Reference no: EM133109732
Questions -
QUESTION 1 - Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021. What was White's capital balance at the end of 2021?
a. $390,060.
b. $405,000.
c. $417,900.
d. $384,060.
e. $402,060.
QUESTION 2 - The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows:
Donald, capital $ 200,000
Hanes, capital 100,000
Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized. What is the new total balance of the partnership accounts?
a. $176,000.
b. $84,000.
c. $400,000.
d. $140,000.
e. $200,000.
QUESTION 3 - A partnership began its first year of operations with the following capital balances:
Young, Capital $ 143,000
Eaton, Capital $ 104,000
Thurman, Capital $ 143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.
What was Eaton's total share of net income for the second year?
a. $19,760 income.
b. $4,160 income.
c. $17,160 income.
d. $28,080 income.
e. $17,290 income.
QUESTION 4 - Which of the following could be used as a basis to allocate profits among partners who are active in the management of the partnership?
1) Allocation of salaries.
2) The number of years with the partnership.
3) The amount of time each partner works.
4) The average capital invested.
a. 1, 2, and 4.
b. 1 and 3.
c. 1, 2, 3, and 4.
d. 1, 3, and 4.
e. 1 and 2.
QUESTION 5 - The partnership contract for Hanes and Jones LLP provides that Hanes is to receive a bonus of 20% of net income (after the bonus) and that the remaining net income is to be divided equally. If the partnership income before the bonus for the year is $57,600, Hanes' share of this pre-bonus income is:
a. $35,520.
b. $28,800.
c. $33,600.
d. $34,560.
e. $38,400.
QUESTION 6 - A partnership began its first year of operations with the following capital balances:
Young, Capital $ 143,000
Eaton, Capital $ 104,000
Thurman, Capital $ 143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.
What was Thurman's total share of net loss for the first year?
a. $3,900 loss.
b. $24,700 loss.
c. $9,100 loss.
d. $11,700 loss.
e. $10,400 loss.
QUESTION 7 - Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively. The partners share profits and losses 20%, 40%, and 40% respectively.
Anne retires and is paid $80,000 based on the terms of the original partnership agreement. If the bonus method is used, what is the capital of the remaining partners?
a. Donald, $50,000; Todd, $50,000.
b. Donald, $24,000; Todd, $18,000.
c. Donald, $40,000; Todd, $30,000.
d. Donald, $30,000; Todd, $10,000.
e. Donald, $70,000; Todd, $40,000.
QUESTION 8 - The partners of Apple, Bere, and Carroll LLP share net income and losses in a 5:3:2 ratio, respectively. The capital account balances on January 1, 2021, were as follows:
Apple, capital $ 25,000
Bere, capital 75,000
Carroll, capital 50,000
Total partners' capital $ 150,000
The carrying amounts of the assets and liabilities of the partnership are the same as their current fair values. Dorr will be admitted to the partnership with a 20% capital interest and a 20% share of net income and losses in exchange for a cash investment. The amount of cash that Dorr should invest in the partnership is:
a. $75,000.
b. $90,000.
c. $25,000.
d. $37,500.
e. $30,000.
QUESTION 9 - Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021. What was the remainder portion of net income allocated to White for 2021?
a. $74,160.
b. $90,000.
c. $68,160.
d. $96,000.
e. $62,160.
QUESTION 10 - The disadvantages of the partnership form of business organization, compared to corporations, include
a. the extent of governmental regulation.
b. the complexity of operations.
c. the requirement for the partnership to pay income taxes.
d. the legal requirements for formation.
e. unlimited liability for the partners.
QUESTION 11 - Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021. What was Goodman's total share of net income for 2020?
a. $26,000.
b. $47,500.
c. $35,000.
d. $41,500.
e. $38,500.
QUESTION 12 - The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows:
Donald, capital $ 200,000
Hanes, capital 100,000
Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.
What is the balance of Hanes's capital account after the new partnership is created?
a. $84,000.
b. $100,000.
c. $176,000.
d. $200,000.
e. $140,000.
QUESTION 13 - P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest.
If C contributes $40,000 to the partnership and the goodwill method is used, what amount will be debited for goodwill?
a. $60,000
b. $15,000
c. $20,000
d. $25,000
e. $28,000
QUESTION 14 - Cherryhill and Hace had been partners for several years, and they decided to admit Quincy to the partnership. The accountant for the partnership believed that the dissolved partnership and the newly formed partnership were two separate entities. What method would the accountant have used for recording the admission of Quincy to the partnership?
a. The bonus method.
b. The cost method.
c. The equity method.
d. The proportionate method.
e. The goodwill method.
QUESTION 15 - A local partnership has two partners, Jim and Pam. Jim has a capital balance of $150,000 and Pam has a capital balance of $125,000. These two partners share profits and losses 60 percent (Jim) and 40 percent (Pam). Cece invests $75,000 in cash in the partnership for a 25 percent ownership. The bonus method will be used. What is Pam's capital balance after this new investment?
a. $120,000.
b. $130,000.
c. $142,500.
d. $157,500.
e. $87,500.
QUESTION 16 - A partnership began its first year of operations with the following capital balances:
Young, Capital $ 143,000
Eaton, Capital $ 104,000
Thurman, Capital $ 143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following manner:
Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.
What was Young's total share of net loss for the first year?
a. $11,700 loss.
b. $9,100 loss.
c. $3,900 loss.
d. $24,700 loss.
e. $10,400 loss.
QUESTION 17 - When Danny withdrew from John, Daniel, Harry, and Danny, LLP, he was paid $80,000, although his capital account balance was only $60,000. The four partners shared net income and losses equally, and no revaluation will take place. The journal entry to record the effect on John's capital due to Danny's withdrawal would include:
a. $6,667 debit to John, Capital.
b. $20,000 debit to John, Capital.
c. $5,000 credit to John, Capital.
d. $6,667 credit to John, Capital.
e. $5,000 debit to John, Capital.
QUESTION 18 - When the hybrid method is used to record the withdrawal of a partner, the partnership
a. revalues liabilities but not assets, and no goodwill is recorded.
b. revalues assets and liabilities but does not record goodwill.
c. revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner.
d. revalues assets but not liabilities, and records goodwill to the continuing partner but not to the withdrawing partner.
e. can recognize goodwill but does not revalue assets and liabilities.
QUESTION 19 - Peter, Roberts, and Dana have the following capital balances; $80,000, $100,000 and $60,000, respectively. The partners share profits and losses 20%, 40%, and 40% respectively.
What is the total partnership capital after Roberts retires receiving $160,000 and using the goodwill method?
a. $120,000.
b. $80,000.
c. $230,000.
d. $176,000.
e. $290,000.
QUESTION 20 - Which of the following is a type of investment designed primarily for individuals who want the tax benefits of a partnership but who do not wish to work in a partnership or have unlimited liability?
a. Subchapter S Partnership.
b. General Partnership.
c. Limited Liability Partnership.
d. Limited Partnership.
e. Limited Liability Company.
QUESTION 21 - White, Sands, and Luke has the following capital account balances and profit and loss ratios:
$60,000 (30%); $100,000 (20%); and $200,000 (50%).
The partnership has received a predistribution plan.
How would $90,000 be distributed?
White Sands Luke
A) $ 15,000 $ 25,000 $ 50,000
B) $ 0 $ 18,947 $ 71,053
C) $ 0 $ 40,000 $ 50,000
D) $ 0 $ 10,588 $ 79,412
E) $ 27,000 $ 18,000 $ 45,000
a. Option C.
b. Option B.
c. Option E.
d. Option D.
e. Option A.
QUESTION 22 - The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:
Cash $ 90,000 Liabilities $ 60,000
Noncash assets 300,000 Henry, capital 80,000
Isaac, capital 110,000
Jacobs, capital 140,000
Total $ 390,000 Total $ 390,000
Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4.
What amount of cash was available for safe payments, based on the above information?
a. $40,000.
b. $30,000.
c. $85,000.
d. $35,000.
e. $25,000.
QUESTION 23 - A local partnership was considering the possibility of liquidation. Capital account balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.
Ding, capital $ 60,000
Laurel, capital 67,000
Ezzard, capital 17,000
Tillman, capital 96,000
At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time.
If the assets could be sold for $228,000 and there are no liquidation expenses, what is the amount that Tillman would receive from the liquidation?
a. $38,250.
b. $67,250.
c. $0.
d. $36,000.
e. $2,500.
QUESTION 24 - When a partnership is insolvent and a partner has a deficit capital account balance, that partner should:
a. Contribute enough cash to the partnership to offset their deficit.
b. None of these answer choices are correct. The partner has no legal responsibility to cover the capital deficit balance.
c. Declare personal bankruptcy.
d. Initiate legal proceedings against the partnership.
e. Deliver a note payable to the partnership with specific payment terms.
QUESTION 25 - Which of the following is false a regarding a partner's deficit balance?
a. The partner with a deficit balance should contribute assets to cover the deficit balance.
b. Deficits can occur when the sale of noncash assets during the liquidation process results in material losses.
c. Deficits can occur when the partnership has incurred significant operating losses.
d. The other partners may have to absorb the deficit balance.
e. A partner cannot refuse to make contributions to cover their deficit balance.
QUESTION 26 - The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:
Cash $ 90,000 Liabilities $ 60,000
Noncash assets 300,000 Henry,capital 80,000
Isaac, capital 110,000
Jacobs, capital 140,000
Total $ 390,000 Total $ 390,000
Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4.
Before liquidating any assets, the partners determined the amount of cash available for safe payments. How should the amount of safe cash payments be distributed?
a. In a ratio of 1:2 between Henry and Jacobs.
b. $15,000 to Henry and $10,000 to Jacobs.
c. $18,333 to Henry and $16,667 to Jacobs.
d. In a ratio of 2:4:4 among all the partners.
e. $21,667 to Henry and $3,333 to Jacobs.
QUESTION 27 - Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start of the process, Capital account balances were as follows:
Dancey, capital $ 72,000
Reese, capital 32,000
Newman, capital 52,000
Jahn, capital 24,000
Which one of the following statements is true for a predistribution plan?
a. The first available $8,000 would go to Newman.
b. The first available $20,000 would go to Dancey.
c. The first available $8,000 would go to Jahn.
d. The first available $4,000 would go to Jahn.
e. The first available $16,000 would go to Newman.
QUESTION 28 - Which of the following statements is true concerning the distribution of safe payments?
a. There are no safe payments until the liquidation is complete.
b. The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership.
c. Safe payments are equal to the recorded capital account balances of those partners with capital account balances in excess of $0.
d. In computing safe payments, partners with positive capital account balances are assumed to absorb an equal share of any deficit balance(s).
e. The distribution of safe payments may only be made after all liabilities have been paid.
QUESTION 29 - A partnership has assets of cash of $10,000 and equipment with a book value of $160,000. All liabilities have been paid. The partners' capital accounts are as follows Michael $80,000, Gregory $60,000 and Phillips $30,000. The partners share profits and losses on a 4:3:3 basis. If the equipment is sold for $100,000 and there are no liquidation expenses what amount should Phillips receive in the final settlement?
a. $20,000.
b. $12,000.
c. $36,000.
d. $6,000.
e. $42,000.
QUESTION 30 - A local partnership has assets of cash of $5,000 and a building recorded at $80,000. All liabilities have been paid. The partners' capital accounts are as follows: Harry $40,000, Landers $30,000 and Waters $15,000. The partners share profits and losses 4:4:2.
If the building is sold for $50,000 and there are no liquidation expenses what amount should Harry receive in the final settlement?
a. $9,000.
b. $28,000.
c. $55,000.
d. $5,000.
e. $18,000.
QUESTION 31 - Hanson, James, and Smith, a partnership, is in the process of liquidating. The partners have the following capital account balances; $48,000, $48,000, and ($18,000) respectively. The partners share all profits and losses 16%, 48%, and 36%, respectively. Smith has indicated that the ($18,000) deficit will be covered with a forthcoming contribution. The remaining partners have requested an immediate distribution of $40,000 in cash that is available. How should this cash be distributed?
a. Hanson $34,000; James $6,000.
b. Hanson $22,308; James $17,692.
c. Hanson $25,000; James $15,000.
d. Hanson $10,000; James $30,000.
e. Hanson $28,594; James $11,406.
QUESTION 32 - The Allen, Bevell, and Carter partnership began the process of liquidation with the following balance sheet:
Cash $ 25,000 Liabilities $ 175,000
Noncash assets 500,000 Allen, capital 90,000
Bevell, capital 100,000
Carter, capital 160,000
Total $ 525,000 Total $ 525,000
Allen, Bevell, and Carter share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $14,000.
Assuming that, after the payment of liquidation expenses in the amount of $14,000 was made and the noncash assets were sold, if Carter has a deficit of $10,000, for what amount would the noncash assets have been sold?
a. $146,000.
b. $160,000.
c. $174,000.
d. $185,000.
e. $188,000.
QUESTION 33 - The Allen, Bevell, and Carter partnership began the process of liquidation with the following balance sheet:
Cash $ 25,000 Liabilities $ 175,000
Noncash assets 500,000 Allen, capital 90,000
Bevell, capital 100,000
Carter, capital 160,000
Total $ 525,000 Total $ 525,000
Allen, Bevell, and Carter share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $14,000.
If the noncash assets were sold for $275,000, what amount of the loss would have been allocated to Bevell with respect to the noncash assets?
a. $45,000.
b. $46,800.
c. $55,000.
d. $42,400.
e. $50,000.
QUESTION 34 - The Allen, Bevell, and Carter partnership began the process of liquidation with the following balance sheet:
Cash $ 25,000 Liabilities $ 175,000
Noncash assets 500,000 Allen, capital 90,000
Bevell, capital 100,000
Carter, capital 160,000
Total $ 525,000 Total $ 525,000
Allen, Bevell, and Carter share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $14,000.
Assuming that the noncash assets were sold for $150,000, which partner(s) would have been required to contribute assets to the partnership to cover a deficit in his or her capital account, prior to considering the liquidation expenses incurred?
a. Allen.
b. Allen and Carter.
c. Carter.
d. Allen and Bevell.
e. Bevell.
QUESTION 35 - During a partnership liquidation, how are gains and losses recorded?
a. Directly to the partners' capital accounts, allocated on the partners' profit and loss ratio.
b. Directly to Retained Earnings.
c. Accrued in a Liquidation Gain/Loss account.
d. Accrued in Other Comprehensive Income.
e. Directly to the partners' capital accounts, allocated equally.
QUESTION 36 - A local partnership has assets of cash of $5,000 and a building recorded at $80,000. All liabilities have been paid. The partners' capital accounts are as follows: Harry $40,000, Landers $30,000 and Waters $15,000. The partners share profits and losses 4:4:2.
If the building is sold for $50,000, what amount should Waters receive in the final settlement?
a. $9,000.
b. $28,000.
c. $18,000.
d. $55,000.
e. $5,000.
QUESTION 37 - A proposed schedule of liquidation is developed
a. on the first day of each month as required by the Uniform Partnership Act.
b. based on the underlying assumption that all future events will result in total gains.
c. based on the underlying assumption that all partners will remain solvent throughout liquidation.
d. based on the underlying assumption that all future events will result in total losses.
e. on a weekly basis as required by the Uniform Partnership Act.
QUESTION 38 - Which one of the following statements is correct?
a. If a partner of a liquidating partnership is unable to pay a capital account deficit, the deficit is absorbed by the other partners in the profit and loss ratio of those partners.
b. A loan receivable from a partner is added to the partner's capital account balance in the preparation of a cash distribution plan.
c. All cash payments to partners are made using their profit and loss ratio when liquidating the partnership.
d. Partners may not receive any cash before partnership creditors receive cash when liquidating a partnership.
e. Gains and losses from the sale of noncash assets are divided in the ratio of the partners' capital account balances absent an alternate income-sharing plan stated in the partnership agreement.
QUESTION 39 - A local partnership was considering the possibility of liquidation. Capital account balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.
Ding, capital $ 60,000
Laurel, capital 67,000
Ezzard, capital 17,000
Tillman, capital 96,000
At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time.
If the assets could be sold for $228,000 and there are no liquidation expenses, what is the minimum amount that Ezzard would receive from the liquidation?
a. $67,250.
b. $0.
c. $38,250.
d. $2,500.
e. $36,000.
QUESTION 40 - A partnership has assets of cash of $10,000 and equipment with a book value of $160,000. All liabilities have been paid. The partners' capital accounts are as follows Michael $80,000, Gregory $60,000 and Phillips $30,000. The partners share profits and losses on a 4:3:3 basis. If the equipment is sold for $100,000 and there are no liquidation expenses what amount should Michael receive in the final settlement?
a. $20,000.
b. $10,000.
c. $18,000.
d. $62,000.
e. $56,000.