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Exam 12: Accounting for Partnerships and Limited Liability Companies

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Question 21

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Immediately prior to the admission of Allen, the Sanson-Jeremy Partnership assets had been adjusted to current market prices and the capital balances of Sanson and Jeremy were $80,000 and $120,000, respectively. If the parties agree that the business is worth $240,000, what is the amount of bonus that should be recognized in the accounts at the admission of Allen?

A) $60,000
B) $80,000
C) $40,000
D) $100,000

E) A) and B)
F) C) and D)

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Question 22

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

A) True
B) False

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Question 23

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Brad Simmons, sole proprietor of a hardware business, decides to form a partnership with Rich Winter. Brad's accounts are as follows:​ $\begin{array}{lrr} & \text { Book Value } & \text { Market Value } \\\text { Cash } & \$ 30,000 & \$ 30,000 \\\text { Accounts Receivable (net) } & 55,000 & 45,000 \\\text { Inventory } & 112,000 & 135,000 \\\text { Land } & 40,000 & 100,000 \\\text { Buil ding (net) } & 500,000 & 540,000 \\\text { Accounts Payable } & 25,000 & 25,000 \\\text { Mortgage Payable } & 125,000 & 125,000\end{array}$ Rich agrees to contribute $170,000 for a 20% interest. Journalize the entries to record (a) Brad's investment and (b) Rich's investment.

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

Based on this information, the statement of partners' equity would show what amount in the capital account for Hawk on December 31?

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 $120,000 of net income under each of the following assumptions: (a)No agreement as to division of net income (b)In ratio of capital balances (c)In ratio of time devoted to business (d)Interest of 10% on capital balances and the remainder divided equally (e)Interest of 10% on capital balances, salaries of $40,000 to Jackson and $20,000 to Campbell, and the remainder divided equally

The equity reporting for a limited liability company is similar to that of a partnership, but the changes in capital are shown on a statement of members' equity.

Match each statement to the appropriate term (a-h) : -Business owned by a single individual

Hamir, Darci, and Pete are partners sharing income in the ratio of 3:2:1. After the firm's loss from liquidation is distributed, the capital account balances were Hamir, $45,000 Dr.; Darci, $90,000 Cr., and Pete, $64,000 Cr. If Hamir is personally bankrupt and unable to pay any of the $45,000, what will be the amount of cash received by Darci and Pete upon liquidation? Show your work.

A partnership liquidation occurs when

Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $80,000 and $120,000, respectively. The partnership generated net income of $30,000. What is Tomas's capital balance after closing the revenue and expense accounts to the capital accounts?

The limited liability company may elect to be manager-managed rather than member-managed, which means that only authorized members may legally bind the corporation.

In a partnership liquidation, gains and losses on the sale of partnership assets are divided among the partners' capital accounts on the basis of their capital balances.

Samuel and Darci are partners. The partnership capital for Samuel is $50,000 and that of Darci is $60,000. Josh is admitted as a new partner by investing $50,000 cash. Josh is given a 20% interest in return for his investment. The amount of the bonus to the old partners is

Details of the division of net income for a partnership should be disclosed in the

If the partnership agreement does not otherwise state, partnership income is divided in proportion to the individual partner's capital balance.

Jefferson has a capital balance of $65,000 and devotes full time to a partnership. Washington has a capital balance of $45,000 and devotes half time to the partnership. If no other information is available regarding distributions, in what ratio is net income to be divided?

Antonio and Barbara are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000, respectively, at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $80,000. What amount of loss on realization should be allocated to Barbara?

Benson and Orton are partners who share income in the ratio of 2:3 and have capital balances of $60,000 and $40,000, respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Benson's capital balance after admitting Ramsey?

Benson contributed land, inventory, and $22,000 cash to a partnership. The land had a book value of $65,000 and a market value of $111,000. The inventory had a book value of $60,000 and a market value of $58,000. The partnership also assumed a $52,000 note payable owned by Benson that was used originally to purchase the land.​RequiredProvide the journal entry for Benson's contribution to the partnership.​