1) William and Smith formed a partnership with Scott who contributed $100,000, William who contributed $30,000, and Smith who contributed $70,000. Their partnership agreement called for the earnings division to be based on the ratio of capital investments. If the partnership had a profit of $475,000 for its first year of operation, how much would be credited to Smith's capital account?

• $475,000
• $345,000
• $166,250
• $130,000
• $70,000

2) Salary and interest allowances are reported as expenses on a partnership income statement.

True or False

3) The equity section of the balance sheet of a partnership usually shows the individual capital account balance of each partner.

True or False

4) Mutual agency means each partner can bind or commit the partnership to any contract within the scope of the partnership's business.

True or False

5) Belinda Kim contributed $6,000 in cash plus office equipment with a fair value of $23,000 to the BK Partnership. In addition, the partnership assumed a $5,000 note payable. The journal entry to record the transaction is

• Cash 6,000

Office Equipment 23,000

Note Payable 5,000

B. Kim, Capital24,000

• B. Kim, Capital 5,000

Note Payable 24,000

Cash6,000

Office Equipment23,000

• Cash 24,000

B. Kim, Capital24,000

• B. Kim, Capital -29,000

Cash6,000

Office Equipment23,000

• Cash 6,000

Office Equipment 23,000

B. Kim, Capital29,000