Partl QUESTIONS 1. The characteristics of a partnership include the following: (a) association of individuals, (b) limited life, and (c) co-ownership of property. Explain each of these terms. 2. Kevin Mathis is confused about the partnership characteristics of (a) mutual agency and (b) unlimited liability. Explain these two characteristics for Kevin. 3. Lance Kosinski and Matt Morrisen are considering a business venture. They ask you to explain the advantages and disadvantages of the partnership form of organization. 4. Newland and Palermo form a partnership. Newland contributes land with a book value of $50,000 and a fair value of $60,000. Newland also contributes equipment with a book value of $52,000 and a fair value of $57,000. The partnership assumes a $20,000 mortgage on the land. What should be the balance in Newland's capital account upon formation of the partnership? 5. Are the financial statements of a partnership similar to those of a proprietorship? Discuss Sty! Palagliap Part II PARNERSHIP PROBLEMS (CHAPTER 16 ADVANCE ACCOUNTING BOOK) Initial Investment in a Partnership I-Ashley and Becker each invest $40,000 cash in a new partnership DATE PR DEBIT DESCRIPTION Noncash Investments 2-C. Cola and R. Crown enter into a partnership C. cola R. Crown Fair value Fair value Cash - SB,000 Land (cost to C. Cola, 55,000) 14,000 Building cost to c. cola, 530,000) 55,000 inventory (cost to R. Crown, 528,000) Total GENERAL JOURNAL PAGE 1 55.000 DEBIT DESCRIPTION Allocation Based on Stated Ratios 3- Smith and Jones agree to divide profits or losses % for Smith and K for Jones. For 2008, the partnership reported net income of $80,000. GENERAL JOURNAL PAGE 1 DATE PR. DEBIT DESCRIPTION CREDIT Allocation Based on Capital Balances Smith, Capital Jones, Capital Totals Balance $ 80.000 40,000 $120,000 Ratio 66.67% 33.33% 100.00% Income $ 60,000 60,000 Allocation $ 40.000 20.000 $ 60,000 GENERAL JOURNAL PAGE 1 DATE DEBIT DESCRIPTION CREDIT Allocation Based on Services, Capital, and Stated Ratios 4-Smith and Jones have a partnership agreement with the following conditions: Smith receives $25,000 and Jones receives $8,000 as annual salaries. Each partner is allowed an annual interest allowance of 8% on the beginning-of-year capital balance. Any remaining balance of income or loss is allocated equally. Net income for 2008 is $90,000. GENERAL JOURNAL PAGE DATE DEBIT DESCRIPTION CREDIT