Question
1. Partners A and B report average capital balances of $320,000 and $200,000 for the year. The partnership agreement provides for interest at the rate
1. Partners A and B report average capital balances of $320,000 and $200,000 for the year. The partnership agreement provides for interest at the rate of 10% on the average capital balance and an equal division of the remaining profit of $8,000 for the year.
By what amount should Bs capital account change for the year?
A: $2,000 decrease
B: $2,000 increase
C: $24,000 decrease
D: $24,000 increase
______________________________________
2. Assume the same fact set as in Multiple Choice question 18 and assume that the partners do not wish to recognize an intangible asset. What total amount should be recorded as a bonus to Snickers and Opie?
A: $0
B: $10,000
C: $15,000
D: $40,000
___________________________________________________
3. Snickers and Opie are partners with capital balances of $90,000 and $50,000, respectively. They agree to admit Sparky as a partner with a 25% interest upon payment of $60,000. Assuming that the partners wish to recognize an intangible asset, what amount of goodwill should be reported?
A: $0
B: $10,000
C: $15,000
D: $40,000
_____________________________
4. Assume that there are three partners in a partnership, A, B, and C. Partner C provides services to the partnership and is entitled to a salary of $60,000. Assume that the partnership revenues less expenses (other than salary to Partner C), amount is $300,000. Finally, assume that the Partnership Agreement provides for a sharing ratio of 40%/40%/20% for Partners A, B, and C, respectively. How much profit should be allocated to each partner?
| Partner A | Partner B | Partner C | |
|---|---|---|---|
| a. | $100,000 | $100,000 | $100,000 |
| b. | $120,000 | $120,000 | $60,000 |
| c. | $120,000 | $120,000 | $120,000 |
| d. | $96,000 | $96,000 | $108,000 |
a.
b.
c.
d.
______________________________________-
5. Assume that two individuals agree to form a partnership. Partner A is contributing an operating business that reports net assets of $25,000. Partner B is contributing cash of $35,000. The partners agree that the initial capital of the partnership should be shared equally. What will be the initial balance of the Capital Accounts of the partners assuming that the partners wish to employ the Goodwill Method?
| Partner A | Partner B | |
|---|---|---|
| a. | $25,000 | $35,000 |
| b. | $30,000 | $30,000 |
| c. | $35,000 | $35,000 |
| d. | $70,000 | $70,000 |
a.
b.
c.
d.
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Accounting And Business Ethics An Introduction
Authors: Ken McPhail, Diane Walters
1st Edition
0674018788, 9780415362368
