QUESTION 1

Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.

What was White's capital balance at the end of 2021?

$390,060.

$405,000.

$417,900.

$384,060.

$402,060.

QUESTION 2

The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows:

Donald, capital $ 200,000 Hanes, capital 100,000 Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.

What is the new total balance of the partnership accounts?

$176,000.

$84,000.

$400,000.

$140,000.

$200,000.

QUESTION 3

A partnership began its first year of operations with the following capital balances:

Young, Capital $ 143,000 Eaton, Capital $ 104,000 Thurman, Capital $ 143,000 The Articles of Partnership stipulated that profits and losses be assigned in the following manner:

Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman. Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year. The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively. Each partner withdrew $13,000 per year. Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.

What was Eaton's total share of net income for the second year?

$19,760 income.

$4,160 income.

$17,160 income.

$28,080 income.

$17,290 income.

QUESTION 4

Which of the following could be used as a basis to allocate profits among partners who are active in the management of the partnership?

1) Allocation of salaries.

2) The number of years with the partnership.

3) The amount of time each partner works.

4) The average capital invested.

1, 2, and 4.

1 and 3.

1, 2, 3, and 4.

1, 3, and 4.

1 and 2.

QUESTION 5

The partnership contract for Hanes and Jones LLP provides that Hanes is to receive a bonus of 20% of net income (after the bonus) and that the remaining net income is to be divided equally. If the partnership income before the bonus for the year is $57,600, Hanes' share of this pre-bonus income is:

$35,520.

$28,800.

$33,600.

$34,560.

$38,400.

QUESTION 6

A partnership began its first year of operations with the following capital balances:

Young, Capital $ 143,000 Eaton, Capital $ 104,000 Thurman, Capital $ 143,000 The Articles of Partnership stipulated that profits and losses be assigned in the following manner:

Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman. Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year. The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively. Each partner withdrew $13,000 per year. Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.

What was Thurman's total share of net loss for the first year?

$3,900 loss.

$24,700 loss.

$9,100 loss.

$11,700 loss.

$10,400 loss.

QUESTION 7

Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively.The partners share profits and losses 20%, 40%, and 40% respectively.

Anne retires and is paid $80,000 based on the terms of the original partnership agreement.If the bonus method is used, what is the capital of the remaining partners?

Donald, $50,000; Todd, $50,000.

Donald, $24,000; Todd, $18,000.

Donald, $40,000; Todd, $30,000.

Donald, $30,000; Todd, $10,000.

Donald, $70,000; Todd, $40,000.

QUESTION 8

The partners of Apple, Bere, and Carroll LLP share net income and losses in a 5:3:2 ratio, respectively. The capital account balances on January 1, 2021, were as follows:

Apple, capital $ 25,000 Bere, capital 75,000 Carroll, capital 50,000 Total partners' capital $ 150,000 The carrying amounts of the assets and liabilities of the partnership are the same as their current fair values. Dorr will be admitted to the partnership with a 20% capital interest and a 20% share of net income and losses in exchange for a cash investment. The amount of cash that Dorr should invest in the partnership is:

$75,000.

$90,000.

$25,000.

$37,500.

$30,000.

QUESTION 9

Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.

What was the remainder portion of net income allocated to White for 2021?

$74,160.

$90,000.

$68,160.

$96,000.

$62,160.

QUESTION 10

The disadvantages of the partnership form of business organization, compared to corporations, include

the extent of governmental regulation.

the complexity of operations.

the requirement for the partnership to pay income taxes.

the legal requirements for formation.

unlimited liability for the partners. QUESTION 11

Goodman, Pinkman, and White formed a partnership on January 1, 2020, and made capital contributions of $125,000 (Goodman), $175,000 (Pinkman), and $250,000 (White), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner's beginning capital balance for the year; (2) annual compensation of $15,000 to Pinkman; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Goodman; (b) 40% for Pinkman; and (c) 40% for White. Net income was $200,000 in 2020 and $240,000 in 2021. Each partner withdrew $1,500 for personal use every month during 2020 and 2021.

What was Goodman's total share of net income for 2020?

$26,000.

$47,500.

$35,000.

$41,500.

$38,500.

QUESTION 12

The capital account balances for Donald & Hanes LLP on January 1, 2021, were as follows:

Donald, capital $ 200,000 Hanes, capital 100,000 Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The partners agreed to admit May to the partnership with a 35% interest in partnership capital and net income. May invested $100,000 cash, and no goodwill was recognized.

What is the balance of Hanes's capital account after the new partnership is created?

$84,000.

$100,000.

$176,000.

$200,000.

$140,000.

QUESTION 13

P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest.

If C contributes $40,000 to the partnership and the goodwill method is used, what amount will be debited for goodwill?

$60,000

$15,000

$20,000

$25,000

$28,000

QUESTION 14

Cherryhill and Hace had been partners for several years, and they decided to admit Quincy to the partnership. The accountant for the partnership believed that the dissolved partnership and the newly formed partnership were two separate entities. What method would the accountant have used for recording the admission of Quincy to the partnership?

The bonus method.

The cost method.

The equity method.

The proportionate method.

The goodwill method.

QUESTION 15

A local partnership has two partners, Jim and Pam. Jim has a capital balance of $150,000 and Pam has a capital balance of $125,000. These two partners share profits and losses 60 percent (Jim) and 40 percent (Pam). Cece invests $75,000 in cash in the partnership for a 25 percent ownership. The bonus method will be used. What is Pam's capital balance after this new investment?

$120,000.

$130,000.

$142,500.

$157,500.

$87,500.

QUESTION 16

A partnership began its first year of operations with the following capital balances:

Young, Capital $ 143,000 Eaton, Capital $ 104,000 Thurman, Capital $ 143,000 The Articles of Partnership stipulated that profits and losses be assigned in the following manner:

Young was to be awarded an annual salary of $26,000 and $13,000 salary was to be awarded to Thurman. Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year. The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively. Each partner withdrew $13,000 per year. Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.

What was Young's total share of net loss for the first year?

$11,700 loss.

$9,100 loss.

$3,900 loss.

$24,700 loss.

$10,400 loss.

QUESTION 17

When Danny withdrew from John, Daniel, Harry, and Danny, LLP, he was paid $80,000, although his capital account balance was only $60,000. The four partners shared net income and losses equally, and no revaluation will take place. The journal entry to record the effect on John's capital due to Danny's withdrawal would include:

$6,667 debit to John, Capital.

$20,000 debit to John, Capital.

$5,000 credit to John, Capital.

$6,667 credit to John, Capital.

$5,000 debit to John, Capital.

QUESTION 18

When the hybrid method is used to record the withdrawal of a partner, the partnership

revalues liabilities but not assets, and no goodwill is recorded.

revalues assets and liabilities but does not record goodwill.

revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner.

revalues assets but not liabilities, and records goodwill to the continuing partner but not to the withdrawing partner.

can recognize goodwill but does not revalue assets and liabilities.

QUESTION 19

Peter, Roberts, and Dana have the following capital balances; $80,000, $100,000 and $60,000, respectively.The partners share profits and losses 20%, 40%, and 40% respectively.

What is the total partnership capital after Roberts retires receiving $160,000 and using the goodwill method?

$120,000.

$ 80,000.

$230,000.

$176,000.

$290,000.

QUESTION 20

Which of the following is a type of investment designed primarily for individuals who want the tax benefits of a partnership but who do not wish to work in a partnership or have unlimited liability?

Subchapter S Partnership.

General Partnership.

Limited Liability Partnership.

Limited Partnership.

Limited Liability Company.