Term
T or F
A bonus to the remaining partners results when a retiring partner receives partnership assets which are less than his or her capital balance on the date of withdrawal. |
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Definition
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Term
T or F
If a partner's investment in a partnership consists of Accounts Receivable of $25,000 and an Allowance for Doubtful Accounts of $7,000, it would not be appropriate for the partnership to record the Allowance for Doubtful Accounts. |
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Definition
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Term
T or F
Once assets have been invested in the partnership, they are owned jointly by all partners. |
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Definition
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Term
T or F
The act of any partner is binding on all other partners if the act appears to be appropriate for the partnership. |
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Definition
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Term
T or F
The partners' drawing accounts are closed each period into the Income Summary account. |
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Definition
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Term
T or F
Two proprietorships cannot combine and form a partnership |
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Definition
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Term
| A general partner in a partnership |
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Definition
| has unlimited liability for all partnership debts. |
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Term
| A partners' capital statement explains |
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Definition
| the changes in each partner's capital account and in total partnership capital during a period. |
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Term
| Bell and Herr sell 1/4 of their partnership interest to Ives receiving $200,000 each. At the time of admission, Bell and Herr each had a $350,000 capital balance. The admission of Ives will cause the net partnership assets to |
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Definition
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Term
| Danny and Vicky are forming a partnership. Danny will invest a truck with a book value of $10,000 and a fair market value of $14,000. Vicky will invest a building with a book value of $30,000 and a fair market value of $42,000 with a mortgage of $15,000. At what amount should the building be recorded? |
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Definition
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Term
| If a partner with a capital deficiency is unable to pay the amount owed to the partnership, the deficiency is allocated to the partners with credit balances |
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Definition
| on the basis of their income ratios |
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Term
| In liquidation, balances prior to the distribution of cash to the partners are: Cash $255,000; Presley, Capital $140,000; Laswell, Capital $130,000, and Hunter, Capital $15,000 deficiency. The income ratio is 6:2:2, respectively. How much cash should be distributed to Laswell if Hunter does not pay his deficiency? |
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Definition
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Term
| In the liquidation process, if a capital account shows a deficiency |
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Definition
| the partner with a deficiency has an obligation to the partnership for the amount of the deficiency. |
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Term
| Which of the following statements is correct? |
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Definition
| Neither salaries to partners nor interest on partners' capital are expenses of the partnership. |
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Term
| Lance joins the partnership of Kubek and Musial by paying $30,000 in cash. If the net assets of the partnership are still the same amount after Lance has been admitted as a partner, then Lance |
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Definition
| must have been admitted by purchase of a partner's interest |
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Term
| On November 30, capital balances are Gast $120,000, Cook $100,000 and Irving $100,000. The income ratios are 20%, 20% and 60% respectively. Gast decides to retire from the partnership. The partnership pays Gast $100,000 cash for her partnership interest. After Gast’s retirement, what is the balance of Irving’s capital account? |
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Definition
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Term
| Mary, Jim, and Mike have partnership capital account balances of $225,000, $450,000 and $105,000, respectively. The income sharing ratio is Mary, 50%; Jim, 40%; and Mike, 10%. Mary desires to withdraw from the partnership and it is agreed that partnership assets of $195,000 will be used to pay Mary for her partnership interest. The balances of Jim's and Mike's Capital accounts after Mary's withdrawal would be |
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Definition
| Jim, $474,000; Mike, $111,000. |
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Term
| Partners Don and Ron have agreed to share profits and losses in an 80:20 ratio respectively, after Don is allowed a salary allowance of $80,000 and Ron is allowed a salary allowance of $40,000. If the partnership had net income of $80,000 for 2010, Ron’s share of the income would be |
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Definition
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Term
| The first step in the liquidation of a partnership is to |
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Definition
| sell noncash assets and recognize a gain or loss on realization |
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Term
The liquidation of a partnership is a process containing the following steps:
1. Pay partnership liabilities in cash.
2. Allocate the gain or loss on realization to the partners on their income ratios.
3. Sell noncash assets for cash and recognize a gain or loss on realization.
4. Distribute remaining cash to partners on the basis of their remaining capital balances. |
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Definition
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Term
| Which of the following is not a principal characteristic of the partnership form of business organization? |
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Definition
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Term
| The partnership agreement of Nieto, Keller, and Pickert provides for the following income ratio: (a) Nieto, the managing partner, receives a salary allowance of $36,000, (b) each partner receives 15% interest on average capital investment, and (c) remaining net income or loss is divided equally. The average capital investments for the year were: Nieto $200,000, Keller $400,000, and Pickert $600,000. If partnership net income is $180,000, the amount distributed to Nieto should be: |
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Definition
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Term
The net income of the Rice and Nance partnership is $180,000. The partnership agreement specifies that Rice and Nance have a salary allowance of $48,000 and $72,000, respectively. The partnership agreement also specifies an interest allowance of 10% on capital balances at the beginning of the year. Each partner had a beginning capital balance of $120,000. Any remaining net income or net loss is shared equally.
What is the balance of Nance's Capital account at the end of the year after net income has been distributed? |
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Definition
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Term
The partners' income and loss sharing ratio is 2:3:5, respectively.
If the Cindi, Jenni, and Becki Partnership is liquidated by selling the noncash assets for $390,000 and creditors are paid in full, what is the amount of cash that can be safely distributed to each partner? |
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Definition
| Cindi, $72,000; Jenni, $108,000; Becki, $0. |
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Term
Use the following account balance information for Grinotfin Partnership with income ratios of 2:4:4 for Grigsby, Nott, and Fine, respectively.
Assume that, as part of liquidation proceedings, Grinotfin sells its noncash assets for $120,000. As a result, one of the partners has a capital deficiency which that partner decides not to repay. The amount of cash that would ultimately be distributed to Fine would be: |
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Definition
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Term
| When a partnership terminates business, the sale of noncash assets is called |
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Definition
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Term
T or F
A partnership is an association of no more than two persons to carry on as co-owners of a business for profit. |
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Definition
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Term
T or F
If a partnership has a loss for the period, the closing entry to transfer the loss to the partners will require a credit to the Income Summary account. |
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Definition
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Term
T or F
If salary allowances and interest on capital are stipulated in the partnership profit and loss sharing agreement, they are implemented only if income is sufficient to cover the amounts required by these features. |
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Definition
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Term
T or F
Partnership income or loss need not be closed to partners' capital accounts each period because of the unlimited life characteristic of partnerships. |
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Definition
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Term
T or F
The liquidation of a partnership means that a new partner has been admitted to the partnership. |
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Definition
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Term
T or F
Unless stated otherwise in the partnership contract, profits and losses are shared among the partners in the ratio of their capital equity balances. |
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Definition
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Term
| A general partner in a partnership |
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Definition
| has unlimited liability for all partnership debts |
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Term
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Definition
| is dissolved upon the acceptance of a new partner |
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Term
| Ard, Ball, and Dole have partnership capital account balances of $400,000 each. Income and losses are shared equally. Dole agrees to sell three-fourths of his ownership interest to Ard for $350,000 and one-fourth to Ball for $125,000. Ard and Ball will use personal assets to purchase Dole's interest. The partnership's entry to record Dole's withdrawal from the partnership would be |
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Definition
Dole Captial $400,000
Ard Capital 300,000
Ball Capital 100,000 |
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Term
| D. Dieker purchases a 25% interest for $30,000 when the Reeves, Porter, Kiner partnership has total capital of $270,000. Prior to the admission of Dieker, each partner has a capital balance of $90,000. Each partner relinquishes an equal amount of his capital balance to Dieker. The amount to be relinquished by Kiner is |
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Definition
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Term
| If a partner with a capital deficiency is unable to pay the amount owed to the partnership, the deficiency is allocated to the partners with credit balances |
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Definition
| on the basis of their income ratios. |
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Term
| In liquidation, balances prior to the distribution of cash to the partners are: Cash $255,000; Presley, Capital $140,000; Laswell, Capital $130,000, and Hunter, Capital $15,000 deficiency. The income ratio is 6:2:2, respectively. How much cash should be distributed to Laswell if Hunter does not pay his deficiency? |
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Definition
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Term
| In the liquidation process, if a capital account shows a deficiency |
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Definition
| the partner with a deficiency has an obligation to the partnership for the amount of the deficiency |
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Term
| Which of the following would not cause an increase in partnership capital? |
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Definition
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Term
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Definition
| must have at least one general partner |
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Term
| Mock is admitted to a partnership with a 25% capital interest by a cash investment of $120,000. If total capital of the partnership is $520,000 before admitting Mock, the bonus to Mock is |
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Definition
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Term
Partners Acer and Barr have capital balances in a partnership of $40,000 and $60,000, respectively. They agree to share profits and losses as follows:
If income for the year was $30,000, what will be the distribution of income to Acer? |
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Definition
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Term
| Sam is investing in a partnership with Jerry. Sam contributes equipment that originally cost $63,000, has a book value of $30,000, and a fair market value of $39,000. The entry that the partnership makes to record Sam's initial contribution includes a |
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Definition
| debit to Equipment for $39,000. |
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Term
| The Butkus, Sayers, and Halas partnership is terminated when the claims of company creditors exceed partnership assets by $50,000. The capital balances for Butkus, Sayers, and Halas are $35,000, $5,000, and $0, respectively. The original claims of the creditors were negotiated by Sayers and Halas. Which partner(s) is(are) personally and individually liable for all partnership liabilities? |
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Definition
| Butkus, Sayers, and Halas |
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Term
The liquidation of a partnership is a process containing the following steps:
1. Pay partnership liabilities in cash.
2. Allocate the gain or loss on realization to the partners on their income ratios.
3. Sell noncash assets for cash and recognize a gain or loss on realization.
4. Distribute remaining cash to partners on the basis of their remaining capital balances.
Identify the proper sequencing of the steps in the liquidation process. |
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Definition
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Term
| Which of the following is not a necessary action that the partnership must take upon the death of a partner? |
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Definition
| Discontinue business operations |
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Term
| The partnership agreement of Rossi and Petry provides for salary allowances of $45,000 to Rossi and $35,000 to Petry, with the remaining income or loss to be divided equally. During the year, Rossi and Petry each withdraw cash equal to 80% of their salary allowances. If partnership net income is $100,000, Rossi's equity in the partnership would |
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Definition
| increase more than Petry’s |
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Term
| The partner in a limited partnership that has unlimited liability is referred to as the |
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Definition
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Term
The partners' income and loss sharing ratio is 2:3:5, respectively.
If the Cindi, Jenni, and Becki Partnership is liquidated by selling the noncash assets for $750,000, and creditors are paid in full, what is the total amount of cash that Cindi will receive in the distribution of cash to partners? |
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Definition
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Term
| The partnership of Lane and Starr reports net income of $60,000. The partners share equally in income and losses. The entry to record the partners' share of net income will include a |
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Definition
| credit to Lane, Capital for $30,000. |
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Term
| When a partnership interest is purchased |
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Definition
| the transaction is a personal transaction between the purchaser and the selling partner(s). |
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