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Exam 12: Accounting for Partnerships and Limited Liability Companies

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Question 1

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

A) $216,000
B) $164,000
C) $380,000
D) $52,000

E) B) and C)
F) None of the above

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Question 2

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If a partner's capital balance is a debit after it has absorbed its share of the loss on realization, the balance is referred to as a deficiency.

A) True
B) False

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Question 3

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The statement of members' equity is used for equity reporting of a partnership.

The partner capital accounts may change due to capital additions, net income, or withdrawals.

Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and Ramona, $30,000 Cr. How much cash should be distributed to Everett assuming that Miguel pays the deficiency?

Xavier and Yolanda have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remaining income equally. How much of the net loss of $6,000 is allocated to Yolanda?

If there is no written agreement as to the way income will be divided among partners,

In the liquidating process, any uncollected cash becomes a loss to the partnership and is divided among the remaining partners' capital balances based on their income-sharing ratio.

Malcolm has a capital balance of $90,000 after adjusting to fair market value. Celeste contributes $45,000 to receive a 25% interest in a new partnership with Malcolm.​Determine the amount and recipient of the partner bonus.​

Which of the following is a disadvantage of a partnership when compared to a corporation?

Seth and Rachel have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investments at 15%; salary allowances of $24,000 and $20,000, respectively; and the remainder to be divided equally. How much of the net income of $90,000 is allocated to Seth?

Match each statement to the appropriate term (a-h) : -Each partner may act on behalf of the entire partnership so that the liabilities created by one partner become the liabilities of all partners

Match each statement to the appropriate term (a-h) . -Causes the closing of accounts and settling with a partner's estate

Match each statement to the appropriate term (a-h) . -The final step in the liquidation of a partnership

Derek and Hailey, partners sharing net income in the ratio of 2:1, admit Ben to the partnership in accordance with the following agreement:? (1)Merchandise inventory recorded in the partnership accounts at $62,500 is to be revalued at its current replacement price of $68,500. (2)Ben invested $48,000 in cash for a 30% interest in the partnership, which has total net assets (assets minus liabilities) of $130,000 that includes the inventory revaluation and the cash invested by Ben. (3)The income-sharing ratio of Derek, Hailey, and Ben is to be 2:1:1.?? Required (a)Journalize the entries to record the revaluation of merchandise inventory and the admission of Ben to the partnership. (b)A few years later, the capital balances of Derek, Hailey, and Ben were $150,000, $90,000, and $55,000, respectively. At this time, Kacy is admitted to the partnership by the purchase of one-half of Derek's interest for $80,000. Journalize the entry to record the admission of Kacy to the partnership.

Top Dog, LLC provides repair services for oil rigs. The firm has five members in the LLC, which did not change between the first year and the second year. During Year 2, the business expanded into three new regions of the country. The following revenue and employee information is provided:​ $\begin{array}{|l|r|r|}\hline & {\text { Year 1 }} &{\text { Year 2 }} \\\hline \text { Revenues (in thousands) } & \$ 60,525 & \$ 58,500 \\\hline \text { Number of employees } & 120 & 160 \\\hline\end{array}$ Required (a) For Year 1 and Year 2, determine the revenue per employee (excluding members). (b) Interpret the trend between the two years.

Henry Jones contributed equipment, inventory, and $44,000 cash to a partnership. The equipment had a book value of $35,000 and market value of $28,000. The inventory had a book value of $25,000 but only had a market value of $12,000 due to obsolescence. The partnership also assumed a $15,000 note payable owed by Henry that was originally used to purchase the equipment.​What amount should be recorded to Henry's capital account?

If a new partner is given a 20% interest in the firm, the new partner will receive a 20% interest in earnings.

The partnership of Miner Company began operations on January 1, with contributions as follows:? $\begin{array}{|l|r|}\hline \text { Waverley } & \$ 35,000 \\\hline \text { Marquez } & 40,000 \\\hline\end{array}$ The following additional partner transactions took place during the year: (1)In early January, Houston is admitted to the partnership by contributing $25,000 cash for a 25% interest. (2)Net income of $160,000 was earned. In addition, Waverley received a salary allowance of $30,000 for the year. The three partners agree to an income-sharing ratio equal to their capital balances after admitting Houston. (3)The partners' withdrawals are equal to half of their respective distributions of income after salary . ?RequiredPrepare a statement of partnership equity for the year ended December 31.

Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann's was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann, respectively, and 10% interest on original capital. If they agree to share the remaining profits and losses on a 3:2 ratio, what will Singer's share of the income be if the income for the year is $50,000?