Exam DB Notes

$36,000

Callie is admitted to the Adams & Beal Partnership under the bonus method. Callie contributes cash of $20,000 and non-cash assets with a market value of $30,000 and book value of $15,000 in exchange for a 20% ownership interest in the new partnership. Prior to the admission of Callie, the capital of the existing partnership was $130,000 and an appraisal showed the partnership net assets were fairly stated. What will be Callie's initial capital balance?

$44,500

Partners A and B have a profit and loss agreement with the following provisions: salaries of $20,000 and $25,000 for A and B, respectively; a bonus to A of 10% of net income after bonus; and interest of 20% on average capital balances of $40,000 and $50,000 for A and B, respectively. Any remainder is split equally. If the partnership had net income of $88,000, how much should be allocated to Partner A?

$43,225

Partners A and B have a profit and loss agreement with the following provisions: salaries of $30,000 and $45,000 for A and B, respectively; a bonus to A of 12% of net income after salaries and bonus; and interest of 10% on average capital balances of $50,000 and $65,000 for A and B, respectively. One-fourth of any remaining profits are allocated to A and the balance to B. If the partnership had net income of $108,600, how much should be allocated to Partner A?

$30,000

Partners Thomas, Adams and Jones have capital balances of $24,000, $45,000, and $90,000 respectively. They split profits in the ratio of 3:3:4, respectively. Under a predistribution plan, one of the partners will get the following total amount in liquidation before any other partners get anything:

The incoming partner's market value of consideration divided by the incoming partner's percentage ownership share in the new partnership.

The fair market value of a partnership can be implied by

includes all assets owned by a decedent at the moment of death, regardless of whether they pass to others by means of will, joint tenancy, or community property laws

The gross estate of a decedent:

More excess paid in capital is created by reducing the par value of the common stock.

The last step in a Quasi Reorganization is to eliminate the final deficit in retained earnings by transferring enough excess paid in capital to retained earnings. What happens when the excess paid in capital is not enough to cover the deficit in retained earnings?

transactions affecting principal and income.

The primary purpose of an estate's charge and discharge statement is to detail

The bonus criteria would not be used.

A partnership agreement calls for allocation of profits and losses by salary allocations, a bonus allocation, interest on capital, with any remainder to be allocated by preset ratios. If a partnership has a loss to allocate, generally which of the following procedures would be applied?

$10,000

Ace & Barnes partnership has income of $110,000 and Partner A is to be allocated a bonus of 10% of income after the bonus, Partner A's bonus would be ____.

$5,000 to Branden only

Allen, Branden & Caylin are in the process of liquidating their partnership. They have the following capital balances and profit and loss percentages: Allen Capital Balance Profit/Loss % Branden 5,000 debit 20% Caylin 18,000 credit 50% 6,000 credit 30% The partnership balance sheet shows cash of $5,000, non-cash assets of $14,000, and no liabilities. Assuming no liquidation expenses, what safe payment could be made?

$128,000

Assume the existing capital of a partnership is $100,000. Two partners currently own the partnership and split profits 40/60. A new partner is to be admitted and will contribute net assets with a fair value of $50,000. An appraisal of existing partnership assets indicates accounts receivable overstated by $10,000, inventory overstated by $12,000 and land understated by $25,000. What is the total capital of the new partnership if the bonus method is being used and the assets are first adjusted to fair market value?

$2,800 increase to Beal capital

Callie is admitted to the Adams & Beal Partnership under the bonus method. Callie contributes cash of $20,000 and non-cash assets with a market value of $30,000 and book value of $15,000 in exchange for a 20% ownership interest in the new partnership. Prior to the admission of Callie, the capital of the existing partnership was $130,000 and an appraisal showed the partnership net assets were fairly stated. Adams & Beal shared profits and losses at a ratio of 80/20, respectively. Which of the following bonus amounts would be recorded?

fair market value (fair value)

For financial accounting purposes, assets of an individual partner contributed to a partnership are recorded by the partnership at

residuary legacy.

In a testate distribution, a gift of property left after all other legacies have been assigned is referred to as a

Palit capital is created in the amount of $60,000.

Palit buys Quincy's partnership interest in the Q-R-S partnership. Quincy thus retires, leaving Reale and Susien as Palit's co-partners. Prior to Palit entering the partnership, Quincy, Reale, and Susien split profits and losses equally. Palit pays $75,000 for Quincy's capital which, at the time, totaled $60,000. No revaluation of partnership assets or liabilities occurs at the time. In recording this event on the partnership books

$31,000

Partner Alta had a capital balance on January 1, 2008 of $45,000 and made additional capital contributions during 2008 totaling $50,000. During the year 2008, Alta withdrew $8,000 per month. Alta's post-closing capital balance on December 31, 2008 is $30,000. Alta's share of 2008 partnership income is ____.

the book value of the previous partnership minus any asset write downs from book to market value plus the fair market value of the consideration paid to the existing partnership by the incoming partner

Under the bonus method, when a new partner is admitted to the partnership, the total capital of the new partnership is equal to:

a reduction in the estate tax when computing final estate tax to be paid.

What is the unified credit?

the asset is first written up/down to fair market value resulting in a gain/loss on writeup or writedown and then the difference between the new book value of the asset and the book value of the debt is gain/loss on restructure.

When an asset is given to a creditor for payment of debt

an increase in principal assets.

When investment in an estate are sold for more than the fair value upon death, the gain is reported as

a tract of land bequeathed to the local humane society

Which of the following is not a legacy?

Unlimited liability

Which of the following is not an advantage of a partnership over a corporation?

Loss on the sale of an estate asset

Which of the following items is not charged against the income of an estate?

All affect the estate principal

Which of the following items is not included in the estate principal subsequent to the date of death?

Partner salaries may be used to allocate profits and losses; they are not considered expenses of the partnership

Which of the following statements is true concerning the treatment of salaries in partnership accounting?

Interest on average capital balances

Which of the following would be least likely to be used as a means of allocating profits among partners who are active in the management of the partnership?