Accounting Chapter 12 smartbook

limited liability partnership

A partnership that protects innocent partners from malpractice or negligence claims resulting from the acts of another partner is called a

S Corporation

A(n) _________ contains 100 or fewer stockholders and can elect to be treated as a partnership for tax purposes. The stockholders have limited liability.

cash

A. Scott withdraws from her partnership with three other partners and takes cash equal to her capital balance, in the amount of $13,000. The journal entry to reflect this transaction would include a credit to the _____ account?

limited

A ________ partnership allows some partners to have limited liability. One partner must be a general partner, who assumes management duties and unlimited liability for the debts of the partnership.

Partnership

A __________ is an unincorporated association of two or more people who pursue a business for profit as co-owners.

debited remaining

F. Yang withdraws from a partnership with five other partners. Yang agrees to take $10,000 cash in settlement of her capital balance of $8,000. The remaining $2,000 will be (debited/credited)

Shareholders will have limited liability Taxes will flow through shareholders like a partnership

A group of friends decide to create an S corporation. Which of the following features will be granted to the shareholders by making this election? (Check all that apply.)

Investing cash in the partnership Purchasing interest from an existing partner

A new partner can be admitted to an existing partnership in which of the following ways? (Check all that apply.)

withdraw from

A partner can _________ a partnership by selling his or her interest to another person.

partner rights and duties Income and loss sharing names of partners

A partnership agreement will include each of the following:

5,000 remaining

C. Guess withdraws from a partnership with three other partners. Guess agrees to take $25,000 in settlement of her capital balance of $30,000. This creates a $_____bonus that is paid to the (remaining/withdrawing) partner(s).

debited; remaining partners capital accounts

D. Sims withdraws from a partnership with two other partners. Sims agrees to take $20,000 cash in settlement of his capital balance of $15,000. The remaining $5,000 will be (debited/credited) _______ to the ______ account(s).

Net income

In partnership accounting, ownership rights are divided among partners. Each partner will use a capital account, withdrawal account, and be allocated ________ according to the partnership agreement.

partnership agreement or contract

In partnership accounting, ownership rights are divided among partners. Each partner will use a capital account, withdrawal account, and be allocated net income according to the

limited liability partnership

John and Tyler Jones are brothers who entered into a partnership. The brothers have limited liability that protects each partner from malpractice or negligence claims resulting from the other partner. However, both brothers are responsible for other debts in the partnership. This type of partnership is called a(n):

$10,000; the remaining partners

L. Jones withdraws from a partnership with two other partners. Jones agrees to take $15,000 in settlement of his capital balance of $25,000. This creates a ______ bonus that is allocated to _______.

Santiago, Capital; for $20,000

Manuel and Jones operate a partnership with beginning-year capital balances of $50,000 each. During the year, Santiago joins the partnership by investing $20,000 cash. The journal entry to record Santiago's contribution would include a credit of how much and to which account?

whether or not the cash is distributed

Partners are taxed on the partnership income:

Salary and interest allowances Ratio of capital balances Stated ratio basis

Partners must agree to a method of dividing income or loss. Which of the following are common methods to divide income or loss? (Check all that apply.)

15,000

S. Diaz and T. Sosa are partners with equal capital balances of $60,000 each. They agree to let J. Smith invest $30,000 in their partnership for a 10% interest, including bonuses to the existing partners. Smith's beginning capital balance will equal $

Debit to Cash; $30,000

S. Diaz and T. Sosa are partners with equal capital balances of $60,000 each. They agree to let J. Smith invest $30,000 in their partnership for a 10% interest, including bonuses to the existing partners. The journal entry to reflect this transaction will include which of the following items?

12,000

S. Wang and T. Wu are partners with equal capital balances of $50,000 each. They agree to let J. Li invest $20,000 in their partnership for a 10% interest, including bonuses to the existing partners. Li's beginning capital balance will equal _________.

Wang, Capital; $4,000

S. Wang and T. Wu are partners with equal capital balances of $50,000 each. They agree to let J. Li invest $20,000 in their partnership for a 10% interest, including bonuses to the existing partners. The journal entry to reflect the bonus to Wang will include a credit to _______ in the amount of ______.

credit, 30,000

T. Bina and and M. Valley are partners with equal capital balances of $50,000 each. They agree to let R. Smith invest $20,000 in their partnership for a 25% interest, which means that Smith's beginning capital balance will equal $30,000, with each existing partner granting a $5,000 bonus to Smith. The journal entry to reflect Smith's new capital balance will include a (debit/credit)

cash account

T. Dewey withdraws from her partnership with two other partners and takes cash equal to her capital balance, in the amount of $33,000. The journal entry to reflect this transaction would include a credit to theT. Dewey withdraws from her partnership with two other partners and takes cash equal to her capital balance, in the amount of $33,000. The journal entry to reflect this transaction would include a credit to the

90,000

T. Dole invests cash and land into an existing partnership. The cash invested is $30,000 and the land has a fair market value of $60,000. The journal entry to reflect this transaction would include a credit to T. Dole, Capital in the amount of $

T. Reed, Capital for $3,750

T. Reed and S. Riley are partners with equal capital balances of $60,000 each. They agree to let R. Smith invest $30,000 in their partnership for a 25% interest, which means that R. Smith's beginning capital balance will equal $37,500 with each existing partner contributing a $3,750 bonus to Smith. The journal entry to reflect this transaction will include a debit in what amount and to which of the following accounts?

Credit to Cash Debit to T. Thomas, Capital

T. Thomas withdraws from his partnership with five other partners and takes cash equal to his capital balance, in the amount of $25,000. The journal entry to reflect this transaction would include which of the following? (Check all that apply.)

T. Wiley, Capital

T. Wiley sells one-half of her partnership to L. Tims for $10,000 cash. The entry to record this transaction in the books of the partnership will include a debit to which account?

paid by the partners even though profit has not been distributed in cash. paid by each partner.

Taxes on a partnership are: (Check all that apply).

unlimited liability

The characteristic that each partner can be legally required to pay the partnership debts even out of personal assets is referred to as

A partner agreement

includes partners' names, rights, income and loss sharing agreement, withdrawal arrangement, dispute procedures, admission and withdrawal procedures and rights and duties in the event a partner dies.

Hahn, Capital for $75,000

The partnership agreement of C. Hahn and D. Barry states that Hahn receives 75% and Barry 25% of partnership income and losses. The partnership's net income is $100,000 and is allocated to the partners when the Income Summary account is closed. Which of the following will be credited to close the Income Summary account?

Blank 1: credit Blank 2: 35,000

The partnership agreement of Martinez and Magden states that L. Martinez will receive 50% of all income and losses. During the current period, the company has net income of $70,000. To close the Income Summary account and give Martinez her share of net income, the partnership will (debit/credit) blank the L. Martinez, Capital account for $blank

75,000

The partnership agreement of T. Chung and N. Patel states that the partners will share income and loss based on beginning capital balances. At the beginning of the year, Chung's capital balance was $30,000 and Patel's capital balance was $10,000. If net income during the period was $100,000, then the entry to close net income to Chung's capital account will include a credit to T Chung, Capital in the amount of $

25,000

The partnership agreement of T. Chung and N. Patel states that the partners will share income and loss based on beginning capital balances. At the beginning of the year, Chung's capital balance was $30,000 and Patel's capital balance was $10,000. If net income during the period was $100,000, then the entry to close net income to Patel's capital account will include a credit to N. Patel, Capital in the amount of ________.

withdrawals

The statement of partners' equity shows each partner's beginning capital balance, additional investments, allocated income or loss, partners' ________(expenses, withdrawals), and ending capital balance.

general partnership

The type of partnership where all partners have mutual agency and unlimited liability is called:

True

True or false: A new partner is admitted to an existing partnership by purchasing an interest from a current partner or by investing assets in the partnership.

False

True or false: A partner can be admitted to a partnership by either selling his or her interest to another person, or distributing cash or other assets of the partnership to the partner in settlement of his or her interest.

Partner A 75%; Partner B 25%

Two partners agree to share income based on the following—75% to Partner A and 25% to Partner B. They do not agree on how to share losses. Since there is no agreement on how to share losses they will be shared:

federal income tax

Which of the following would not be shown on the statement of partners' equity?

A partnership

is an unincorporated association of two or more people who pursue a business for profit as co-owners.

limited

partnership has two classes of partners—general and limited.