ch 12 accounting smart book

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.

False

Identify the first step to take when liquidating a partnership.

Record the sale of noncash assets and any resulting gains or losses.

On January 1, Baker and Rios create a partnership by investing $20,000 each and agreeing to share income and losses equally. During the year, Baker earns $5,000 salary allowance and withdraws $2,000. Net income is $20,000. Baker's ending capital balance is $__________.

Blank 1: 30500

L. Lang withdraws from a partnership with two other partners. Lang agrees to take $25,000 in settlement of her capital balance of $20,000. This creates a $________________ bonus that is paid to the (remaining/withdrawing) _______________ partner(s).

Blank 1: 5000 or 5,000 Blank 2: withdrawing

D. Buck withdraws from a partnership with four other partners. Buck agrees to take $25,000 in settlement of his capital balance of $15,000. This creates a ______ bonus that is paid to _______.

$10,000; the withdrawing partner

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 _______.

$10,000; the remaining partners

On January 1, Drake and Potter create a partnership by investing $10,000 each and agreeing to share income and losses equally. During the year, Drake withdraws $3,000 and Potter withdraws $5,000. Net income is $30,000. How much is Drake's ending capital balance?

$22,000

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 ________.

$25,000 30,000 + 10,000 = 40,000. Patel's ratio = $10,000/$40,000=.1/4 or 25%. $100,000 net income x.25 = $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 Chung's capital account will include a credit to T Chung, Capital in the amount of $________.

Blank 1: 75000

J. Jones sells one-half of his partnership to J. Denim for $5,000 cash. The entry to record this transaction will include a (debit/credit) _______ to J. Denim, Captial.

Blank 1: credit

The partnership of Crandall, Crandall, and Dixon state that the partners will share profits and losses equally. Prior to liquidation, Dixon has a deficit of $8,000 that he cannot pay. The other partners will absorb the deficiency. The journal entry to record this transaction will include a (debit/credit) ______ to Dixon, Capital in the amount of $________.

Blank 1: credit Blank 2: 8000

After all assets are sold and liabilities are settled, the partnership of Bina and Niren is liquidated. Capital balances are $30,000 for Bina and $20,000 for Niren. Cash distributed is $50,000. The transaction to record the distribution of cash to Bina will include a (debit/credit)____________ to Bina, Capital in the amount of $_____________________.

Blank 1: debit Blank 2: 30000

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 _______ _________.

Blank 1: partnership Blank 2: agreement or contract

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 items will be credited to close the Income Summary account?

C. Hahn, Capital for $75,000 Revenues and expenses are closed to income summary. Income summary is then closed to the partner's capital accounts. D. Barry, Capital will be credited for $25,000.

Zenner and Maddox operate a partnership with beginning-year capital balances of $20,000 each. During the year, Kramer joins the partnership by investing $10,000 cash. The journal entry to record Kramer's contribution would include a debit of how much and to which account?

Cash; for $10,000

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?

Debit to Cash; $30,000 J. Smith will have a credit balance representing 10% interest of $60,000 + $60,000 + $30,000 = $150,000 x .10 = $15,000.

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.)

Debit to T. Thomas, Capital Credit to Cash

A limited partnership has two classes of partners. Which of the following terms describe the two classes of partners?

General partners and limited partners

The partnership of Zion, Graves, and Miro state that the partners will share profits and losses equally. Prior to liquidation, Miro has a deficit of $6,000 that she cannot pay. The other partners will absorb the deficiency. The journal entry to record this transaction will include a debit of how much to which of the following accounts? (Check all that apply.)

Graves, Capital for $3,000 Zion, Capital for $3,000

After all assets are sold and liabilities have been settled, the partnership of Jose and Santiago is liquidated. Capital balances for Jose are $15,000 and Santiago are $30,000. Cash distributed is $45,000. The transaction to record the distribution of cash to Jose will include a debit to the _______ account in the amount of _______.

Jose, Capital; $15,000

Match the type of business to the correct set of characteristics.

Limited Partnership - has both general partners and limited partners Limited liability partnerships - protects innocent partners from malpractice or negligence claims of other partners s corp - provides all shareholders with limited liability, but allows them to elect to be treated as partnership for tax purposes

Which of the following are characteristics of a partnership? (Check all that apply.)

Mutual agency Co-ownership of property Voluntary association

Match the type of business to the correct set of characteristics.

Partnership - More than one owner allowed; owners have unlimited liability LLC - One or more owners; owners have limited liability; no business tax C corp - One or more owners; owners have limited liability; business is taxed

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?

Santiago, Capital; for $20,000

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?

T. Wiley, Capital

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 ______.

Wang, Capital; $4,000 50,000+50,000=100,000. + 20,000 =$120,000. $120,000x.10=$12,000new $20,000-12,000=$8,000 divided equally between Wang and Wu = $4000 each.50,000+50,000=100,000. + 20,000 =$120,000. $120,000x.10=$12,000new $20,000-12,000=$8,000 divided equally between Wang and Wu = $4000 each.

When liquidating a partnership, any remaining cash should be distributed to partners:

based on capital balances

When liquidating a partnership, gains or losses from the sale of assets should be distributed to partners:

based on income-and-loss-sharing ratio

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).

blank 1 5000 blank 2 remaining

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?

cash

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) __________ the L. Martinez, Capital account for $____________.

credit 35000

M. Capone sells one-half of her partnership to M. Harris for $30,000 cash. The entry to record this transaction will include a (debit/credit) _______ to M. Capone, Capital.

debit

The partnership of Roland, Simmons, and Kim state that the partners will share profits and losses equally. Prior to liquidation, Kim has a deficit of $5,000 that he cannot pay. The other partners will absorb the deficiency. The journal entry to record this transaction will include a (debit/credit) ________ to Roland, Capital in the amount of ______.

debit; $2,500

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.

limited

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.

net income

Taxes on a partnership are

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

Partners are taxed on the partnership income:

whether or not the cash is distributed

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

withdraw from