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Partnership Reviewer

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Reviewer for Accounting 2: Partnership

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Partnership Reviewer

  1. 1. Name:________________________ Class: ___________ Date: ___________ PARTNERSHIP REVIEWER TRUE/FALSE Indicate whether the statement is true or false. 1. There are only four legal structures to form and operate a business. 2. In a general partnership, each partner is individually liable to creditors for debts incurred by the partnership, to the extent of the partner's capital balance. 3. A partnership is a legal entity separate from its owners. 4. A partnership is subject to income taxes. 5. A disadvantage of partnerships is the mutual agency of all partners. 6. Each partnership must have a written partnership agreement. 7. Each partner may withdraw the assets he or she contributed to the partnership at any time. 8. When compared to a corporation, one of the major disadvantages of the partnership is its limited life. 9. When compared to a corporation, one of the major advantages of a partnership is its ease of formation. 10. Under a Subchapter S Corporation, the IFRS allows income to pass through the corporation to the individual stockholders without the corporation having to pay taxes on the income. 11. A Limited Liability Corporation is a business entity form designed to overcome some of the disadvantages of the corporation and the partnership forms. 12. For tax purposes, a Limited Liability Company may elect to be treated as a partnership. 13. The Limited Liability Company may elect to be manager managed rather than member managed which means that only authorized members may legally bind the corporation. 14. Each partner has a separate capital and withdrawal account. 15. The chart of accounts for a partnership, with the exception of drawing and capital accounts, does not differ from the chart of accounts for a sole proprietorship. 16. When the profitallocation isbased on capital contribution,the allocation of profit for industrial partner is atlowest available rate of division of profit in the partnership. 17. The equity reporting for a Limited Liability Corporation issimilar to that of a partnership but the changes in capital are shown on a statement of members' equity. 18. When a partner invests noncash assets in a partnership, the assets are recorded at the partner's book value. 19. Accounts receivable contributed to the partnership are recorded at their face value.
  2. 2. 20. A new partner contributes accounts receivable to a partnership which appear in the ledger of his sole proprietorship at $ 20,500 and there was an allowance for doubtful accounts of $ 750. If $600 of the accounts receivables are completely worthless, the partnership accounts receivable should be debited for $19,900. 21. One reason that distributions of income and loss are prepared is to obtain the information to record a closing entry. 22. If nothing is stated, partnership income is divided in proportion to the individual partner's capital balance. 23. The salary allocation to partners used in dividing net income would also appear as salary expense on the partnership income statement. 24. 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. 25. 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. 26. The amount that a partner withdraws as a monthly salary allowance does not affect the division of net income. 27. A devotes full time and B devotes one-half time to their partnership. If the partnership agreement is silent concerning the division of net income, A will receive a $20,000 share of a net income of $30,000. 28. 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. 29. Details of the division of partnership income should normally be disclosed in the financial statements. 30. Whenever a partnership is dissolved, the assets are liquidated. 31. When a partnership dissolves, a new partnership is formed and a new partnership agreement should be prepared. 32. Many partnerships providefor the admission of new partners or withdrawals of present partners i n the partnership agreement so that the firm may continue to operate without executing a new agreement. 33. A person may be admitted to a partnership only with the consent of all the current partners. 34. Partnership's assetaccounts should bechanged from cost to fair market value when a new partner is admitted to a firm or an existing partner withdraws and dies. 35. In admitting a new partner, the company chooses to use the purchase of an interest method, the capital interest of the new partner is obtained from the current partners and both the total assets and total capital are increased. 36. When a new partner purchases the entire interest of an old partner, the new partner's capital account should be credited for the amount he or she paid to the old partner. 37. If a new partner is given a 20% interest in the firm then the new partner will receive a 20% interest in earnings. 38. When a new partner is admitted by making an investment in the partnership,the old partners' capital accounts are always credited. 39. When a new partner is admitted by making an investment of assets in the partnership and the new partner has to pay a premium for admission, a bonus is divided among the old partners' capital accounts.
  3. 3. 40. Williams has a capital balance of $42,000 after adjusting the assets to fair market value. Mantle contributes $22,000 to receive a 30% interest in the new partnership. The bonus paid by Mantle is $2,800. 41. When a partner withdraws from the partnership, the partnership dissolves. 42. If not enough partnership cash or other assets are available to pay the withdrawing partner, a liability may be created for the amount owed the withdrawing partner. 43. When a partner withdraws from the partnership by selling his or her interest back to the partnership, the remaining partners must pay the withdrawing partner a specified amount from their personal assets. 44. X sells to A one-half of a partnership capital interest that totals $70,000 for $40,000. A's capital account in the partnership should be credited for $40,000. 45. When a new partner is admitted to a partnership,all partnership assets should be revised to reflect current prices. 46. 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. 47. If retiring partner A sells his or her interest to B, the partnership should record the assets paid to A in its a ccounts at their book values. 48. When a new partner is admitted to a partnership, bonuses attributable to either the old partnership or to the incoming partner may be recognized in accordance with the agreement among the partners. 49. Dissolution is the term which solely means to liquidate the partnership. 50. 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. 51. If the shareof losses on realization of the saleof noncash assets exceed the balance in a partner's capital account, the resulting balance is called a deficiency. 52. In a partnership liquidation, if a partner has a debit capital balance in his or her capital account, he or she is responsible for contributing personal assets sufficient to eliminate the deficit. 53. The process of winding up the affairs of a partnership is referred to as realization. 54. The distribution of cash, as the final process in winding up the affairs of a partnership, is based on the income- sharing ratio. 55. If a partner's capital balance is a debit after it has absorbed its share of the loss on realization, the balance is referred to as a deficiency. 56. In the liquidating process, any uncollected cash becomes a loss to the partnership and is divided among the remaining partners' capital balances based on their income-sharing ratio. 57. After all noncash assets have been converted to cash and all liabilities paid, A, B, and C have ca pital balances of $10,000 (debit), $5,000 (debit), and $25,000 (credit). The cash availablefor distribution to the partners is $10,000. 58. After all noncash assets have been converted to cash and all liabilities paid, A, B, and C have capital balances of $15,000 (credit), $10,000 (debit), and $30,000 (credit). C's share of the cash to be distributed is $30,000.
  4. 4. MULTIPLE CHOICE Identify the choice that best completes the statement or answers the question. 1. FORMATION Which of the following is characteristic of a general partnership? a. The partners have co-ownership of partnership property. b. The partnership is subject to income tax. c. The partnership has an unlimited life. d. The partners have limited liability. 2. FORMATION Which of the followingis not a characteristic of a general partnership? a. the partnership is created by a contract b. mutual agency c. partners share equally in net income or net losses unless an agreement states differently d. dissolution occurs only when all partners agree 3. FORMATION Which of the following is an advantage of a partnership when compared to a corporation? a. The partnership is more likely have a net income. b. The partnership is relatively inexpensive to organize. c. The partnership involves fewer people to operate. d. The partnership usually hires professional managers. 4. FORMATION Which of the following is a disadvantage of a partnership when compared to a corporation? a. The partnership is more likely to have a net loss. b. The partnership is easier to organize. c. The partnership is less expensive to organize. d. The partnership has limited life. 5. FORMATION An advantage of the partnership form of business organization is a. unlimited liability b. mutual agency c. ease of formation d. limited life 6. FORMATION 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 a. unlimited liability b. ease of formation c. mutual agency d. dissolution 7. FORMATION When a limited partnership is formed a. the partnership activities are limited b. all partners have limited liability c. some of the partners have limited liability
  5. 5. d. none of the partners have limited liability 8. FORMATION Which of the following below is not one of the four major forms of business entities that are discussed in this chapter? a. sole proprietorship b. corporation c. partnership d. subchapter s corporation 9. FORMATION Which of the following below isnota characteristic of a Limited Liability Company? a. limited life b. limited liability c. file articles of organization with the state government d. avoids mutual agency 10. FORMATION Accounting for the day-to-day activities for a partnership or Limited Liability Company is a. the same as the accounting for any other form of business b. the same as the accounting for a sole proprietorship only c. is not the same as the accounting for any other form of business d. the same as the accounting for a corporation only 11. FORMATION When a partnership is formed, assets contributed by the partners should be recorded on the partnership books at their a. book values on the partners' books prior to their being contributed to the partnership b. fair market value at the time of the contribution c. original costs to the partner contributing them d. assessed values for property purposes 12. FORMATION As part of the initial investment, a partner contributes equipment that had originally cost $100,000 and on which accumulated depreciation of $75,000 has been recorded. If similar equipmentwould cost $150,000 to replace and the partners agree on a valuation of $40,000 for the contributed equipment, what amount should be debited to the equipment account? a. $40,000 b. $150,000 c. $100,000 d. $75,000 13. FORMATION As part of the initial investment, Oswald contributes accounts receivable that had a balance of $25,000 in the accounts of a soleproprietorship. Of this amount, $1,250 is completely worthless. For the remainingaccounts, the partnership will establish a provision for possible future uncollectible accounts of $750. The amount debited to Accounts Receivable for the new partnership is a. $23,000 b. $25,000 c. $24,250 d. $23,750 14. PROFIT AND LOSS ALLOCATION Jack and Jill shareincomeand losses in a 2:1 ratio after allowing for salaries to Jack of $24,000 and $30,000 to Jill. Net income for the partnership is $48,000. Income should be divided as follows: a. Jack, $24,000; Jill, $24,000
  6. 6. b. Jack, $21,000; Jill, $27,000 c. Jack, $32,000; Jill, $16,000 d. Jack, $20,000; Jill, $28,000 15. PROFIT AND LOSS ALLOCATION Fred and Ethel shareincome equally. During the current year the partnership net income was $40,000. Fred made withdrawals of $12,000 and Ethel made withdrawals of $17,000. At the beginning of the year, the capital account balances were: Fred capital, $42,000; Ethel capital, $58,000. Fred's capital account balance at the end of the year is a. $76,500 b. $64,500 c. $62,000 d. $50,000 16. PROFIT AND LOSS ALLOCATION Partnership income and losses are usually divided on the basis of interest, salaries, and stated ratios because a. partners seldom contribute time and resources equally b. this method reflects the amount of time devoted to the partnership by the partners c. it is simpler than following the legal rules d. it prevents arguments among the partners 17. PROFIT AND LOSS ALLOCATION A ratio of 3:2:1 is the same as a. 30%:20%:10% b. 1/2:1/3:1/6 c. 3/10:2/10:1/20 d. both (a) and (c) 18. DISSOLUTION-ADMISSION C and D form a partnership in which C contributes $50,000 in assets and agrees to devote half time to the partnership. D contributed $40,000 in assets and agrees to devote full time to the partnership. How will C and D share in the division of income? a. 5:8 b. 1:2 c. 1:1 d. 5:4 19. PROFIT AND LOSS ALLOCATION X and Y have original investments of $50,000 and $100,000 respectively in a partnership.The articles of partnership includethe followingprovisionsregardingthe division of net income: interest on original investment at10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net income of $90,000 is allocated to X? a. $60,000 b. $43,000 c. $45,000 d. $47,000 20. PROFIT AND LOSS ALLOCATION X and Y have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership includethe followingprovisionsregardingthedivision of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net income of $50,000 is allocated to X? a. $33,333 b. $23,000
  7. 7. c. $25,000 d. $27,000 21. PROFIT AND LOSS ALLOCATION X and Y have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership includethe followingprovisionsregardingthedivision of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net loss of $10,000 is allocated to X? a. $10,000 b. $3,000 c. $5,000 d. $7,000 22. PROFIT AND LOSS ALLOCATION-STATEMENT OF PARTNER’S EQUITY The articles of partnership for A B Partnership provide for a salary allowance of $5,000 per month for partner B, with the balance of net income to be divided equally. If B made an additional investment of $10,000 during the year and withdrew $4,000 per month, and net income for the year was $90,000, by what a mount did B's capital increase during the year? a. $85,000 b. $10,000 c. $37,000 d. $60,000 23. PROFIT AND LOSS ALLOCATION If there is no written agreement as to the way income will be divided among partners a. they will share income and losses equally b. they will share income and losses according to their capital balances c. they will share income and losses according to the time devoted to the business. d. there really is no partnership agreement 24. PROFIT AND LOSS ALLOCATION Partner A has a capital balanceof $20,000 and devotes full time to the partnership. Partner B has a capital balance of $30,000 and devotes half time to the partnership. In what ratio is net income to be divided? a. 3:5 b. 1:1 c. 2:3 d. 1:2 25. PROFIT AND LOSS ALLOCATION Details of the division of net income for a partnership should be disclosed a. in the asset section of the balance sheet b. in the partners’ subsidiary ledger c. in the statement of cash flows d. in the income statement 26. PROFIT AND LOSS ALLOCATION –STATEMENT OF PARTNER’S EQUITY Deng and Dangare partners who shareincome in the ratio of 3:2. Their capital balances are $40,000 and $60,000 respectively. Income Summary has a credit balance of $20,000. What is Deng's capital bal ance after closing Income Summary to Capital? a. $30,000 b. $52,000 c. $28,000 d. $32,000
  8. 8. 27. DISSOLUTION-ADMISSION Selma pays Sally $39,000 for her 30% interest in a partnership with total net assets of $120,000. Following this transaction, Selma's capital account should have a credit balance of a. $36,000 b. $39,000 c. $33,000 d. more than $39,000 28. DISSOLUTION-ADMISSION Nellie is admitted to an existing partnership by investing cash. Nellie agrees to pay a bonus for her ownership interest because of the past success of the partnership. When Nellie's investment in the partnership is recorded a. her capital account will be credited for more than the cash she invested b. her capital account will be credited for the amount of cash she invested c. a bonus will be credited for the amount of cash she invested d. a bonus will be distributed to the old partners' capital accounts. 29. DISSOLUTION-ADMISSION Peter and Paul are partners. The partnership capital of Peter is $40,000 and Paul is $70,000. Peter sells his interest in the partnership to Mary for $50,000. The journal entry to record the a dmission of Mary as a new partner would include a. a credit to Mary's capital for $40,000 b. a credit to Paul's capital for $10,000 c. a credit Mary's capital for $50,000 d. a credit to Mary's capital for $40,000 and a credit to Paul's capital for $10,000 30. DISSOLUTION When a partner dies, the capital account balances of the remaining partners a. will increase b. will decrease c. will remain the same d. may increase, decrease, or remain the same 31. DISSOLUTION-WITHDRAWALS A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm. As a results of this transaction, the capital account balance of the other partners in the partnership a. will increase b. will decrease c. will remain the same d. may increase, decrease, or remain the same 32. DISSOLUTION-ADMISSION Shaw and Hall are partners. The partnership capital for Shaw is $50,000 and for Hall is $60,000. Thomas is admitted as a new partner by investing $40,000 cash. Thomas is given a 20% interest in return for her investment. The amount of the bonus to the old partners is a. $0 b. $18,000 c. $8,000 d. $10,000 33. DISSOLUTION-ADMISSION A and B are partners who share income in the ratio of 2:1 and have capital balances of $50,000 and $30,000 respectively. With the consent of B, X buys one half of A's interest for $35,000. For what amount will A's capital account be debited to record admission of X to the partnership? a. $40,000
  9. 9. b. $15,000 c. $25,000 d. $35,000 34. DISSOLUTION-ADMISSION A new partner may be admitted to a partnership by a. inheriting a partnership interest b. contributing assets to the partnership c. purchasing a specific quantity of assets from the partnership d. the consent of the majority of the current partners 35. DISSOLUTION A change in the ownership of a partnership results in the a. consolidating of the partnership b. liquidating of the partnership c. realization of the partnership d. dissolution of the partnership 36. DISSOLUTION-ADMISSION When a new partner is admitted to a partnership, there should be a(n) a. revaluation of assets b. realization of assets c. allocation of assets d. return of assets 37. DISSOLUTION-ADMISSION When a new partner is admitted to a partnership, there should be a(n) a. the total assets of the partnership increase b. new capital account is added to the ledger for the new partner c. the total owner's equity of the partnership increases d. the cash received by the current partner represents the amount of the debit to that partner's capital account. 38. DISSOLUTION-ADMISSION When an additional partner is admitted to a partnership by contribution of assets to the partnership a. the total assets of the partnership do not change b. no liabilities can be contributed at the same time c. the amount of the cash contribution is the same as the amount of the debit to the new partner's capital account d. the total of the owner's equity accounts increases 39. DISSOLUTION-ADMISSION When a new partner is admitted to a partnership a. a bonus may be attributable to the old partner b. a bonus may only result from more cash being given by the new partner than the value of the of the assets being purchased c. a bonus agreed upon by the partners is recorded as an asset so long as the amount is within the range set by the SEC d. a bonus is not recorded 40. DISSOLUTION-ADMISSION The CD Partnership owns inventory that was purchased for $65,000, has a current replacement cost of $62,500, and is priced to sell for $95,000. At what amount should the inventory be recorded in the accounts of the new partnership if A is to be admitted?
  10. 10. a. $97,000 b. $62,500 c. $65,000 d. $95,000 41. DISSOLUTION-ADMISSION Immediately prior to the admission of A, the XY Partnership assets had been adjusted to current market prices,and the capital balances of X and Y were $40,000 and $60,000 respectively. If the parties agree that the business is worth $150,000, what is the amount of bonus that should be recognized in the accounts at the admission of A? a. $100,000 b. $0 c. $40,000 d. $50,000 42. DISSOLUTION-ADMISSION Stan and Olliearepartners who shareincome in the ratio of 2:3 and have capital balances of $50,000 and $30,000 respectively. Ray is admitted to the partnership and is given a 40% interest by investing $20,000. What is Stan's capital balance after admitting Ray? a. $20,000 b. $25,000 c. $42,000 d. $18,000 43. DISSOLUTION-ADMISSION Stan and Olliearepartners who shareincome in the ratio of 2:3 and have capital balances of $30,000 and $50,000 respectively. Ray is admitted to the partnership and is given a 10% interest by investing $20,000. What is Ollie's capital balance after admitting Ray? a. $56,000 b. $34,000 c. $20,000 d. $44,000 44. DISSOLUTION-WITHDRAWALS Tim, Don, and Hans are partners with capital balances of $20,000, $30,000, and $50,000 respectively. They share income in the ratio of 3:2:1. Income Summary with a debit balance of $30,000 is closed to the capital accounts. Don withdraws from the partnership. How much cash does he get upon withdrawal? a. $30,000 b. $20,000 c. $40,000 d. $24,000 45. LIQUIDATION A and B are partners who shareincome in the ratio of 1:2 and have capital balances of $40,000 and $70,000 at the time they decide to terminate the partnership. After all noncash assets aresold and all liabilities are paid, there is a cash balance of $80,000. What amount of loss on realization should be allocated to A? a. $80,000 b. $10,000 c. $20,000 d. $30,000 46. LIQUIDATION A partnership liquidation occurs when a. a new partner is admitted
  11. 11. b. a partner dies c. the ownership interest of one partner is sold to a new partner d. the assets are sold, liabilities paid, and business operations terminated 47. LIQUIDATION The balance sheet of Marilyn and Monroe was as follows immediately prior to the partnership being liquidated: cash,$20,000;other assets,$160,000;liabilities,$40,000; Marilyn capital, $60,000; Monroe capital, $80,000. The other assets were sold for $139,000. Marilyn and Monroe share profits and losses in a 2:1 ratio. As a final cash distribution from the liquidation, Marilyn will receive cash totalling a. $46,000 b. $51,000 c. $60,000 d. $73 333 48. LIQUIDATION Jimmy Jerry and Johnny decide to liquidate their partnership. All assets are sold and the liabilities are paid. Followingthese transactions, the capital balances and profit and loss percentages are as follows: Jimmy, $27,000 and 30%; Jerry, $(12,000) and 40%; Johnny, $43,000 and 30%. Jerry is unable to contribute any assets to reduce the deficit. How much cash will Jimmy receive as a results of the partnership liquidation? a. $27,000 b. $21,000 c. $23,400 d. $15,000 49. LIQUIDATION The remaining cash of a partnership (after creditors have been paid) upon liquidation is divided among partners according to their a. capital balances b. contribution of assets c. drawing balances d. income sharing ratio 50. LIQUIDATION A gain or loss on realization is divided among partners according to their a. income sharing ratio b. capital balances c. drawing balances d. contribution of assets 51. LIQUIDATION A and B are partners who shareincome in the ratio of 3:2 and have capital balances of $50,000 and $90,000 at the time they decide to terminate the partnership. After all noncash assets aresold and all liabilities are paid, there is a cash balance of $90,000. How much cash should be distributed to A? a. $50,000 b. $20,000 c. $30,000 d. $45,000 52. LIQUIDATION X, Y, and Z arepartners, sharingincome1:2:3. After sellingall of the assets for cash,dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: X, $50,000 Cr.; Y, $40,000 Dr.; and Z, $30,000 Cr. How much cash is available for distribution to the partners? a. $120,000 b. $30,000 c. $40,000
  12. 12. d. $90,000 53. LIQUIDATION X, Y, and Z arepartners, sharingincome1:2:3. After sellingall of the assets for cash,dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: X, $50,000 Cr.; Y, $40,000 Dr.; and Z, $30,000 Cr. How much cash should be distributed to X assuming that Y pays the deficiency? a. $50,000 b. $20,000 c. $30,000 d. $40,000 54. LIQUIDATION X, Y, and Z arepartners, sharingincome1:2:3. After sellingall of the assets for cash,dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: X, $50,000 Cr.; Y, $20,000 Cr.; and Z, $30,000 Dr. Assume that after the availablecash is distributed to the partners, Z pays $15,000 of the deficiency to the firm. How much of the $15,000 should be distributed to X? a. $15,000 b. $0 c. $5,000 d. $10,000 55. FORMATION (additional) Jessica and Sienna want to put up an internet café business. Jessica is an expert in information technology and computers but has no funds or property to invest. Sienna knows nothing about internet and computers but she is willing to contribute the funds and property needed. If Jessica and Sienna decide to enter into a limited partnership, who between the two of them will be the limited partner? a. Jessica only. b. Sienna only. c. Both Jessica and Sienna. d. Neither Jessica nor Sienna: hence, they cannot enter into a limited partnership. 56. FORMATION (additional) These statements are presented to you: I. A limited partner may also be general partner at the same time. II. An industrial partner may also be a capitalist partner at the same time. a. Both statements are true b. Both statements are false. c. Only statement I is true. d. Only statement II is true. 57. PROFIT AND LOSS ALLOCATION (additional) Sun and Moon are partners in a business. Sun’s original capital was 40,000 and Moon’s was 60,000. They agree to salaries of 12,000 and 18,000 for Sun and Moon respectively and 10% interest on original capital. If they agree to shareremainingprofits and losses on a 3:2 ratio,what will Sun’s share of the income (loss) be if the net loss for the year was 10,000? a. (12,600) b. (14,000)
  13. 13. c. (6,000) d. (10,000) 58. FORMATION (additional) Resnel and Lana arecombiningtheir separatebusinesses to form a partnership.Cash and non-cash assets are to be contributed for a total capital of P 600,000.The non-cash assets to be contributed and the liabilities to be assumed are as follows. Resnel Lana Book Value Fair Market Value Book Value Fair Market Value Accounts Receivable 40,000 40,000 - - Merchandise Inventory 60,000 100,000 P 40,000P 50,000 Equipment 120,000 90,000 80,000 100,000 Accounts Payable 30,000 30,000 20,000 20,000 The partners’ capital accounts areto be equal after all the contributions of assets and the assumption of liabilities. The amount of cash to be contributed by Resnel is A P 200,000 C P 100,000 B P 300,000 D P 210,000 59. Using the information in item 39, the total assets of the partnership is A P 630,000 C P 360,000 B P 650,000 D P 340,000 60. PROFIT AND LOSS ALLOCATION(additional) The followingincomeand loss allocation method recognized the services rendered by the partners in terms of time and skill as well as the contribution made by each partner, except: A interest allowance to partners, balance in agreed ratio B salary allowance to partners, balance in agreed ratio C bonus allowance to partners, balance in agreed ratio D equally Enjoy your journey in reviewing accounting for partnerships!! Reviewer for corporation will be uploaded later. God Bless you all First accounting students!! #CPAinTransit xxxx nothing follows xxxxx
  14. 14. True or False 1. T 2. F 3. T 4. F 5. T 6. T 7. F 8. T 9. T 10. T 11. T 12. F 13. T 14. T 15. T 16. T 17. T 18. F 19. F 20. T 21. T 22. T 23. F 24. F 25. T 26. F 27. T 28. T 29. T 30. F 31. T 32. F 33. F 34. T 35. T 36. F 37. F 38. F 39. T 40. T
  15. 15. 41. T 42. T 43. T 44. F – 35 000 45. T 46. T 47. F – FAIRVALUE 48. T 49. F – TO CHANGE THE OWNERSHIP 50. F – P ANDL RATIO 51. T 52. T 53. F – LIQUIDATION 54. T 55. T 56. T 57. T 58. T Multiple Choice 1. D 2. D 3. B 4. D 5. C 6. C 7. C 8. B 9. D 10. A 11. B 12. A 13. D 14. D JACK JILL TOTAL SALARIES 24 000 30 000 54 000 REMAININGBALANCE(2:1) ( 4 000) ( 2 000) ( 6 000) NET INCOME 20 000 28 000 48 000
  16. 16. 15. D 16. D 17. B 18. D (AVAILABLEGIVEN ISASSET/CAPITALCONTRIBUTION) 19. D 20. D 21. B 22. C FRED ETHEL TOTAL BEGINNINGCAPITAL 42 000 58 000 100 000 NET INCOME (50%, 50%) 20 000 20 000 40 000 WITHDRAWAL (12 000) (17 000) (29 000) ENDING CAPITAL 50 000 61 000 111 000 X Y TOTAL INTEREST (10%) 5 000 10 000 15 000 SALARIES 27 000 18 000 45 000 REMAININGBALANCE(50%, 50%) 15 000 15 000 30 000 NET INCOME 47 000 43 000 90 000 X Y TOTAL INTEREST (10%) 5 000 10 000 15 000 SALARIES 27 000 18 000 45 000 REMAININGBALANCE(50%, 50%) ( 5 000) ( 5 000) (10 000) NET INCOME 27 000 23 000 50 000 X Y TOTAL INTEREST (10%) 5 000 10 000 15 000 SALARIES 27 000 18 000 45 000 REMAININGBALANCE(50%, 50%) (35 000) (35 000) (70 000) NET LOSS ( 3 000) ( 7 000) (10 000) A B TOTAL SALARIES - 60 000 60 000 REMAININGBALANCE(EQUALLY) 15 000 15 000 30 000
  17. 17. 23. A 24. C 25. D 26. B 27. A 28. D 29. A NET INCOME 15 000 75 000 90 000 A B TOTAL NET INCOME 15 000 75 000 90 000 ADDITIONALINVESTMENT - 10 000 10 000 WITHDRAWAL - (48 000) (48 000) CHANGESIN CAPITAL 15 000 37 000 52 000 DENG DANG TOTAL BEG, CAPITAL 40 000 60 000 100 000 INCOME ANDEXPENSE SUMMARY 12 000 8 000 20 000 NET INCOME 52 000 68 000 120 000 OLD CAPITAL CONTRIBUTION CHANGES AGREED NEW CAPITAL SALLY (OLD PARTNER) 120 000 (36 000) 84 000 SELMA (NEW PARTNER) - - 36 000 36 000 TOTAL 120 000 120 000 0 120 000 OLD CAPITAL CONTRIBUTION CHANGES AGREED NEW CAPITAL PETER 40 000 (40 000) 0 PAUL 70 000 70 000
  18. 18. 30. D 31. D 32. B 33. C 34. B 35. D 36. B 37. B (IF C,IT IS NOT APPLICABLEON PURCHASINGPARTNER’SINTERESTIN PARTNERSHIP) 38. D 39. B 40. D 41. D MARY - - 40 000 40 000 TOTAL 110 000 110 000 0 110 000 OLD CAPITAL CONTRIBUTION CHANGES AGREED NEW CAPITAL A 50 000 (25 000) 25 000 B 30 000 30 000 X (NEWPARTNER) - - 25 000 25 000 TOTAL 80 000 80 000 0 80 000 OLD CAPITAL CONTRIBUTION CHANGES AGREED NEW CAPITAL STAN 40 000 - 50 000 OLLIE 60 000 - 30 000 RAY (NEW PARTNER) - 0 50 000 50 000 TOTAL 100 000 100 000 50 000 150 000
  19. 19. 42. D 43. A 44. B 45. D ASSET,DEBIT SIDE OWNERSHIP,CREDIT SIDE 46. D 47. A OLD CAPITAL CONTRIBUTION CHANGES AGREED NEW CAPITAL STAN 50 000 (8 000) 42 000 OLLIE 30 000 (12 000) 18 000 RAY (NEW PARTNER) - 20 000 20 000 40 000 TOTAL 80 000 100 000 0 100 000 CASH NON CASH LIABILITIES CAPITAL DESCRIPTION AND EXPLAINATION A B PROFIT AND LOSS RATIO and PARTNER’S NAME 110 000 0 0 40 000 70 000 (30 000) (10 000) (20 000) LOSS AFTER REALIZATION 80 000 30 000 50 000 (80 000) (30 000) (50 000) CASH DISTRIBUTION OF 80 000 0 0 0 0 0 xxx END OF LIQUIDATION xxx CASH NON CASH LIABILITIES CAPITAL DESCRIPTION AND EXPLAINATION MANILYN (2/3) MONROE (1/3) PROFIT AND LOSS RATIO and PARTNER’S NAME 20 000 160 000 40 000 60 000 80 000
  20. 20. 48. B 49. D 50. A 51. A 52. C ASSET (DEBITSIDE) = LIABILITIES+ CAPITAL(OWNERSHIP,CREDITSIDE) ASSET,DEBIT SIDE OWNERSHIP,CREDIT SIDE 53. A ASSET,DEBIT SIDE OWNERSHIP,CREDIT SIDE 139 000 (160 000) 0 (14 000) (7 000) LOSS AFTER REALIZATION (139K -160K = -21K) 159 000 0 40 000 46 000 73 000 (40 000) - (40 000) PAYMENT OF LIABILITIES 119 000 - 0 46 000 73 000 (46 000) - - (46 000) - CASH DISTRIBUTION FOR MANILYN (73 000) - - - (73 000) CASH DISTRIBUTION FOR MONROE 0 0 0 0 0 xxx END OF LIQUIDATION xxx CASH NON CASH LIABILITIES CAPITAL DESCRIPTION AND EXPLAINATION X (1/6) Y (2/6) Z (3/6) PROFIT AND LOSS RATIO and PARTNER’S NAME 40 000 0 0 50 000 (40 000) 30 000 0 (10 000) 40 000 (30 000) DISTRIBUTION OF INSOLVENCY OF PARTNER Y 40 000 40 000 0 0 (40 000) (40 000) CASH DISTRIBUTION OF 40 000 0 0 0 0 0 0 xxx END OF LIQUIDATION xxx
  21. 21. 54. C ASSET,DEBIT SIDE OWNERSHIP,CREDIT SIDE 55. B JESSICA ISAN INDUSTRIALPARTNERWHILE SIENNA IS A CAPITALISTPARTNER SIENNA ONLYWILL BE LIMITED PARTNERBECAUSE SHE IS A CAPITALISTPARTNER. CASH NON CASH LIABILITIES CAPITAL DESCRIPTION AND EXPLAINATION X (1/6) Y (2/6) Z (3/6) PROFIT AND LOSS RATIO and PARTNER’S NAME 40 000 0 0 50 000 (40 000) 30 000 40 000 40 000 INVESTMENT OF PARTNER Y 80 000 50 000 0 30 000 (80 000) (50 000) (30 000) CASH DISTRIBUTION OF 80 000 0 0 0 0 0 0 xxx END OF LIQUIDATION xxx CASH NON CASH LIABILITIES CAPITAL DESCRIPTION AND EXPLAINATION X (1/6) Y (2/6) Z (3/6) PROFIT AND LOSS RATIO and PARTNER’S NAME 40 000 0 0 50 000 20 000 (30 000) 15 000 15 000 INVESTMENT OF PARTNER Z 55 000 50 000 20 000 (15 000) 0 (5 000) (10 000) 15 000 DISTRIBUTION OF INSOLVENCY OF PARTNER Z 55 000 0 0 45 000 10 000 0 (15 000) (5 000) (10 000) CASH DISTRIBUTION OF 15 000 40 000 40 000 0 (40 000) (40 000) CASH DISTRIBUTION OF 40 000 0 0 xxx END OF LIQUIDATION xxx
  22. 22. 56. C 57. B 58. BONUS $ 270 000 59. B Resnel Lana Fair Market Value Fair Market Value TOTAL CASH (SQUEEZE) 270 000 - 270 000 Accounts Receivable 40,000 - 40 000 Merchandise Inventory 100,000 50,000 150 000 Equipment 90,000 100,000 190 000 TOTAL ASSET 500 000 150 000 650 000 Accounts Payable ( 30,000) ( 20,000 ) ( 50 000) TOTAL CAPITAL 470 000 130 000 600 000 60. A INTEREST IS NOT APPLICABLE TO INDUSTRIAL PARTNERS BECAUSE THE COMPUTATIONFOR INTEREST IS MULTIPLICATION OF INITIAL INVESTMENT,WHICH IT IS NOT PRESENT ON INDUSTRIAL PARTNER, AND ASSIGNEDRATE. xxx NOTHING FOLLOWS xxx SUN MOON TOTAL INTEREST (10%) 4 000 6 000 10 000 SALARIES 12 000 18 000 30 000 REMAININGBALANCE(3/5, 2/5) (30 000) (20 000) (50 000) NET LOSS ( 14 000) 4 000 (10 000)

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