Reference no: EM132544927

Problem 1: In a partnership, the profit and loss sharing ratio will be based on:

a. the relative capital contributions of the partners.
b. the relative effort contributed by the partners.
c. the relative business risks assumed by the partners.
d. any formula that the partners may choose.

Problem 2: P, Q and R agree to share profits in the ratio 5: 4: 2. This means:

a. P is entitled to 5/6 of the profits.
b. Q is entitled to 4/11 of the profits.
c. R is entitled to 1/2 of the profits.
d. P is entitled to 1/3 of the profits.

Problem 3: L and B agree to share profits and losses in the ratios 8:2. If the net loss is $25 000, how much loss is allocated to each partner?

a. L $20 000; B $5000
b. L $5000; B $20 000
c. L $16 000; B $9000
d. L $23 000; B $2000

Problem 4: With the fixed capital balances method (method 2) of accounting for partnership equity, the general journal entry to record interest on capital is:

a. debit profit distribution account; credit partner's capital accounts.
b. debit profit distribution account; credit partner's retained profit accounts.
c. debit profit or loss summary account; credit partner's capital accounts.
d. debit profit or loss summary account; credit partner's retained earnings accounts.

Problem 5: Fatima and Jaddon have capital balances of $50 000 and $80 000, respectively and use the variable capital balances method. If their profit/loss sharing ratios are Fatima 40% and Jaddon 60%, calculate Fatima's capital balance after the net loss of $60 000 is distributed.

a. $74 000
b. $26 000
c. $50 000
d. $20 000

Problem 6: Sally and Amanda have capital balances of $60 000 and $75 000, respectively and use the variable capital balances method. If their profit/loss sharing ratios are Sally 40% and Amanda 60% calculate Amanda's capital balance after a net loss of $40 000 is distributed.

a. $35 000
b. $51 000
c. $75 000
d. $99 000