chapter 14
The dissolution of a partnership occurs
when there is any change in the individuals who make up the partnership
When Danny withdrew from John, Daniel, Harry, and Danny, LLP, he was paid $80,000, although his capital account balance was only $60,000. The four partners shared net income and losses equally. The journal entry to record the effect on John's capital due to Danny's withdrawal would include:
A. $6,667 debit to John, Capital. ($80,000 - $60,000) ÷ 3 = $6,667
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. C contributes $38,000 to the partnership and the bonus method is used. What amount will be credited for C's beginning capital balance?
C. $27,600
The partners of Apple, Bere, and Carroll LLP share net income and losses in a 5:3:2 ratio, respectively. The capital account balances on January 1, 2013, were as follows: APPLE, CAPITAL: $25,000 BERE, CAPITAL: 75,000 CARROLL, CAPITAL: 50,000 TOTAL CAPITAL: 150,000 The carrying amounts of the assets and liabilities of the partnership are the same as their current fair values. Dorr will be admitted to the partnership with a 20% capital interest and a 20% share of net income and losses in exchange for a cash investment. The amount of cash that Dorr should invest in the partnership is:
C. $37,500. ($150,000/.8 = $187,500. $187,500 - $150,000 = $37,500 to invest)
Max, Jones and Waters shared profits and losses 20%, 40%, and 40% respectively and their partnership capital balance is $10,000, $30,000 and $50,000 respectively. Max has decided to withdraw from the partnership. An appraisal of the business and its property estimates the fair value to be $200,000. Land with a book value of $30,000 has a fair value of $45,000. Max has agreed to receive $20,000 in exchange for her partnership interest after revaluation. At what amount should land be recorded on the partnership books?
C. $45,000. Land will be recorded at the fair value of $45,000.
The partnership of Clapton, Seidel, and Thomas was insolvent and will be unable to pay $30,000 in liabilities currently due. What recourse was available to the partnership's creditors?
D. they may seek remuneration from any partner they choose.
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Wasser's capital balance at the end of 2012?
E. $201,000. Beginning $150,000 + Interest $15,000 + Salary $10,000 + Remainder (40%) $38,000 - Withdrawals $12,000 = $201,000
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was the remainder portion of net income allocated to Nolan for 2013?
A. $45,440 $113,600 × 40% = $45,440
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?
E. $230,000. Roberts receives an additional $60,000 above her capital balance. Since she is assigned 40 percent of all profits and losses, this extra allocation indicates total goodwill of $150,000, which must be split among all partners. 40% of Goodwill = $60,000 Goodwill = $150,000 Total Capital is $240,000 + Goodwill $150,000 = $390,000 Roberts receives $160,000 and Partnership Capital is then $390,000 - $160,000 = $230,000
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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 Young's total share of net income for the second year?
E. $28,080 income. Net Income $52,000 - Interest $32,500 - Salaries $39,000 = ($19,500) × 50% = Young's Portion ($9,750) + Interest $11,830 + Salary $26,000 = Young's Share of Income $28,080
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Nolan's capital balance at the end of 2013?
E. $304,040. Beginning $246,000 + Interest $24,600 + Salary $0 + Remainder (40%) $45,440 - Withdrawals $12,000 = $304,040
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Wasser's total share of net income for 2012?
A. $63,000. Interest $15,000 + Salary $10,000 + Remainder (40%) $38,000 = $63,000
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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 Eaton's total share of net loss for the first year?
C. $10,400 loss. Net Loss ($26,000) - Interest $39,000 - Salaries $39,000 = ($104,000) × 20% = Eaton's Portion ($20,800) + Interest $10,400 + Salary $0 = Eaton's Share of Loss ($10,400)
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 Peter?
C. $110,000. Roberts receives an additional $60,000 above her capital balance. Since she is assigned 40 percent of all profits and losses, this extra allocation indicates total goodwill of $150,000, which must be split among all partners. 40% of Goodwill = $60,000 .40 G = $60,000 G = $150,000 and Peter receives 20% = $30,000. Peter's balance = $80,000 + $30,000 = $110,000.
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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 the balance in Thurman's Capital account at the end of the first year?
C. $126,100. Beginning $143,000 + Interest $14,300 + Salary $13,000 + Remainder (30%) ($31,200) - Withdrawals $13,000 = Ending Balance $126,100
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?
B. $40,000.
The advantages of the partnership form of business organization, compared to corporations, include
A. single taxation.
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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 the balance in Young's Capital account at the end of the second year?
A. $133,380. Beginning $118,300 + Interest $11,830 + Salary $26,000 + Remainder (50%) ($9,750) - Withdrawals $13,000 = Ending Balance $133,380
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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 loss for the first year?
A. $3,900 loss. Net Loss ($26,000) - Interest $39,000 - Salaries $39,000 = ($104,000) × 30% = Thurman's Portion ($31,200) + Interest $14,300 + Salary $13,000 = Thurman's Share of Loss ($3,900)
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Cleary's total share of net income for 2013?
A. $34,420. $11,700 + Salary $0 + Remainder (20%) $22,720 = $34,420
The capital account balances for Donald & Hanes LLP on January 1, 2013, were as follows: DONALD, CAPITAL: 200K HANES, CAPITAL: 100K 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. The capital account balances for Donald & Hanes LLP on January 1, 2013, were as follows: DONALD, CAPITAL: 200K HANES, CAPITAL: 100K 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 Hanes's capital account after the new partnership is created?
A. $84,000. Bonus to May $40,000 × .40 = $16,000 from Hanes' $100,000 = $84,000 New Capital Balance
Jell and Dell were partners with capital balances of $600 and $800 and an income sharing ratio of 2:3. They admitted Zell to a 30% interest in the partnership, and the total amount of goodwill credited to the original partners was $700. What amount did Zell contribute to the business?
A. $900. Jell $600 + Dell $800 + Goodwill $700 = $2,100/70% = $3,000 × 30% = $900 Cash
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. Anne retires and is paid $80,000 based on an independent appraisal of the business. If the goodwill method is used, what is the capital of the remaining partners?
A. Donald, $55,000; Todd, $60,000 Anne receives an additional $30,000 above her capital balance. Since she is assigned 40 percent of all profits and losses, this extra allocation indicates total goodwill of $75,000, which must be split among all partners. 40% of Goodwill = $30,000 Goodwill = $75,000 Donald = 20% Goodwill = $15,000 [$40,000 + $15,000] = $55,000 Todd = 40% Goodwill = $30,000 [$30,000 + $30,000] = $60,000
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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 Young's total share of net loss for the first year?
B. $11,700 loss. Net Loss ($26,000) - Interest $39,000 - Salaries $39,000 = ($104,000) × 50% = Young's Portion ($52,000) + Interest $14,300 + Salary $26,000 = Young's Share of Loss ($11,700)
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Cleary's capital balance at the end of 2012?
B. $117,000. Beginning $100,000 + Interest $10,000 + Salary $0 + Remainder (20%) $19,000 - Withdrawals $12,000 = $117,000
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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 the balance in Young's Capital account at the end of the first year?
B. $118,300. Beginning $143,000 + Interest $14,300 + Salary $26,000 + Remainder (50%) ($52,000) - Withdrawals $13,000 = Ending Balance $118,300
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What will be the amount of interest attributed to Cleary for 2014?
B. $13,942 $139,420 × 10% = $13,942
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:
B. $33,600. Bonus = .20 (NI - Bonus) = (.20 NI) - (.20 Bonus) 1.2 Bonus = $11,520 Bonus = $9,600 Remainder to share equally = $48,000. Hanes receives $24,000 + $9,600 = $33,600
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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 Eaton's total share of net income for the second year?
B. $4,160 income. Net Income $52,000 - Interest $32,500 - Salaries $39,000 = ($19,500) × 20% = Eaton's Portion ($3,900) + Interest $8,060 + Salary $0 = Eaton's Share of Income $4,160
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was the total capital balance for the partnership at December 31, 2012?
B. $564,000 Cleary $117,000 + Wasser $201,000 + Nolan $246,000 = $564,000
Jerry, a partner in the JSK partnership, begins the year on January 1, 2013 with a capital balance of $20,000. The JSK partnership agreement states that Jerry receives 6% interest on this weighted average capital balance. • On March 1, 2013, when the partnership tax return for 2012 was completed, Jerry's capital account was credited for his share of 2012 profit of $120,000. • Jerry withdrew $5,000 quarterly, beginning March 31st. • On September 1, Jerry's capital account was credited with a special bonus of $60,000 for business he brought to the partnership. What amount of interest will be attributed to Jerry for year 2013 that will go toward his profit distribution for the year? (Use a 360-day year for calculations.)
B. $6,000 Beginning Balance $20,000 + Profit $40,000 ($120,000/3) + Bonus $60,000 - Withdrawals $20,000 = Ending $100,000 × .06 = $6,000
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Wasser's total share of net income for 2013?
B. $75,540. Interest $20,100 + Salary $10,000 + Remainder (40%) $45,440 = $75,540
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. Anne retires and is paid $80,000 based on the terms of the original partnership agreement. If the bonus method is used, what is the capital of the remaining partners?
B. Donald, $30,000; Todd, $10,000 The $30,000 bonus is deducted from the remaining partners according to their relative profit and loss ratio. Donald = 20% and Todd = 40% which is a 1/3, 2/3 split Donald = $40,000 - (1/3 × $30,000) = $30,000 Todd = $30,000 - (2/3 × $30,000) = $10,000
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. C contributes $10,000 to the partnership and the goodwill method is used. What will be the result of the goodwill calculation?
B. Goodwill of $15,000; all to C. $50,000 + $30,000 + $20,000 = $100,000/80% = $125,000 - Current Capital $100,000 = $25,000 Cash is needed for 20%, $10,000 Cash received, $15,000 Goodwill is Recorded to C's Capital Account
The disadvantages of the partnership form of business organization, compared to corporations, include
B. unlimited liability for the partners.
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013.
C. $139,420. Beginning $117,000 + Interest $11,700 + Salary $0 + Remainder (20%) $22,720 - Withdrawals $12,000 = $139,420
The capital account balances for Donald & Hanes LLP on January 1, 2013, were as follows: DONALD, CAPITAL: 200K HANES, CAPITAL: 100K 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?
C. $140,000. Donald $200,000 + Hanes $100,000 + Cash $100,000 = $400,000 × .35 = $140,000 to May
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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?
C. $19,760 income. Net Income $52,000 - Interest $32,500 - Salaries $39,000 = ($19,500) × 30% = Thurman's Portion ($5,850) + Interest $12,610 + Salary $13,000 = Thurman's Share of Income $19,760
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was the amount of interest attributed to Wasser for 2013?
C. $20,100 Beginning $201,000 × 10% = $20,100
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?
C. $25,000 $50,000 + $30,000 + $20,000 = $100,000/80% = $125,000 - Current Capital $100,000 = $25,000 Cash
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Wasser's capital balance at the end of 2013?
C. $264,540. Beginning $201,000 + Interest $20,100 + Salary $10,000 + Remainder (40%) $45,440 - Withdrawals $12,000 = $264,540
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Nolan's total share of net income for 2012?
C. $58,000. Interest $20,000 + Salary $0 + Remainder (40%) $38,000 = $58,000
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was the total capital balance for the partnership at December 31, 2013?
C. $708,000 Cleary $139,420 + Wasser $264,540 + Nolan $304,040 = $708,000
Partnerships have alternative legal forms including all of the following except:
C. Subchapter S Partnership.
Which of the following statements is correct regarding the admission of a new partner?
C. The right to participate in management of the business cannot be conveyed without the consent of other existing partners.
Withdrawals from the partnership capital accounts are typically not used
C. to record interest earned on a partner's capital balance.
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?
D. $120,000. Roberts receives an additional $60,000 above her capital balance. Since she is assigned 40 percent of all profits and losses, this extra allocation indicates total goodwill of $150,000, which must be split among all partners. 40% of Goodwill = $60,000 Goodwill = $150,000 Dana receives 40% = $60,000 Dana's Balance = $60,000 + $60,000 = $120,000
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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 the balance in Thurman's Capital account at the end of the second year?
D. $132,860. Beginning $126,100 + Interest $12,610 + Salary $13,000 + Remainder (30%) ($5,850) - Withdrawals $13,000 = Ending Balance $132,860
The capital account balances for Donald & Hanes LLP on January 1, 2013, were as follows: DONALD, CAPITAL: 200K HANES, CAPITAL: 100K 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 Donald's capital account after the new partnership is created?
D. $176,000. Bonus to May $40,000 × .60 = $24,000 from Donald's $200,000 = $176,000 New Capital Balance
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Nolan's capital balance at the end of 2012?
D. $246,000. Beginning $200,000 + Interest $20,000 + Salary $0 + Remainder (40%) $38,000 - Withdrawals $12,000 = $246,000
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Cleary's total share of net income for 2012?
D. $29,000. Interest $10,000 + Salary $0 + Remainder (20%) $19,000 = $29,000
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2012 and $180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012 and 2013. What was Nolan's total share of net income for 2013?
D. $70,040. Interest $24,600 + Salary $0 + Remainder (40%) $45,440 = $70,040
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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 the balance in Eaton's Capital account at the end of the first year?
D. $80,600. Beginning $104,000 + Interest $10,400 + Salary $0 + Remainder (20%) ($20,800) - Withdrawals $13,000 = Ending Balance $80,600
Which of the following is not a characteristic of a partnership?
D. A partnership requires written Articles of Partnership.
The appropriate format of the December 31, 2012 closing entry for John & Hope Limited Liability Partnership, whose two partners had withdrawn their salaries from the partnership during the year is: JOHN, CAPITAL XXX HOPE, CAPITAL XXX JOHN, DRAWING XXX HOPE DRAWING XXX
D. Option D
The capital account balances for Donald & Hanes LLP on January 1, 2013, were as follows: DONALD, CAPITAL: 200K HANES, CAPITAL: 100K 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. The capital account balances for Donald & Hanes LLP on January 1, 2013, were as follows: DONALD, CAPITAL: 200K HANES, CAPITAL: 100K 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.
E. $400,000. Donald $176,000 + Hanes $84,000 + May $140,000 = Total Partners Capital $400,000
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?
E. $60,000 $40,000/20% = $200,000 - Current Capital $100,000 - New Cash $40,000 = $60,000 Goodwill
A partnership began its first year of operations with the following capital balances: Young, Capital: $143,000 Eaton, Capital: $104,000 Thurman, Capital: $143,000 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 with $13,000 salary assigned 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 the balance in Eaton's Capital account at the end of the second year?
E. $71,760. Beginning $80,600 + Interest $8,060 + Salary $0 + Remainder (20%) ($3,900) - Withdrawals $13,000 = Ending Balance $71,760
Which of the following could be used as a basis to allocate profits among partners who are active in the management of the partnership? 1) allocation of salaries. 2) the number of years with the partnership. 3) the amount of time each partner works. 4) the average capital invested.
E. 1, 2, 3, and 4.
Which of the following type of organization is classified as a partnership, or similar to a partnership, for tax purposes? (I.) Limited Liability Company (II.) Limited Liability Partnership (III.) Subchapter S Corporation
E. I, II, and III.
When the hybrid method is used to record the withdrawal of a partner, the partnership
E. revalues assets and liabilities but does not record goodwill.
Cherryhill and Hace had been partners for several years, and they decided to admit Quincy to the partnership. The accountant for the partnership believed that the dissolved partnership and the newly formed partnership were two separate entities. What method would the accountant have used for recording the admission of Quincy to the partnership?
The Goodwill Method