Accounting Principles

Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

Chapter 12

Accounting for Partnerships - all with Video Answers

Educators

Chapter Questions

Problem 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.

Oluwadamilola Ameobi

Oluwadamilola Ameobi

Numerade Educator

Problem 2

Kevin Mathis is confused about the partnership characteristics of (a) mutual agency and (b) unlimited liability. Explain these two characteristics for Kevin.

Oluwadamilola Ameobi

Oluwadamilola Ameobi

Numerade Educator

Problem 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.

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Problem 4

Why might a company choose to use a limited partnership?

Jennifer Stoner

Jennifer Stoner

Numerade Educator

Problem 5

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?

Yujie Wang

College of San Mateo

Problem 6

W. Jenson, N. Emch, and W. Gilligan have a partnership called Outlaws. A dispute has arisen among the partners. Jenson has invested twice as much in assets as the other two partners, and he believes net income and net losses should be shared in accordance with the capital ratios. The partnership agreement does not specify the division of profits and losses. How will net income and net loss be divided?

Jennifer Stoner

Jennifer Stoner

Numerade Educator

Problem 7

Mutt and Jeff are discussing how income and losses should be divided in a partnership they plan to form. What factors should be considered in determining the division of net income or net loss?

Jennifer Stoner

Jennifer Stoner

Numerade Educator

Problem 8

M. Elston and R. Ogle have partnership capital balances of $$\$ 40,000$$ and $$\$ 80,000$$, respectively. The partnership agreement indicates that net income or net loss should be shared equally. If net income for the partnership is $$\$ 42,000$$, how should the net income be divided?

Jennifer Stoner

Jennifer Stoner

Numerade Educator

Problem 9

S. Pletcher and F. Holt share net income and net loss equally. (a) Which account(s) is (are) debited and credited to record the division of net income between the partners? (b) If S. Pletcher withdraws $$\$ 30,000$$ in cash for personal use instead of salary, which account is debited and which is credited?

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Problem 10

Partners T. Greer and R. Parks are provided salary allowances of $$\$ 30,000$$ and $$\$ 25,000$$, respectively. They divide the remainder of the partnership income in a ratio of 3:2. If partnership net income is $$\$ 40,000$$, how much is allocated to Greer and Parks?

Narayan Hari

Numerade Educator

Problem 11

Are the financial statements of a partnership similar to those of a proprietorship? Discuss.

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Problem 12

How does the liquidation of a partnership differ from the dissolution of a partnership?

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Problem 13

Roger Fuller and Mike Rangel are discussing the liquidation of a partnership. Roger maintains that all cash should be distributed to partners on the basis of their income ratios. Is he correct? Explain.

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Problem 14

In continuing their discussion from Question 13, Mike says that even in the case of a capital deficiency, all cash should still be distributed on the basis of capital balances. Is Mike correct? Explain.

Bharat Koirala

Numerade Educator

Problem 15

Norris, Madson, and Howell have income ratios of $5: 3: 2$ and capital balances of $$\$ 34,000 $$, $$\$ 31,000 $$, and $$\$ 28,000$$, respectively. Noncash assets are sold at a gain and allocated to the partners. After creditors are paid, $$\$ 103,000$$ of cash is available for distribution to the partners. How much cash should be paid to Madson?

Narayan Hari

Numerade Educator

Problem 16

Before the final distribution of cash, account balances are Cash $$\$ 27,000$$; S. Shea, Capital $$\$ 19,000$$ (Cr.); L. Seastrom, Capital $$\$ 12,000$$ ; and M. Luthi, Capital $$\$ 4,000(\mathrm{Dr}$$.). Luthi is unable to pay any of the capital deficiency. If the income-sharing ratios are $5: 3: 2$, respectively, how much cash should be paid to L. Seastrom?

Narayan Hari

Numerade Educator

Problem 17

Why is Apple not a partnership?

Jennifer Stoner

Jennifer Stoner

Numerade Educator

Problem 18

Susan Turnbull decides to purchase from an existing partner for $$\$ 50,000$$ a one-third interest in a partnership. What effect does this transaction have on partnership net assets?

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Problem 19

Jerry Park decides to invest $$\$ 25,000$$ in a partnership for a one-sixth capital interest. How much do the partnership's net assets increase? Does Park also acquire a one-sixth income ratio through this investment?

Nick Johnson

Numerade Educator

Problem 20

Jill Parsons purchases for $$\$ 72,000$$ Jamar's interest in the Tholen-Jamar partnership. Assuming that Jamar has a $$\$ 68,000$$ capital balance in the partnership, what journal entry is made by the partnership to record this transaction?

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Problem 21

Jaime Keller has a $$\$ 41,000$$ capital balance in a partnership. She sells her interest to Sam Parmenter for $$\$ 45,000$$ cash. What entry is made by the partnership for this transaction?

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Problem 22

Andrea Riley retires from the partnership of Jaggard, Pester, and Riley. She receives $$\$ 85,000$$ of partnership assets in settlement of her capital balance of $$\$ 81,000$$. Assuming that the income-sharing ratios are $5: 3: 2$, respectively, how much of Riley's bonus is debited to Pester's capital account?

Susan Cooper

Numerade Educator

Problem 23

Your roommate argues that partnership assets should be revalued in situations like those in Question 21. Why is this generally not done?

Cotton Starr

Numerade Educator

Problem 24

How is a deceased partner's equity determined?

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