Acct 2333 CH 14

The capital balance for Maxwell is $110,000 and for Russell is $40,000. These two partners share profits and losses 70 percent (Maxwell) and 30 percent (Russell). Evan invests $50,000 in cash into the partnership for a 30 percent ownership. The bonus method will be used. What is Russell's capital balance after Evan's investment? $35,000 $37,000 $43,000 $40,000

$37,000

Patrick has a capital balance of $120,000 in a local partnership, and Caitlin has a $90,000 balance. These two partners share profits and losses by a ratio of 60 percent to Patrick and 40 percent to Caitlin. Camille invests $60,000 in cash in the partnership for a 20 percent ownership. The goodwill method will be used. What is Caitlin's capital balance after this new investment? $102,000 $126,000 $112,000 $99,600

$102,000

The capital balance for Messalina is $210,000 and for Romulus is $140,000. These two partners share profits and losses 60 percent (Messalina) and 40 percent (Romulus). Claudius invests $100,000 in cash in the partnership for a 20 percent ownership. The bonus method will be used. What are the capital balances for Messalina, Romulus, and Claudius after this investment is recorded? $222,000, $148,000, $80,000 $240,000, $160,000, $100,000 $218,000, $142,000, $88,000 $216,000, $144,000, $90,000

$216,000, $144,000, $90,000

How does partnership accounting differ from corporate accounting? Individual capital accounts replace the contributed capital and retained earnings balances found in corporate accounting. The matching principle is not considered appropriate for partnership accounting. Revenues are recognized at a different time by a partnership than is appropriate for a corporation. Partnerships report all assets at fair value as of the latest balance sheet date.

Individual capital accounts replace the contributed capital and retained earnings balances found in corporate accounting.

Which of the following is not a reason for the popularity of partnerships as a legal form for businesses? Partnerships can more easily generate significant amounts of capital. In some cases, losses may be used to offset gains for tax purposes. Partnerships may be formed merely by an oral agreement. Partnerships avoid the double taxation of income that is found in corporations.

Partnerships can more easily generate significant amounts of capital.

Which of the following best describes the articles of partnership agreement? The purpose of the partnership and partners' rights and responsibilities are required elements of the articles of partnership. The articles of partnership are a legal covenant that may be expressed orally or in writing, and form the central governance for a partnership's operations. Correct The articles of partnership are an agreement that limits partners' liability to partnership assets. The articles of partnership are a legal covenant and must be expressed in writing to be valid.

The articles of partnership are a legal covenant that may be expressed orally or in writing, and form the central governance for a partnership's operations.

Pat, Jean Lou, and Diane are partners with capital balances of $50,000, $30,000, and $20,000, respectively. These three partners share profits and losses equally. For an investment of $50,000 cash (paid to the business), MaryAnn will be admitted as a partner with a one-fourth interest in capital and profits. Based on this information, which of the following best justifies the amount of MaryAnn's investment? MaryAnn is apparently bringing goodwill into the partnership, and her capital account will be credited for the appropriate amount. MaryAnn will receive a bonus from the other partners upon her admission to the partnership. Assets of the partnership were overvalued immediately prior to MaryAnn's investment. The book value of the partnership's net assets was less than the fair value immediately prior to MaryAnn's investment.

The book value of the partnership's net assets was less than the fair value immediately prior to MaryAnn's investment.