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Exam 9: Partnerships: Formation and Operation

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Question 41

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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.

F) A) and B)
G) B) and E)

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Question 42

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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.

F) All of the above
G) C) and D)

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Question 43

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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?

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?

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?

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?

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?

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.

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?

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.)

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?

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 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?

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?

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?

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?

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

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?

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

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?