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Exam 12: Accounting for Partnerships and Limited Liability Companies

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Question 31

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Gleason invested $90,000 in the James and Kirk partnership for ownership equity of $90,000. Prior to the investment land was revalued to a market value of $425,000 from a book value of $200,000. James and Kirk share net income in a 1:2 ratio. a. Provide the journal entry for the revaluation of land. b. Provide the journal entry to admit Gleason.

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Question 32

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If a new partner is given a 20% interest in the firm then the new partner will receive a 20% interest in earnings.

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Question 33

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What is a partnership? List three advantages and three disadvantages of the partnership form of business organization.

A partnership requires only an agreement between two or more persons to organize.

Use the following information to answer the following questions. Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $7,500 and a fair market value of $20,000. Marta will invest a building with a book value of $40,000 and a fair market value of $58,000. What amount will be recorded to Marta's capital account ?

Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in the year's net income of $200,000 under each of the following independent assumptions:

After discontinuing the ordinary business operations and closing the accounts on May 7, the ledger of the partnership of Anna, Brian, and Cole indicated the following: The partners share net income and losses in the ratio of 3:2:1. Between May 7-30, the noncash assets were sold for $150,000, the liabilities were paid, and the remaining cash was distributed to the partners.

Abby and Bailey are partners who share income in the ratio of 2:1 and have capital balances of $60,000 and $30,000 respectively. With the consent of Bailey, Sandra buys one half of Abby's interest for $35,000. For what amount will Abby's capital account be debited to record admission of Sandra to the partnership?

Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net loss of $6,000 is allocated to Yolanda?

The statement of members' equity is used for equity reporting of a partnership.

If there is no written agreement as to the way income will be divided among partners

When a partnership dissolves, a new partnership is formed and a new partnership agreement should be prepared.

When a partner dies, the capital account balances of the remaining partners

Bobbi and Stuart are partners. The partnership capital of Bobbi is $40,000 and Stuart is $70,000. Bobbi sells his interest in the partnership to John for $50,000. The journal entry to record the admission of John as a new partner would include

Xavier and Yolonda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net loss of $6,000 is allocated to Xavier?

Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and $50,000 respectively. They share income in the ratio of 3:2:1. Income Summary with a debit balance of $30,000 is closed to the capital accounts. Doug withdraws from the partnership. How much cash does he get upon withdrawal?

A disadvantage of partnerships is the mutual agency of all partners.

Match the definition with its term.

Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income under each of the following assumptions:

Immediately prior to the admission of Abbott, the Smith-Jones Partnership assets had been adjusted to current market prices, and the capital balances of Smith and Jones were $40,000 and $60,000 respectively. If the parties agree that the business is worth $120,000, what is the amount of bonus that should be recognized in the accounts at the admission of Abbott?