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Exam 26: Accounting for Partnerships

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Question 31

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Active Sports LP is organized as a limited partnership consisting of two partners: Basketball Products LP and Hockey Products LP. Each of the partners sell sporting equipment for their respective sports. Compute the partner return on equity for each limited partnership and for the total limited partnership for the year ended September 30, 2010 using the following data:

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Partner return on equity = Partner net i...

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Question 32

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Blaser, Lukins and Franko formed a partnership with Blaser contributing $160,000, Lukins contributing $520,000 and Franko contributing $240,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $275,000 for its first year of operation, what amount of income (rounded to the nearest dollar) would be credited to Franko's capital account?

A) $50,000
B) $240,000
C) $91,667
D) $71,739
E) $275,000

F) C) and E)
G) A) and B)

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Question 33

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___________________________ implies that each partner in a partnership can be called on to pay a partnership's debts.

Conley and Liu allow Lepley to purchase a 25% interest in their partnership for $50,000 cash. Conley and Liu both have capital balances of $55,000 each and have agreed to share income and loss equally. Prepare the journal entry to record the admission of Lepley to the partnership.

Elaine Valero is a limited partner in a marketing and design firm. During the previous year her return on partnership equity was 14%. During this time, the beginning and ending balances in her capital account were $210,000 and $230,000 respectively. What was Elaine's partnership net income for this year?

Alberts and Bartel are partners. On October 1, Alberts' capital balance is $75,000 and Bartel's capital balance is $125,000. With the partnership's approval, Bartel sells ½ of his partnership interest to Camero for $70,000. Prepare the journal entry to record this transaction in the partnership records.

McCartney, Harris and Hussin are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are McCartney, $13,000; Harris, $13,000; and Hussin, $(2,000) . After all assets are sold and liabilities are paid, there is $24,000 in cash to be distributed. Hussin is unable to pay the deficiency. The journal entry to record the distribution should be:

When the current value of a partnership is greater than the recorded amounts of equity, the current partners usually require any new partner to pay a bonus for the privilege of joining.

Mutual agency means each partner can commit or bind the partnership to any contract within the scope of the partnership business.

Limited liability partnerships are designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.

Nguyen invested $100,000 and Hansen invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Nguyen and a $40,000 per year salary allowance to Hansen, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns a $105,000 in income are:

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from the acts of other partners is a ____________________________ partnership.

Chad Forrester is a limited partner in a sports management firm. During the previous year his return on partnership equity was 16%. The beginning balance in his capital account was $450,000 and his partnership net income for this year was $75,000. What was the balance in Chad's capital account at the end of last year?

Web Services is organized as a limited partnership, with David White as one of its partners. David's capital account began the year with a balance of $45,000. During the year, David's share of the partnership income was $7,500 and David received $4,000 in distributions from the partnership. What is David's partner return on equity?

The statement of changes in partners' equity shows the beginning balance in retained earnings, plus investments, less withdrawals, the income or loss and the ending balance in retained earnings.

S. Reising contributed $48,000 in cash plus equipment valued at $73,000 to the Reising Construction Partnership. The journal entry to record the transaction for the partnership is:

Armstrong plans to leave the FAP Partnership. The recorded balance in her capital account is $48,000. The remaining partners, Peters and Floyd, agree to pay Armstrong $58,000 cash. The partners have agreed to share income and loss equally. Prepare the journal entry to record the transaction.

The life of a partnership is ____________________ in duration.

Marquis and Bose agree to accept Sherman into their partnership. Sherman will contribute $25,000 in cash. Prepare the journal entry to record this transaction.

Assets invested by a partner into a partnership remain the property of the individual partner.