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Exam 12: Accounting for Partnerships

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Question 31

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Assets invested by a partner into a partnership remain the property of the individual partner.

A) True
B) False

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Question 32

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In closing the accounts at the end of a period,the partners' capital accounts are credited for their share of the partnership loss or debited for their share of the partnership net income.

A) True
B) False

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Question 33

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When a partner is unable to pay a capital deficiency:

Benson is a partner in B&D Company.Benson's share of the partnership income is $18,600 and her average partnership equity is $155,000.Her partner return on equity equals 8.33.

Partners' withdrawals are credited to their separate withdrawals accounts.

Paul and Peggy's company is organized as a partnership.At the prior year-end,Paul's equity balance was $352,000 and Peggy's was $256,000.For the current year,partnership net income is $137,000 ($77,000 allocated to Paul and $60,000 allocated to Peggy); withdrawals are $87,000 ($45,000 for Paul and $42,000 for Peggy).Compute the total partnership return on equity and the individual partner return on equity ratios.

Sam and Dave's company is organized as a partnership.At the prior year-end,Sam's equity balance was $258,000 and Dave's was $212,000.For the current year,partnership net income is $125,000 ($75,000 allocated to Sam and $50,000 allocated to Dave); withdrawals are $77,000 ($40,000 for Sam and $37,000 for Dave).Compute the total partnership return on equity and the individual partner return on equity ratios.

Admitting a partner by accepting assets is a personal transaction between one or more current partners and the new partner.

A partnership has an unlimited life.

The withdrawals account of each partner is closed to retained earnings at the end of the accounting period.

Mutual agency implies that each partner in a partnership is a fully authorized agent of the partnership.Which of the following statements is correct regarding the authority of a partner to bind the partnership in dealings with third parties?

A _________________________ means that at least one partner has a debit balance in his/her capital account at the point of the final distribution of cash.

If at the time of partnership liquidation,a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency,then that partner is entitled to share in the final distribution of cash.

How are partners' investments in a partnership recorded?

A partnership that has two classes of partners,general and limited,where the limited partners have no personal liability beyond the amounts they invest in the partnership,and no active role in the partnership,except as specified in the partnership agreement is a:

If partners devote their time and services to their partnership,their salaries are expenses on the income statement.

A partnership is an unincorporated association of two or more people to pursue a business for profit as co-owners.

Chen and Wright are forming a partnership.Chen will invest a building that currently is being used by another business owned by Chen.The building has a market value of $90,000.Also,the partnership will assume responsibility for a $30,000 note secured by a mortgage on that building.Wright will invest $50,000 cash.For the partnership,the amounts to be recorded for the building and for Chen's Capital account are:

A partner can withdraw from a partnership by:

A capital deficiency can arise from liquidation losses,excessive withdrawals before liquidation,or recurring losses in prior periods.