1. The partnership agreement of Thomas, Gise, and Bosco provides for the following income ratio: (a) Thomas, the managing partner, receives a salary allowance of $108400, (b) each partner receives 15% interest on average capital investment, and (c) remaining net income or loss is divided equally. The average capital investments for the year were: Thomas $596000, Gise $1240000, and Bosco $1820000. If partnership net income is $538000, the amount allocated to Thomas should be:

1. $89400.
2. $182800.
3. $197800.
4. $158200.

2. When a partner invests noncash assets in a partnership, the assets should be recorded at their:

1. carrying value.
2. original cost.
3. fair value.
4. book value.

3. Paul invests $20300 in cash (admission by investment) in the Seiler-Shaw partnership to acquire a 1/4 interest. In this case:

1. the accounting will be the same as a purchase of an interest.
2. Pauls income ratio will automatically be 1/4.
3. the total capital of the new partnership is greater than the total capital of the old partnership.
4. the total net assets of the new partnership are unchanged from the previous partnership.

4. The partnership agreement of Donald and Cohen provides for salary allowances of $89300 to Donald and $70600 to Cohen, with the remaining income or loss to be divided equally. During the year, Donald and Cohen each withdraw cash equal to 75% of their salary allowances. If partnership net income is $206000, Donalds equity in the partnership would:

1. decrease the same as Cohens.
2. decrease more than Cohens.
3. increase more than Cohens.
4. increase the same as Cohens.

5. The Partners' Capital Statement for DSB Company reported the following information in total:

Capital, January 1	$241000
Additional investment	80200
Drawings	161000
Net income	197000

6. The partners share income in the ratio of their beginning of year capital balances and each partner withdrew the same amount during the period. The partnership has three partners: Davis, Sauls, and Birch with ending capital balances in a ratio 40:20:40. What are the respective ending balances of the three partners?

1. Davis, $175200; Sauls, $87600; Birch, $175200.
2. Davis, $142880: Sauls, $71440; Birch, $142880.
3. Davis, $160800; Sauls, $80400; Birch, $160800.
4. Davis, $271680; Sauls, $135840; Birch, $271680.

7. Donald and Devito share partnership profits and losses in the ratio of 6:4. Donalds Capital account balance is $155000 and Devitos Capital account balance is $108000. Nance is admitted to the partnership by investing $180000 and is to receive a one-fourth ownership interest. Donald, Devito and Nances capital balances after Nances investment will be

Donald				Devito				Nance
A $155000		$108000				$180000

B $198000		$127300		$110750
C $196550		$135700		$110750

D $195000		$130300		$110750

8. On November 30, capital balances are James $710000, Lagassi $590000 and Kelly $590000. The income ratios are 20%, 20% and 60% respectively. James decides to retire from the partnership. In order for Lagassi and Kelly to have equal capital interests after the retirement of James, how much partnership cash would have to be paid to James for her partnership interest?

1. $710000.
2. $630000.
3. Any amount paid to James will cause Lagassi and Kelly to still have equal capital balances.
4. $0.

9. In the liquidation process, if a capital account shows a deficiency :

1. it may be written off to a "Loss" account.
2. it is disregarded until after the partnership books are closed.
3. the partner with a deficiency has an obligation to the partnership for the amount of the deficiency.
4. it can be written off to a "Gain" account.