1.
When property other than cash is transferred to the partnership, the asset
should be valued at
the cost to the partner contributing the asset.
fair market value.
zero.
all of the above are acceptable valuations
2.
If partners agree to equal capital interests but contribute unequal capital,
the partners’capital balances should reflect unequal capital
interests.
it is assumed that unidentifiable assets were contributed and
goodwill may be recorded.
the partner contributing the greater amount of capital is paid a
bonus.
plant assets fair market values are pro-rated to adjust the capital
account balances.
3.
Salary allowances
are recorded as salary expense and deducted in the calculation of
partnership profits and losses.
are normally charged against the partner’s capital account balance.
are normally charged to the partner’s drawing account.
are not paid to partners because they receive partnership profits.
4.
According to the partnership agreement of Click and Clack, annual
withdrawals greater than $30,000 are considered excessive. If Click
withdraws $35,000 at the beginning of 2003, ta portion of this drawing
would
not be honored by the partnership.
be considered a reduction of capital and be charged against Click’s
capital account balance
be charged to Click’s drawing account.
cause the partnership to terminate.
5.
Ellis and Nossiter are partners sharing profits in a 30:70 ratio. The
following data summarizes 2004 activity:
Partnership net income, 2004
$68,000
Ellis capital, 1/1/2004
90,000
Ellis additional investment in 2004 10,000
Ellis drawings in 2004
12,000
Nossiter capital, 1/1/2004
80,000
Nossiter drawings in 2004
20,000
What amount of net income is allocated to Nossiter’s capital account for
2004?
$26,600
$27,600
$34,000
$47,600
6.
Ellis and Nossiter are partners sharing profits in a 30:70 ratio. The
following data summarizes 2004 activity:
Partnership net income, 2004
$68,000
Ellis capital, 1/1/2004
90,000
Ellis additional investment in 2004 10,000
Ellis drawings in 2004
12,000
Nossiter capital, 1/1/2004
80,000
Nossiter drawings in 2004
20,000
What is the value of Ellis’s capital account at 12/31/2004?
$20,400
$108,400
$111,400
$120,400
7.
The ABC partnership agreement contains the following provisions for
profits/ loss sharing:
1) Akron and Boyd receive salary allowances of $30,000 and $20,000,
respectively.
2) Boyd receives a bonus of 50% of sales in excess of $100,000.
3) Carter receives interest of 10% on his ending capital account balance.
4) Remaining profits, losses and profit deficiencies are shared 40:40:20.
Carter’s capital account balance at 1/1/2005 was $20,000. He made an
additional investment of $5,000 at 6/1/2005 and had no drawings.
Assuming sales of $120,000 and profits of $70,000, what amount of profit
would be allocated to Akron, Boyd, and Carter, respectively, for 2005?
$3,000, $13,000 and $4,000
$33,000, $33,000 and $4,000
$30,000, $30,000 and $4,000
cannot be determined without information on Akron’s and Boyd’s
drawings
8.
The ABC partnership agreement contains the following provisions for
profits/ loss sharing:
1) Akron and Boyd receive salary allowances of $30,000 and $20,000,
respectively.
2) Boyd receives a bonus of 50% of sales in excess of $100,000.
3) Carter receives interest of 10% on his ending capital account balance.
4) Remaining profits, losses and profit deficiencies are shared 40:40:20.
Carter’s capital account balance at 1/1/2005 was $20,000. He made an
additional investment of $5,000 at 6/1/2005 and had no drawings.
Assuming sales of $120,000 and profits of $45,000, what would Carter’s
ending capital balance at 12/31/2005?
$24,000
$26,000
$27,500
$31,000
9.
When interest is used as a means of profit distribution, provision that
interest should be calculated on beginning capital balances
discourages excess drawings
discourages additional investments
encourages additional investments
encourages normal drawings
10
.
Alto and Bass are partners with capital balances of $30,000 and $50,000,
respectively. The partners share profits in a 40:60 ratio. Coyote makes a
payment of $90,000 to the partnership in order to be admitted with a 50%
interest. The profit sharing ratio of the new partnership, ABC, will be
20:30:50.
Assuming that the fair market values of the partnership reflect fair market
values, and that the partnership elects revaluation with goodwill to the old
partners, the entry to revalue assets would include
a credit to Alto’s capital account for $2,000.
a debit to goodwill for $10,000.
a debit to Bass’s capital account for $6,000.
a credit to gain for $10,000.
11
.
Alto and Bass are partners with capital balances of $30,000 and $50,000,
respectively. The partners share profits in a 40:60 ratio. Coyote makes a
payment of $90,000 to the partnership in order to be admitted with a 50%
interest. The profit sharing ratio of the new partnership, ABC, will be
20:30:50.
Assuming that the partnership elects nonrevaluation and equal amounts
of capital are to be transferred to Coyote, the capital balances for Alto,
Bass and Coyote, respectively, will be
$56,000, $84,000 and $140,000.
$100,000, $120,000 and $140,000.
$112,000, $138,000 and $170,000.
$120,000, $140,000 and $160,000.