Reference no: EM133048280

Question -

Q1. Statement 1: If the total contributed capital of the partnership is greater than the total agreed capital, it is possible that a goodwill be recognized or an undervaluation of asset occurred. Statement 2: Noncash assets sold by the partnership will prioritize payment of creditors.

S1 True; S2 False

S2 True; S1 False

Both statements are false

Both statements are true

Q2. Partners Alyssa and May divide profits and losses 6:4 with capital balances of $540,000 and $670,000 respectively. They agreed to admit Nica by her purchase of 1/4 of Alyssa's interest for $300,000. They agreed to write off Accounts Receivable worth $10,600. Fixed assets were under-depreciated by $30,000. Payments of accounts payable in the amount of $8,600 was not posted to the payable account. How much should be debited to Alyssa's interest?

Q3. Mary admits Jaja as a partner in the business. Balance sheet accounts of Mary just before the admission of Jaja shows: Cash, $43,000, Accounts Receivable, $150,000, Merchandise Inventory, $170,000, and Accounts Payable, $52,000. It was agreed that for purposes of establishing Mary's interest, the following adjustments should be made: 1) an allowance for doubtful accounts of 3% of accounts receivable is to be established; 2) merchandise inventory is to be increased by $25,000; and 3) prepaid expenses of $7,600 and accrued liabilities of $4,800 are to be recognized. If Jaja is to invest sufficient cash to obtain 2/5 interest in the partnership, how much should she contribute to the new business?

Q4. Bea, Wade, and Freya agree to sell construction tools for a period of one month. Bea agrees to construct a stand on the front of the lawn of Freya. Freya will be paid $2,500 for cleaning up the lawn after the one-month selling period. Bea, Wade, and Freya decide that net income, if any will be allocated first by the $2,500 payment to Freya and then by a 40% commission on individual sales. The balance will be distributed 75% to Bea and 25% to Wade. They agree that a cash box will complicate the matters and that all purchases and sales transactions will be out-of-pocket and the responsibility of the individual. Sales to Bea, Wade, and Freya are to be at cost, except that the ending inventory may be purchased at 50% of cost. All other sales are to be made at 100% mark-up on cost.

The activity of the joint operation are presented below:

a. Bea construct the stand on the front of the lawn at a cost of $10,000;

b. Bea pays for $100,000 for various construction tools. Freya pays $5,000 for permit to operate the concession or business;

c. Bea purchases additional construction tools for $150,000, using $50,000 contributed by Wade and $100,000 of personal money;

d. Sales for the period were as follows: Bea, $170,000; Wade, $260,000; and Freya, $60,000;

e. Freya pays $9,000 for office supplies and these are distributed equally between Bea, Wade, and Freya for their personal use at home. Freya agrees to pay $5,000 for the stand.

f. The balance of construction tools inventory was taken by Bea.

How much is the amount to be received (paid) by Bea during cash settlement?