135,000; Hatch $120,000. B. Chase $137,000; Hatch $122,000 C. Chase $133,000; Hatch $118,000. D. Chase $139,000; Hatch $120,000. E. Chase $135,000; Hatch $124,000. |
B
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Chase and Hatch are partners and share equally in income or loss. Chase's current capital
balance is $135,000 and Hatch's is $120,000. Chase and Hatch agree to accept Flax with a 30% interest in the partnership. Flax invests $115,000 in the partnership. The amount credited to Flax's capital account is: A. $111,000. B. $115,000. C. $92,500. D. $120,000. E. $119,000. |
A
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