Q&A Hero

Q: Groh and Jackson are partners. Groh's capital balance in the partnership is $64,000 and Jackson's capital balance is $61,000. Groh and Jackson have agreed to share equally in income or loss. Groh and Jackson agree to accept Block with a 25% interest. Block will invest $35,000 in the partnership. The bonus that is granted to Block equals: A. $5,000. B. $2,500. C. $6,667. D. $3,333. E. $0, because Block must actually grant a bonus to Groh and Jackson.

Q: Groh and Jackson are partners. Groh's capital balance in the partnership is $64,000 and Jackson's capital balance is $61,000. Groh and Jackson have agreed to share equally in income or loss. Groh and Jackson agree to accept Block with a 20% interest. Block will invest $35,000 in the partnership. The bonus that is granted to Groh and Jackson equals: A. $1,500 each. B. $1,875 each. C. $3,750 each. D. $1,920 to Groh; $1,830 to Jackson. E. $0, because Groh and Jackson actually grant a bonus to Block.

Q: A partnership recorded the following journal entry: Cash......................................... 70,000 B. Tanner, Capital................... 10,000 R. Jackson, Capital.................. 10,000 H. Rivera, Capital............... 90,000 This entry reflects: A. Acceptance of a new partner who invests $70,000 and receives a $20,000 bonus. B. Withdrawal of a partner who pays a $10,000 bonus to each of the other partners. C. Addition of a partner who pays a bonus to each of the other partners. D. Additional investment into the partnership by Tanner and Jackson. E. Withdrawal of $10,000 each by Tanner and Jackson upon the admission of a new partner.

Q: When a partner is added to a partnership: A. The previous partnership ends. B. The underlying business operations ends. C. The underlying business operations must close and then reopen. D. The partnership must continue. E. The partnership equity always increases.

Q: During 2013, Schmidt invested $75,000 and Baldwin invested $90,000 in a partnership. They agreed that Baldwin would get a salary allowance of $30,000 and they would share any remaining income or loss equally. During 2013 the partnership earned net income of $300,000 and they each withdrew $12,000 from the partnership. Which of the following statements is correct? A. Schmidt Capital at the end of 2013 is $213,000. B. Schmidt Capital at the end of 2013 is $210,000. C. Baldwin Capital at the end of 2013 is $243,000. D. Baldwin Capital at the end of 2013 is $255,000. E. Total Capital at the end of 2013 has increased by $300,000.

Q: During 2013, Carpenter invested $75,000 and DiAngelo invested $90,000 in a partnership. They agreed to share income and loss by allowing a $40,000 per year salary allowance to Carpenter and a $42,000 per year salary allowance to DiAngelo, plus an interest allowance on the partners' beginning-year capital investments at 8%, with the balance to be shared equally. Under this agreement, if the partnership earns net income of $300,000 during 2013 the income allocated to each partner is: A. $40,000 to Carpenter; $42,000 to DiAngelo. B. $148,400 to Carpenter; $151,600 to DiAngelo. C. $43,200 to Carpenter; $45,360 to DiAngelo. D. $150,000 to Carpenter; $150,000 to DiAngelo. E. $105,720 to Carpenter; $105,720 to DiAngelo.

Q: Nguyen invested $100,000 and Hansen invested $200,000 in a partnership. They agreed to share income and loss by allowing a $60,000 per year salary allowance to Nguyen and a $40,000 per year salary allowance to Hansen, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns a $105,000 in income are: A. $52,500 to Nguyen; $52,500 to Hansen. B. $35,000 to Nguyen; $70,000 to Hansen. C. $57,500 to Nguyen; $47,500 to Hansen. D. $42,500 to Nguyen; $62,500 to Hansen. E. $70,000 to Nguyen; $60,000 to Hansen.

Q: Which of the following statements is true? A. Partners are employees of the partnership. B. Salaries to partners are expenses on the partnership income statement. C. Salary allowances usually reflect the relative value of services provided by partners. D. Salary allowances are expenses. E. Interest allowances are expenses.

Q: Shelby and Mortonson formed a partnership with capital contributions of $300,000 and $400,000, respectively. Their partnership agreement calls for Shelby to receive a $60,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $125,000, then Shelby and Mortonson's respective shares are: A. $62,500; $62,500 B. $90,000; $35,000 C. $87,500; $37,500 D. $85,000; $40,000 E. $92,000; $33,000

Q: Shelby and Mortonson formed a partnership with capital contributions of $300,000 and $400,000, respectively. Their partnership agreement calls for Shelby to receive a $60,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Shelby and Mortonson's respective shares are: A. $67,500; $67,500 B. $92,500; $42,500 C. $57,857; $77,143 D. $90,000; $40,000 E. $35,000; $100,000

Q: Blaser, Lukins, and Franko formed a partnership with Blaser contributing $160,000, Lukins contributing $520,000, and Franko contributing $240,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $275,000 for its first year of operation, what amount of income (rounded to the nearest dollar) would be credited to Franko's capital account? A. $50,000 B. $240,000 C. $91,667 D. $71,739 E. $275,000

Q: Rice, Hepburn and DiMarco formed a partnership with Rice contributing $60,000, Hepburn contributing $50,000, and DiMarco contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest dollar) would be credited to DiMarco's capital account? A. $20,000 B. $25,000 C. $30,000 D. $40,000 E. $75,000

Q: If a partnership contract provides for interest at 10% annually on each partner's investment, the interest: A. Is ignored when earnings are not sufficient to pay interest. B. Is an allowance that can make up for unequal capital contribution. C. Is an expense of the business. D. Must be paid because the partnership contract has unlimited life. E. Legally becomes a liability of the general partner.

Q: In the absence of a partnership agreement, the law says that income and loss should be allocated based on: A. A fractional basis. B. The ratio of capital investments. C. Salary allowances. D. Equal shares. E. Interest allowances.

Q: Miller and Reising formed a partnership. Miller contributed land valued at $90,000 and a building valued at $115,000. Reising contributed $90,000 cash. In addition, the partnership assumed responsibility for Miller's $85,000 mortgage payable associated with the land and building. What are the balances of the partners' capital accounts after these transactions have been recorded? A. Miller: $120,000; Reising: $90,000. B. Miller: $205,000; Reising: $90,000. C. Miller: $105,000; Reising: $105,000. D. Miller: $90,000; Reising: $120,000. E. Miller: $90,000; Reising: $205,000.

Q: Collins and Farina are forming a partnership. Collins is investing a building that has a market value of $80,000 and a book value of $65,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Farina is investing $20,000 cash. Total capital in the partnership will be: A. $80,000 B. $24,000 C. $56,000 D. $44,000 E. $60,000

Q: Collins and Farina are forming a partnership. Collins is investing a building that has a market value of $80,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Farina is investing $20,000 cash. The balance of Collins' Capital account will be: A. $80,000 B. $24,000 C. $56,000 D. $44,000 E. $60,000

Q: Chen and Wright are forming a partnership. Chen will invest a building that currently is being used by another business owned by Chen. The building has a market value of $90,000. Also, the partnership will assume responsibility for a $30,000 note secured by a mortgage on that building. Wright will invest $50,000 cash. For the partnership, the amounts to be recorded for the building and for Chen's Capital account are: A. Building, $90,000 and Chen, Capital, $90,000. B. Building, $60,000 and Chen, Capital, $60,000. C. Building, $60,000 and Chen, Capital, $50,000. D. Building, $90,000 and Chen, Capital, $60,000. E. Building, $60,000 and Chen, Capital, $90,000.

Q: S. Reising contributed $48,000 in cash plus equipment valued at $73,000 to the Reising Construction Partnership. The equipment had a book value of $65,000. The journal entry to record the transaction for the partnership would include a: A. Debit to Equipment for $73,000. B. Debit to Equipment for $65,000. C. Credit to S. Reising, Capital for $113,000. D. Credit to Common Stock for $121,000 E. Credit to the Gain on Asset for $8,000.

Q: S. Reising contributed $48,000 in cash plus equipment valued at $73,000 to the Reising Construction Partnership. The journal entry to record the transaction for the partnership is: A. Cash...................................................................... 48,000 Equipment............................................................. 73,000 S. Reising, Capital.......................................... 121,000 B. Cash...................................................................... 48,000 Equipment............................................................. 73,000 Reising Construction Partnership, Capital..... 121,000 C. Reising Construction Partnership......................... 121,000 S. Reising, Capital.......................................... 121,000 D. S. Reising, Capital................................................ 121,000 Reising Construction Partnership, Capital..... 121,000 E. Cash...................................................................... 48,000 Equipment............................................................. 73,000 Common Stock............................................... 121,000

Q: B. Tanner contributed $14,000 in cash plus office equipment valued at $7,000 to the JT Partnership. The journal entry to record the transaction for the partnership is: A. Cash................................................................................. 14,000 Office equipment............................................................. 7,000 B. Tanner, Capital...................................................... 21,000 B. Cash................................................................................. 14,000 Office equipment............................................................. 7,000 JT Partnership, Capital...................................................... 21,000 C. JT Partnership, Capital...................................................... 21,000 B. Tanner, Capital...................................................... 21,000 D. Partnership Assets 21,000 JT Partnership, Capital.................................................. 21,000 E. B. Tanner, Capital.................................................................. 21,000 JT Partnership, Capital.................................................. 21,000

Q: The withdrawals account of each partner is: A. Closed to that partner's capital account with a credit. B. Closed to that partner's capital account with a debit. C. A permanent account that is not closed. D. Credited with that partner's share of net income. E. Debited with that partner's share of net loss.

Q: Partners' withdrawals of assets are: A. Credited to their withdrawals accounts. B. Debited to their withdrawals accounts. C. Credited to their retained earnings. D. Debited to their retained earnings. E. Debited to their asset accounts.

Q: Partnership accounting: A. Is the same as accounting for a sole proprietorship. B. Is the same as accounting for a corporation. C. Is the same as accounting for a sole proprietorship, except that separate capital and withdrawal accounts are kept for each partner. D. Is the same as accounting for an S corporation. E. Is the same as accounting for a corporation, except that retained earnings is used to keep track of partners' withdrawals.

Q: Chad Forrester is a limited partner in a sports management firm. During the previous year his return on partnership equity was 16%. The beginning balance in his capital account was $450,000 and his partnership net income for this year was $75,000. What was the balance in Chad's capital account at the end of last year? A. $525,000 B. $937,500 C. $487,500 D. $468,750 E. $37,500

Q: Elaine Valero is a limited partner in a marketing and design firm. During the previous year her return on partnership equity was 14%. During this time, the beginning and ending balances in her capital account were $210,000 and $230,000 respectively. What was Elaine's partnership net income for this year? A. $29,400.00 B. $30,800.00 C. $32,200.00 D. $1,500,000.00 E. $1,642,857.14

Q: Web Services is organized as a limited partnership, with Wren Littlefeather as one of its partners. Wren's capital account began the year with a balance of $87,000. During the year, Wren's share of the partnership income was $60,000 and she received $25,000 in distributions from the partnership. What is Wren's partner return on equity? A. 57.42% B. 49.18% C. 68.97% D. 33.49% E. 40.23%

Q: Web Services is organized as a limited partnership, with David White as one of its partners. David's capital account began the year with a balance of $45,000. During the year, David's share of the partnership income was $7,500 and David received $4,000 in distributions from the partnership. What is David's partner return on equity? A. 7.8% B. 8.9% C. 15.4% D. 16.0% E. 16.7%

Q: Jimmy Hayes is a partner in Sports Promoters. His beginning partnership capital balance for the current year $65,000 and his ending partnership capital balance for the current year is $62,000. His share of this year's partnership income was $5,250. What were his withdrawals for the period? A. $8,250 B. $3,000 C. $2,250 D. $0 E. $5,250

Q: Renee Jackson is a partner in Sports Promoters. Her beginning partnership capital balance for the current year is $55,000 and her ending partnership capital balance for the current year is $62,000. Her share of this year's partnership income was $5,250. What is her partner return on equity? A. 8.47% B. 8.97% C. 9.54% D. 1047% E. 1060%

Q: A partnership designed to protect innocent partners from malpractice or negligence claims resulting from acts of another partner is a: A. Partnership B. Limited partnership C. Limited liability partnership D. General partnership E. Limited liability corporation

Q: A partnership that has two classes of partners, general and limited, where the limited partners have no personal liability beyond the amounts they invest in the partnership and no active role in the partnership except as specified in the partnership agreement, is a: A. Mutual agency partnership B. Limited partnership C. Limited liability partnership D. General partnership E. Limited liability corporation

Q: Mutual agency means A. Creditors can apply their claims to partners' personal assets. B. Partners are taxed on partnership withdrawals. C. All partners must agree before the partnership can act. D. The partnership has a limited life. E. A partner can commit or bind the partnership in any contract within the scope of the partnership business.

Q: A partnership agreement: A. Is not binding unless it is in writing. B. Is the same as a limited liability partnership. C. Is binding even if it is not in writing. D. Does not generally address the issue of the rights and duties of the partners. E. Is also called the articles of incorporation.

Q: Which of the following best lists the disadvantages of a partnership: A. Unlimited life and mutual agency. B. Mutual agency and limited liability. C. Unlimited liability and unlimited life. D. Limited Life and limited liability. E. Limited life, mutual agency, and unlimited liability are all disadvantages of a partnership

Q: An unincorporated association of two or more persons to carry on a business for profit as co-owners is a(n): A. Partnership B. Proprietorship C. Contractual company D. Mutual agency E. Voluntary organization

Q: If a partner is unable to cover a deficiency and the other partners absorb the deficiency, then the partner with the deficiency is thus relieved of all liability.

Q: A capital deficiency can arise from liquidation losses, excessive withdrawals before liquidation, or recurring losses in prior periods.

Q: A capital deficiency exists when all partners have a credit balance in their capital accounts.

Q: When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

Q: When the current value of a partnership is greater than the recorded amounts of equity, the current partners usually require any new partner to pay a bonus for the privilege of joining.

Q: Admitting a partner into a partnership by accepting assets is a personal transaction between one or more current partners and the new partner.

Q: Assets invested by a partner into a partnership remain the property of the individual partner.

Q: When a partner leaves a partnership, the present partnership ends, but the business can still continue to operate.

Q: To buy into an existing partnership, the new partner must contribute cash.

Q: Assume that the S & B partnership agreement gave Steely 60% and Breck 40% of partnership income and losses. The partnership recorded a loss of $27,000 in the current period. Steely's share of the loss equals $16,200 and Breck's share equals $10,800.

Q: If the partners agree on a formula to share income and say nothing about losses, then the losses are shared equally.

Q: If partners devote their time and services to their partnership, their salaries are expenses on the income statement.

Q: The equity section of the balance sheet of a partnership can report the separate capital account balances of each partner.

Q: The statement of partners' equity shows the beginning balance in retained earnings, plus investments, less withdrawals, the income or loss, and the ending balance in retained earnings.

Q: Salary allowances are reported as salaries expense on a partnership income statement.

Q: In the absence of a partnership agreement, the law says that income of a partnership will be shared equally by the partners.

Q: In closing the accounts at the end of a period, the partners' capital accounts are credited for their share of the partnership loss or debited for their share of the partnership net income.

Q: The withdrawals account of each partner is closed to retained earnings at the end of the accounting period.

Q: Partners can invest both assets and liabilities into a partnership.

Q: Partners' withdrawals are credited to their separate withdrawals accounts.

Q: When partners invest in a partnership, their capital accounts are credited for the amount invested.

Q: Benson is a partner in B&D Company. Benson's share of the partnership income is $18,600 and her average partnership equity is $155,000. Her partner return on equity equals 8.33.

Q: Partner return on equity can be used by each partner to help decide whether additional investment or withdrawal of resources is best for that partner.

Q: A partnership cannot use salary allowances or interest allowances if it uses the stated ratio method to allocate income and losses to the partners.

Q: If a U.S. company makes a credit sale to a foreign company, the sales price must be translated into dollars as of the date of _____________.

Q: An investing company that owns _________ of another (investee) company's voting stock (but not more than 50%) is presumed to have a significant influence over the investee.

Q: Long-term investments in available-for-sale securities are reported using their _______ on the balance sheet.

Q: Held-to-maturity securities are ____________ securities a company intends and is able to hold until maturity.

Q: ____________________________ are debt and equity securities that a company intends to actively manage and trade for a profit.

Q: Investments in trading securities are always classified as ______________ and are reported as _______________ on the balance sheet.

Q: ________________________ refers to all changes in equity for a period except for those due to investments and distributions to owners.

Q: Investments in equity securities where the investor has a controlling influence are accounted for using the ________________________________.

Q: Investments in equity securities where the investor has a significant, but not controlling, influence are accounted for using the _______________ method.

Q: An investing company that owns more than ________ of another (investee) company's voting stock is presumed to have controlling influence over the investee.

Q: _________________________ are investments that are both readily converted to known amounts of cash and mature within three months.

Q: __________________________ are investments in securities that are not readily convertible to cash or are not intended to be converted to cash in the short-term.

Q: ___________________________ are investments in securities that management intends to convert to cash within one year or the operating cycle, whichever is longer, and are readily convertible to cash.

Q: As a long-term investment, Elmer's Equipment Enterprise purchased 35% of Sticky Supplies Inc.'s 300,000 shares for $350,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of Stickys net assets were equal. During the year, Stickys earned net income of $430,000 and distributed cash dividends of 0.42 cents per share. The fair value of Stickys assets at the end of the year totaled $349,450. What is the journal entry, if any to record the net income for the investment in Sticky?

Q: As a long-term investment, Elmer's Equipment Enterprise purchased 20% of Sticky Supplies Inc.'s 300,000 shares for $350,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of Stickys net assets were equal. During the year, Stickys earned net income of $430,000 and distributed cash dividends of 0.42 cents per share. The fair value of Stickys assets at the end of the year totaled $349,450. What is Elmers balance for this investment at the end of the year, assuming there is no significant control?

Q: As a long-term investment, Elmer's Equipment Enterprise purchased 35% of Sticky Supplies Inc.'s 300,000 shares for $350,000 at the beginning of the fiscal year of both companies. On the purchase date, the fair value and book value of Stickys net assets were equal. During the year, Stickys earned net income of $430,000 and distributed cash dividends of 0.42 cents per share. The fair value of Stickys assets at the end of the year totaled $349,450. What is Elmers balance for this investment at the end of the year?

Q: The following information is available from the financial statements of Cosmotropolis: 2012 2013 2014 Total assets, December 31 $341,585 $395,412 $922,357 Net income 35,550 49,512 68,149 What is Cosmotropolis return on total assets for 2014?

Q: The following information is available from the financial statements of Cosmotropolis: 2012 2013 2014 Total assets, December 31 $341,585 $395,412 $922,357 Net income 35,550 49,512 68,149 What is Cosmotropolis return on total assets for 2013?

Q: Mian, Inc., sells American gourmet foods to merchandisers in Singapore. Prepare the journal entries for Mian to record the following transactions. Include any year-end adjustments. Dec 20 Sold items to Solingen, Inc., for 60,000 Singapore dollars. The exchange rate was $0.476 per Singapore dollar. The purchase terms were n/30. Dec 31 The exchange rate was $0.480 per Singapore dollar. Jan 17 Received payment from Solingen for the December 20 sale. The exchange rate was $0.495 per Singapore dollar.

Q: Texana Inc. imports inventory from Mexico. Prepare the journal entries for Texana to record the following transactions. Include any year-end adjustments. Dec 21 Purchased inventory from Acquilla Co. for 500,000 Mexican pesos. The exchange rate was $0.0914 per peso. The credit terms were n/30. Dec 31 The exchange rate was $0.0917 per peso. Jan 20 Paid Acquilla Co. for the December 21 purchase. The exchange rate was $0.0920 per peso.