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Exam 12: Accounting for Partnerships and Limited Liability Companies

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Question 51

True/False

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A partnership is subject to federal income taxes.

A) True
B) False

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Question 52

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The chart of accounts for a partnership, with the exception of drawing and capital accounts, does differ from the chart of accounts for a sole proprietorship.

A) True
B) False

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Question 53

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Lambert invests $20,000 for a 1/3 interest in a partnership in which the other partners have capital totaling $34,000 before admitting Lambert. After distribution of the bonus, what is Lambert's capital?

When a partner withdraws from the partnership by selling his or her interest back to the partnership, the remaining partners must pay the withdrawing partner a specified amount from their personal assets.

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.

Immediately prior to the process of liquidation, partners Micco, Niccum, and Orwell have capital balances of $70,000, $20,000, and $30,000 respectively. There is a cash balance of $10,000, noncash assets total $160,000, and liabilities total $50,000. The partners share net income and losses in the ratio of 2:2:1. Journalize the entries to record the liquidation outlined below, using Assets as the account title for the noncash assets and Liabilities as the account title for all creditors' claims.

A devotes full time and B devotes one-half time to their partnership. If the partnership agreement is silent concerning the division of net income, A will receive a $20,000 share of a net income of $30,000.

There are only four legal structures to form and operate a business.

A partnership is a legal entity separate from its owners.

Each partner has a separate capital and withdrawal account.

An advantage of the partnership form of business organization is

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 $38,000 and $28,000 respectively, and the remainder equally. How much of the net income of $75,000 is allocated to Yolanda?

Adriana and Belen are partners who share income in the ratio of 3:2 and have capital balances of $50,000 and $90,000 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 $90,000. How much cash should be distributed to Adriana?

Match each statement to the item listed below.

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.

When a partnership is formed, assets contributed by the partners should be recorded on the partnership books at their

The capital accounts of Hawk and Martin have balances of $160,000 and $140,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income for the year was $258,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners' equity for 2010 would show what amount in the capital account for Martin on December 31, 2010?

Trevor Smith contributed equipment, inventory, and $54,000 cash to a partnership. The equipment had a book value of $30,000 and a market value of $36,000. The inventory had a book value of $60,000, but only had a market value of $20,000, due to obsolescence. The partnership also assumed a $17,000 note payable owed by Smith that was used originally to purchase the equipment. Provide the journal entry for Smith's contribution to the partnership.

Carla and Eliza share income equally. During the current year the partnership net income was $40,000. Carla made withdrawals of $12,000 and Eliza made withdrawals of $17,000. At the beginning of the year, the capital account balances were: Carla capital, $42,000; Eliza capital, $55,000. Eliza's capital account balance at the end of the year is

Benson and Orton are partners who share income in the ratio of 1:3 and have capital balances of $70,000 and $30,000 respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Orton's capital balance after admitting Ramsey?