Question 1

An interest allowance is based on a partner's individual initial investment of capital.

Accepted Answer

An interest allowance is calculated based on a partner's individual initial investment of capital, and therefore varies amongst partners in a partnership.

Question 2

A profit and loss ratio must be based on capital contributions.

Accepted Answer

A profit and loss ratio can be based on various factors such as time, responsibility, experience, or any other mutually agreed upon considerations. It may or may not be based solely on capital contributions.

Question 3

An interest allowance is based on the beginning capital balance of each partner.

Accepted Answer

An interest allowance is typically based on the ending capital balance of each partner, as it reflects the current investment in the partnership.

Question 4

Janie and Larry are partners,with beginning capital balances of $90,000 and $60,000 respectively.During the year,Janie withdrew $20,000 and Larry withdrew $15,000.The year's net income of $40,000 was distributed $15,000 to Janie and $25,000 to Larry.Prepare a statement of Partners' equity.

Accepted Answer

The answer of Janie and Larry are partners,with beginning capital...

Question 5

When a partnership is worth more than the amounts recorded,an incoming partner may:

Accepted Answer

If a partnership is worth more than the amounts recorded, incoming partners may be required to pay a bonus ("goodwill") to the other partners in order to account for the difference in value. This is known as a "premium for goodwill" and is a common practice in partnership agreements. Therefore, choice A is the best answer.

Question 6

The profit and loss ratio is not required to be equally divided between and among the partners.

Accepted Answer

The profit and loss ratio can vary based on the agreement between the partners. It is not mandatory to divide it equally.

Question 7

The statement of partners' equity reveals each partner's ownership percentage of the firm's capital.

Accepted Answer

The statement of partners' equity shows the changes in each partner's capital account over a period of time, including their share of the firm's net income or loss, withdrawals, and additional contributions. This will also reflect their ownership percentage of the firm's capital.

Question 8

Able partner withdrew cash from the business.
Debit ________ Credit ________

Accepted Answer

The answer of Able partner withdrew cash from the business.
Debit...

Question 9

A statement of partner's equity is the same as a statement of owner's equity except:

Accepted Answer

A statement of partner's equity will have a capital account for each partner listed separately, whereas a statement of owner's equity will only have one capital account for the sole proprietor or single owner of the business.

Question 10

James wants to invest cash so that he will have a one-third interest in Thomas and Stanley's company.The capital balances are $6,000 Thomas,$9,000 Stanley.The admission of James would be to:

Accepted Answer

In order for James to have a one-third interest in the company, the total capital balance must be divided into three equal parts. The total capital balance is $15,000 ($6,000 + $9,000). One-third of $15,000 is $5,000. Since James already has $0 in capital, he would need to invest $7,500 ($5,000 - $2,500, which is the difference between his current capital balance and his desired capital balance) to have a one-third interest. Therefore, the entry would be to debit Cash $7,500 and credit James, Capital $7,500.

Question 11

Partners are not required to report their share of partnership earnings on their personal tax return.

Accepted Answer

Partners are required to report their share of partnership earnings on their personal tax return. The partnership itself files an information return (Form 1065) to report the partnership's income, deductions, and credits, but each partner must report their share of these items on their individual tax return (Form 1040).

Question 12

Closed the income summary to the partners' accounts with a net income.
Debit ________ Credit ________ & ________

Accepted Answer

The answer of Closed the income summary to the partners'...

Question 13

Mary sold Jill her equity in the Mary and Jill partnership for $23,000.If both Mary and Jill had a $15,000 capital balance,the entry to record this transaction would be to:

Accepted Answer

Mary is selling her equity in the partnership to Jill, so the $23,000 should be credited to Mary's capital account and debited from Jill's capital account. However, since both Mary and Jill have a $15,000 capital balance, a journal entry must be made to adjust their capital accounts to reflect the sale. By debiting Mary's capital account for $15,000 and crediting Jill's capital account for $15,000, the total capital balance in the partnership remains the same, and the remaining $8,000 from the sale is credited to Mary's capital account.

Question 14

Partnerships are not subject to federal income tax.

Accepted Answer

Partnerships themselves do not pay federal income tax. Instead, they pass through profits and losses to individual partners, who then report them on their personal tax returns.

Question 15

The Brad and Marcia partnership agree to admit Fred with a one-third interest for $10,000.Brad and Marcia's capital balances are $12,000,and $8,000,respectively,and they share profits and losses equally.The entry to admit Fred would include:

Accepted Answer

Fred is admitted with a one-third interest for $10,000, so the entry would be to debit Cash for $10,000 and credit Fred, Capital for $10,000.

Question 16

John and Brad have average capital balances of $35,000 and $20,000,respectively.The partners have agreed to allow $20,000 salary allowances.The partners will share income and losses in a 1:2 ratio for John and Brad,respectively.How much will each partner's capital account change if net income is $100,000?

Accepted Answer

The answer of John and Brad have average capital balances...

Question 17

The partnership of Smith and Jones,who have average capital balances of $17,000 and $23,000,respectively,earned $90,000 net income.Under each of the following independent situations,calculate the distribution of the $90,000.
a)No agreement was established.
b)Share based on their average capital balances.

Accepted Answer

The answer of The partnership of Smith and Jones,who have...

Question 18

Before calculating salary and interest allowances,it is necessary to determine whether net income will cover these expenses.

Accepted Answer

Net income is calculated after deducting expenses, including salary and interest allowances, not before.

Question 19

Closed the income summary,there is a net loss.
Debit ________ & ________ Credit ________

Accepted Answer

The answer of Closed the income summary,there is a net...

Question 20

A loss occurs when net income is not large enough to cover salary and interest allowances for the partners.

Accepted Answer

A loss occurs when the total revenue of a business is not sufficient to cover all its expenses, including salaries, interest allowances for partners, and other operational costs.

Quiz 17: Partnership

An interest allowance is based on a partner's individual initial investment of capital.

A profit and loss ratio must be based on capital contributions.

An interest allowance is based on the beginning capital balance of each partner.

Janie and Larry are partners,with beginning capital balances of $90,000 and $60,000 respectively.During the year,Janie withdrew $20,000 and Larry withdrew $15,000.The year's net income of $40,000 was distributed $15,000 to Janie and $25,000 to Larry.Prepare a statement of Partners' equity.

When a partnership is worth more than the amounts recorded,an incoming partner may:

The profit and loss ratio is not required to be equally divided between and among the partners.

The statement of partners' equity reveals each partner's ownership percentage of the firm's capital.

Able partner withdrew cash from the business. Debit Credit

A statement of partner's equity is the same as a statement of owner's equity except:

James wants to invest cash so that he will have a one-third interest in Thomas and Stanley's company.The capital balances are $6,000 Thomas,$9,000 Stanley.The admission of James would be to:

Partners are not required to report their share of partnership earnings on their personal tax return.

Closed the income summary to the partners' accounts with a net income. Debit Credit &

Mary sold Jill her equity in the Mary and Jill partnership for $23,000.If both Mary and Jill had a $15,000 capital balance,the entry to record this transaction would be to:

Partnerships are not subject to federal income tax.

The Brad and Marcia partnership agree to admit Fred with a one-third interest for $10,000.Brad and Marcia's capital balances are $12,000,and $8,000,respectively,and they share profits and losses equally.The entry to admit Fred would include:

Before calculating salary and interest allowances,it is necessary to determine whether net income will cover these expenses.

Closed the income summary,there is a net loss. Debit & Credit

A loss occurs when net income is not large enough to cover salary and interest allowances for the partners.

Quiz 17: Partnership

An interest allowance is based on a partner's individual initial investment of capital.

A profit and loss ratio must be based on capital contributions.

An interest allowance is based on the beginning capital balance of each partner.

Janie and Larry are partners,with beginning capital balances of $90,000 and $60,000 respectively.During the year,Janie withdrew $20,000 and Larry withdrew $15,000.The year's net income of $40,000 was distributed $15,000 to Janie and $25,000 to Larry.Prepare a statement of Partners' equity.

When a partnership is worth more than the amounts recorded,an incoming partner may:

The profit and loss ratio is not required to be equally divided between and among the partners.

The statement of partners' equity reveals each partner's ownership percentage of the firm's capital.

Able partner withdrew cash from the business. Debit ________ Credit ________

A statement of partner's equity is the same as a statement of owner's equity except:

James wants to invest cash so that he will have a one-third interest in Thomas and Stanley's company.The capital balances are $6,000 Thomas,$9,000 Stanley.The admission of James would be to:

Partners are not required to report their share of partnership earnings on their personal tax return.

Closed the income summary to the partners' accounts with a net income. Debit ________ Credit ________ & ________

Mary sold Jill her equity in the Mary and Jill partnership for $23,000.If both Mary and Jill had a $15,000 capital balance,the entry to record this transaction would be to:

Partnerships are not subject to federal income tax.

The Brad and Marcia partnership agree to admit Fred with a one-third interest for $10,000.Brad and Marcia's capital balances are $12,000,and $8,000,respectively,and they share profits and losses equally.The entry to admit Fred would include:

Before calculating salary and interest allowances,it is necessary to determine whether net income will cover these expenses.

Closed the income summary,there is a net loss. Debit ________ & ________ Credit ________

A loss occurs when net income is not large enough to cover salary and interest allowances for the partners.

Able partner withdrew cash from the business. Debit Credit

Closed the income summary to the partners' accounts with a net income. Debit Credit &

Closed the income summary,there is a net loss. Debit & Credit