Q&A Hero

Q: Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $120,000 of net income under each of the following assumptions:a. No agreement as to division of net incomeb. In ratio of capital balancesc. In ratio of time devoted to businessd. Interest of 10% on capital balances and the remainder divided equallye. Interest of 10% on capital balances, salaries of $40,000 to Jackson and $20,000 to Campbell, and the remainder divided equally

Q: The partnership of Miner Company began operations on January 1, with contributions as follows:Waverley$35,000Marquez40,000​The following additional partner transactions took place during the year:In early January, Houston is admitted to the partnership by contributing $25,000 cash for a 25% interest.Net income of $160,000 was earned. In addition, Waverley received a salary allowance of $30,000 for the year. The three partners agree to an income-sharing ratio equal to their capital balances after admitting Houston.The partners’ withdrawals are equal to half of their respective distributions of income after salary (i.e., half their respective portions of the $130,000).Prepare a statement of partnership equity for the year ended December 31.

Q: Derek and Hailey, partners sharing net income in the ratio of 2:1, admit Ben to the partnership in accordance with the following agreement:• Merchandise inventory recorded in the partnership accounts at $62,500 is to be revalued at its current replacement price of $68,500.• Ben invested $48,000 in cash for a 30% interest in the partnership, which has total net assets (assets minus liabilities) of $130,000 that includes the inventory revaluation and the cash invested by Ben.• The income-sharing ratio of Derek, Hailey, and Ben is to be 2:1:1.a. Journalize the entries for the revaluation of merchandise inventory and the admission of Ben to the partnership. (The partnership does not use the temporary asset revaluation account.)b. A few years later, the capital balances of Derek, Hailey, and Ben were $150,000, $90,000, and $55,000, respectively. At this time, Kacy is admitted to the partnership by the purchase of one-half of Derek’s interest for $80,000. Journalize the entry for the admission of Kacy to the partnership.

Q: The capital accounts of Hope and Indiana have balances of $115,000 and $95,000, respectively. Clint and Casey are to be admitted to the partnership. Clint buys 20% of Hope’s interest for $30,000 and 25% of Indiana’s interest for $20,000. Casey contributes $45,000 cash to the partnership, for which he is to receive an ownership equity of $45,000.a. Journalize the entries for the admission of (1) Clint and (2) Casey.b. What are the capital balances of each partner after the admission of the new partners?

Q: Gavin invested $45,000 in the Jason and Kelly Partnership for ownership equity of $45,000. Prior to the investment, land was revalued to a market value of $320,000 from a book value of $200,000. Jason and Kelly shared net income in a 1:2 ratio.a. Journalize the entry for the revaluation of land. (The partnership does not use the temporary asset revaluation account.)b. Journalize the entry to admit Gavin.

Q: Match each of the following statements to the term (a–h) it best describes.a. Partnershipb. Partnership agreementc. Distribution of remaining cash to partnersd. Mutual agencye. Equallyf. Death of a partnerg. Liquidationh. Unlimited liabilityCauses the closing of accounts and settling with a partner's estate

Q: When an additional partner is admitted to a partnership by contribution of assets to the partnership, a. the total assets of the partnership do not change b. no liabilities can be contributed at the same time c. the amount of the cash contribution is the same as the amount of the debit to the new partner's capital account d. the total of the owners' equity accounts increases

Q: Hannah Johnson contributed equipment, inventory, and $53,000 cash to a partnership. The equipment had a book value of $25,000 and a market value of $28,000. The inventory had a book value of $50,000 but only had a market value of $15,000 due to obsolescence. The partnership also assumed a $12,000 note payable owed by Hannah that was originally used to purchase the equipment.What amount should be recorded to Hannah’s capital account? a. $96,000 b. $84,000 c. $108,000 d. $116,000

Q: Henry Jones contributed equipment, inventory, and $44,000 cash to a partnership. The equipment had a book value of $35,000 and market value of $28,000. The inventory had a book value of $25,000 but only had a market value of $12,000 due to obsolescence. The partnership also assumed a $15,000 note payable owed by Henry that was originally used to purchase the equipment.What amount should be recorded to Henry’s capital account? a. $104,000 b. $89,000 c. $69,000 d. $84,000

Q: Tucker and Titus are partners who share income in the ratio of 3:1 (3/4 to Tucker and 1/4 to Titus). Their capital balances are $40,000 and $60,000, respectively. The partnership generated net income of $40,000 for the year. What is Tucker’s capital balance after closing the revenue and expense accounts to the capital accounts? a. $40,000 b. $70,000 c. $10,000 d. $80,000

Q: Carrie and Callie form a partnership in which Carrie contributes $85,000 in assets and agrees to devote half time to the partnership. Callie contributes $50,000 in assets and agrees to devote full time to the partnership. If no additional information is available, how will Carrie and Callie share in the division of income? a. 63% to Carrie and 37% to Callie b. 33% to Carrie and 67% to Callie c. 50% to Carrie and 50% to Callie d. 67% to Carrie and 33% to Callie

Q: What amount will be recorded to Kelsey’s capital account? a. $14,000 b. $24,000 c. $40,000 d. $44,000

Q: Carla and Eliza share income equally. For the current year, the partnership net income is $40,000. Carla made withdrawals of $12,000, and Eliza made withdrawals of $21,000. At the beginning of the year, the capital account balances were: Carla, Capital, $42,000; Eliza, Capital, $55,000. Eliza’s capital account balance at the end of the year is a. $34,000 b. $54,000 c. $78,000 d. $75,000Use this information to answer the questions that follow.Sandra and Kelsey are forming a partnership. Sandra will invest a piece of equipment with a book value of $7,500 and a fair market value of $18,000. Kelsey will invest a building with a book value of $40,000 and a fair market value of $44,000.

Q: Samuel and Darci are partners. The partnership capital for Samuel is $50,000 and that of Darci is $60,000. Josh is admitted as a new partner by investing $50,000 cash. Josh is given a 20% interest in return for his investment. The amount of the bonus to the old partners is a. $0 b. $18,000 c. $8,000 d. $10,000

Q: Partners Ken and Macki each have a $40,000 capital balance and share income and losses in the ratio of 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $50,000, and each partner is personally insolvent, Partner Macki will eventually receive cash of a. $0 b. $10,000 c. $12,000 d. $20,000

Q: Benton and Orton are partners who share income in the ratio of 1:3 and have capital balances of $70,000 and $30,000, respectively. Ramsey is admitted to the partnership and is given a 40% interest by investing $20,000. What is Benton’s capital balance after admitting Ramsey? a. $20,000 b. $7,000 c. $70,000 d. $63,000

Q: Based on this information, the statement of partners’ equity would show what amount in the capital account for Harrison on December 31? a. $216,000 b. $164,000 c. $380,000 d. $52,000

Q: Antonio and Barbara are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000, respectively, at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $80,000. What amount of loss on realization should be allocated to Barbara? a. $80,000 b. $10,000 c. $20,000 d. $30,000Use this information to answer the questions that follow.The capital accounts of Harrison and Marti have balances of $160,000 and $110,000, respectively, on January 1, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year was $264,000. The articles of partnership make no reference to the division of net income.

Q: Seth and Rachel have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remainder divided equally. How much of the net loss of $16,000 is allocated to Seth? a. $8,000 b. $6,000 c. $4,000 d. $16,000

Q: The balance sheet of Morgan and Rockwell was as follows immediately prior to the partnership's liquidation: cash, $20,000; other assets, $160,000; liabilities, $40,000; Morgan, capital, $60,000; Rockwell, capital, $80,000. The other assets were sold for $139,000. Morgan and Rockwell share profits and losses in a 2:1 ratio. As a final cash distribution from the liquidation, Morgan will receive cash totaling a. $46,000 b. $51,000 c. $60,000 d. $49,500

Q: Nick is admitted to an existing partnership by investing cash. Nick agrees to pay a bonus for his ownership interest because of the past success of the partnership. When Nick’s investment in the partnership is recorded, a. his capital account will be credited for more than the cash he invested b. his capital account will be credited for the amount of cash he invested c. a bonus will be credited for the amount of cash he invested d. a bonus will be distributed to the old partners' capital accounts

Q: Partnership income and losses are usually divided on the basis of interest, salaries, and stated ratios because a. partners seldom contribute time and resources equally b. this method reflects the amount of time devoted to the partnership by the partners c. it is simpler than following the legal rules d. it prevents arguments among the partners

Q: Franco and Jason share income and losses in a 2:1 (2/3 to Franco and 1/3 to Jason) ratio after allowing for salaries of $15,000 and $30,000, respectively. If the partnership suffers a $15,000 loss, by how much would Jason’s capital account increase? a. $10,000 b. $20,000 c. $40,000 d. $25,000

Q: Xavier and Yolanda have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 20%; salary allowances of $34,000 and $26,000, respectively; and the remainder to be divided equally. How much of the net income of $120,000 is allocated to Yolanda? a. $46,000 b. $61,000 c. $60,000 d. $66,000

Q: Paul and Roger are partners who share income in the ratio of 3:2 (3/5 to Paul and 2/5 to Roger). Their capital balances are $90,000 and $130,000, respectively. The partnership generated net income of $50,000 for the year. What is Roger’s capital balance after closing the revenue and expense accounts to the capital accounts? a. $155,000 b. $150,000 c. $110,000 d. $115,000

Q: Douglas pays Selena $45,000 for her 30% interest in a partnership with net assets of $125,000. Following this transaction, Douglas’s capital account should have a credit balance of a. $37,500 b. $45,000 c. $13,500 d. more than $45,000

Q: Which of the following is a characteristic of a general partnership? a. simple to form b. limitation on legal liability c. unlimited life d. not taxable

Q: Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000, respectively, at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $130,000. What amount of loss on realization should be allocated to Winston? a. $110,000 b. $97,500 c. $42,500 d. $82,500

Q: Tomas and Saturn are partners who share income in the ratio of 3:1 (3/4 to Tomas and 1/4 to Saturn). Their capital balances are $80,000 and $120,000, respectively. The partnership generated net income of $30,000. What is Tomas’s capital balance after closing the revenue and expense accounts to the capital accounts? a. $102,500 b. $22,500 c. $57,500 d. $127,500

Q: The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is called a. unlimited liability b. ease of formation c. mutual agency d. dissolution

Q: Singer and McMann are partners in a business. Singer’s original capital was $40,000 and McMann’s was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann, respectively, and 10% interest on original capital. If they agree to share the remaining profits and losses on a 3:2 ratio (3/5 to Singer and 2/5 to McMann), what will Singer’s share of the income be if the income for the year is $50,000? a. $24,000 b. $22,000 c. $16,000 d. $23,400

Q: Sadie and Sam share income equally. For the current year, the partnership net income is $40,000. Sadie made withdrawals of $14,000 and Sam made withdrawals of $15,000. At the beginning of the year, the capital account balances were: Sadie, Capital, $42,000; Sam, Capital, $58,000. Sam’s capital account balance at the end of the year is a. $78,000 b. $43,000 c. $63,000 d. $93,000

Q: An advantage of the proprietorship form of business organization is a. unlimited liability b. mutual agency c. ease of formation d. limited lifeUse this information to answer the questions that follow.The capital accounts of Harrison and Marti have balances of $160,000 and $110,000, respectively, on January 1, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year was $264,000. The articles of partnership make no reference to the division of net income.

Q: Immediately prior to the admission of Allen, the Sanson-Jeremy Partnership assets had been adjusted to current market prices and the capital balances of Sanson and Jeremy were $80,000 and $120,000, respectively. If the parties agree that the business is worth $240,000, what is the amount of bonus that should be recognized in the accounts at the admission of Allen? a. $60,000 b. $80,000 c. $40,000 d. $100,000

Q:

Q: Lambert invests $20,000 for a 1/3 interest in a partnership in which the other partners have capital totaling $34,000 before admitting Lambert. What is Lambert’s capital after admission? a. $18,000 b. $20,000 c. $6,667 d. $11,333

Q: The following ratios have been computed for Piper Company for 2012.The 2012 financial statements for Piper Company with missing information follows:InstructionsUse the above ratios and information from the Piper Company financial statements to fill in the missing information on the financial statements. Follow the sequence indicated. Show computations that support your answers.

Q:

Q:

Q: Which of the following forms of legal business entity provides limited liability to its owners but is not taxable? a. sole proprietorship b. corporation c. partnership d. limited liability company (LLC)

Q: Here is the income statement for Gillman, Inc.Additional information:1. Common stock outstanding January 1, 2012, was 30,000 shares, and 40,000 shares were outstanding at December 31, 2012.2. The market price of Gillman, Inc., stock was $15.20 in 2012.3. Cash dividends of $16,000 were paid, $4,500 of which were to preferred stockholders.InstructionsCompute the following measures for 2012.(a) Earnings per share.(b) Price-earnings ratio.(c) Payout ratio.(d) Times interest earned ratio.

Q: A partnership liquidation occurs when a. a new partner is admitted b. a partner dies c. the ownership interest of one partner is sold to a new partner d. the assets are sold, liabilities paid, and business operations terminated

Q:

Q: Operating data for Petersen Corporation are presented belowInstructionsPrepare a schedule showing a vertical analysis for 2012 and 2011.

Q: Immediately prior to the admission of Abbott, the Smith-Jones Partnership determines that equipment that cost $20,000, with accumulated depreciation of $5,000, has a current market value of $12,000. Assuming an asset revaluation account is used, the journal entry to revalue the equipment will include a. a debit to Asset Revaluation of $12,000 b. a debit to Asset Revaluation of $3,000 c. a credit to Equipment of $3,000 d. a credit to Accumulated Depreciation of $3,000

Q: The following information was taken from the financial statements of Bailey Company:Instructions(a) Compute the net sales for each year.(b) Compute the cost of goods sold in dollars and as a percentage of net sales for each year.(c) Compute operating expenses in dollars and as a percentage of net sales for each year. (Income taxes are not operating expenses).

Q: Adriana and Belen are partners who share income in the ratio of 3:2 and have capital balances of $50,000 and $90,000, respectively, at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $90,000. How much cash should be distributed to Adriana? a. $50,000 b. $20,000 c. $30,000 d. $45,000

Q: The comparative balance sheet of Dunbar Company appears below:Instructions(a) Using horizontal analysis, show the percentage change for each balance sheet item using 2011 as a base year.(b) Using vertical analysis, prepare a common size comparative balance sheet.

Q: A ratio of 4:2:1 is the same as a. 40%:20%:10% b. 4/7:2/7:1/7 c. 4/10:2/10:1/20 d. 7/4:7/2:7/1

Q: Here are the comparative income statements of Ericson Corporation.Instructions(a) Prepare a horizontal analysis of the income statement data for Ericson Corporation using 2011 as a base. (Show the amounts of increase of decrease.)(b) Prepare a vertical analysis of the income statement data for Ericson Corporation for both years.

Q: Which of the following is a characteristic of a partnership? a. taxable b. simple to form c. limited liability d. limited life

Q: Here is financial information for Ridell Inc.InstructionsPrepare a schedule showing a horizontal analysis for 2012 using 2011 as the base year.

Q: The following items were taken from the financial statements of Hinz, Inc., over a four-year period:InstructionsUsing horizontal analysis and 2010 as the base year, compute the trend percentages for net sales, cost of goods sold, and gross profit. Explain whether the trends are favorable or unfavorable for each item.

Q: Holt Corporation had net income of $3,000,000 in 2011. Using 2011 as the base year, net income decreased by 40% in 2012 and increased by 110% in 2013.InstructionsCompute the net income reported by Holt Corporation for 2012 and 2013.

Q: Patty and Paul are partners who share income in the ratio of 3:2 (3/5 to Patty and 2/5 to Paul). Their capital balances are $90,000 and $130,000, respectively, on January 1. The partnership generated net income of $40,000 for the year. What is Paul’s capital balance after closing the revenue and expense accounts to the capital accounts? a. $120,000 b. $146,000 c. $164,000 d. $160,000

Q:

Q:

Q: Paradise Architects had total revenue of $5,400,000 and revenue per employee of $200,000 in 20Y1. In 20Y2, total revenue increased to $5,700,000 and the number of employees expanded to 30. Did employee efficiency increase or decrease with the expansion, and by how much? a. increased by $300,000 b. increased by $10,000 c. decreased by $10,000 d. decreased by $100,000

Q: The balance sheet for Renner Corporation at the end of the current year includes the following:Bonds payable, 6% $5,000,0006% Preferred stock, $100 par 1,000,000Common stock, $10 par 2,000,000Net income was $565,000 and income tax expense for the current year amounted to $285,000. Cash dividends paid on common stock were $200,000, and the common stock was selling for $40 per share at the end of the year. There were no ownership changes during the year.InstructionsDetermine each of the following:(a) Number of times that bond interest was earned.(b) Earnings per share for common stock.(c) Price-earnings ratio.

Q: State the effect of the following transactions on the current ratio. Use increase, decrease, or no effect for your answer.(a) Collection of an accounts receivable(b) Declaration of cash dividends(c) Additional stock is sold for cash(d) Accounts payable are paid(e) Equipment is purchased for cash(f) Inventory purchases are made for cash(g) Temporary investments are purchased for cash

Q: The following data are taken from the financial statements of Mackey Company:Instructions(a) Compute the receivables turnover ratio and the average collection period for both years.(b) What conclusion can an analyst draw about the management of the accounts receivable?

Q: Jefferson has a capital balance of $65,000 and devotes full time to a partnership. Washington has a capital balance of $45,000 and devotes half time to the partnership. If no other information is available regarding distributions, how should net income be divided? a. 59% to Jefferson and 41% to Washington b. 50% to Jefferson and 50% to Washington c. 41% to Jefferson and 59% to Washington d. 33% to Jefferson and 67% to Washington

Q:

Q: Benson and Orton are partners who share income in the ratio of 2:3 and have capital balances of $60,000 and $40,000, respectively. Ramsey is admitted to the partnership and is given a 10% interest by investing $20,000. What is Orton’s capital balance after admitting Ramsey? a. $44,800 b. $35,200 c. $20,000 d. $16,000

Q: Kershaw Corporation had the following comparative current assets and current liabilities:During 2012, net credit sales and cost of goods sold were $570,000 and $350,000, respectively. Net cash provided by operating activities for 2012 was $140,000.InstructionsCompute the following liquidity measures for 2012:1. Current ratio2. Current cash debt coverage ratio3. Receivables turnover4. Inventory turnover

Q: Rex and Kelsey are partners who share income in the ratio of 3:2 (3/5 to Rex and 2/5 to Kelsey). Their capital balances are $95,000 and $140,000, respectively, on January 1. The partnership generated net income of $40,000 for the year. What is Rex’s capital balance after closing the revenue and expense accounts to the capital accounts? a. $71,000 b. $119,000 c. $146,000 d. $111,000

Q: Selected data for Patrick Store appear below.InstructionsCompute the following for 2012:(a) Gross profit percentage(b) Inventory turnover(c) Receivables turnover

Q: The remaining cash of a partnership (after creditors have been paid) upon liquidation is divided among partners according to their a. capital balances b. contribution of assets c. drawing balances d. income-sharing ratio

Q: Selected information from the comparative financial statements of Francona Company for the year ended December 31 appears below:InstructionsAnswer the following questions relating to the year ended December 31, 2012. Show computations.

Q: As part of the initial investment, Ray Blake contributes equipment that had originally cost $125,000 and on which accumulated depreciation of $100,000 has been recorded. If similar equipment would cost $150,000 to replace and the partners agree on a valuation of $29,000 for the contributed equipment, what amount should be debited to the equipment account? a. $29,000 b. $150,000 c. $125,000 d. $100,000

Q: Vertical analysis (common-size) percentages for Hillman Company’s sales, cost of goods sold, and expenses are listed here.Did Wallace Company’s net income as a percent of sales increase, decrease, or remain unchanged over the 3-year period? Provide numerical support for your answer.

Q: Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and Ramona, $30,000 Cr. How much cash should be distributed to Everett assuming that Miguel pays the deficiency? a. $50,000 b. $20,000 c. $30,000 d. $40,000

Q: Using these data from the comparative balance sheet of Kile Company, perform vertical analysis.

Q: Which of the following is not a characteristic of a general partnership? a. The partnership is created by a contract. b. Mutual agency exists. c. Partners share equally in net income or net losses unless an agreement states differently. d. Dissolution occurs only when all partners agree.

Q: Using the following selected items from the comparative balance sheet of Darling Company, illustrate horizontal and vertical analysis.

Q: When a new partner is admitted to a partnership, there should be a(n) a. increase in the total assets of the partnership b. new capital account added to the ledger for the new partner c. increase in the total owners' equity of the partnership d. debit amount to the partner’s capital account for the cash received by the current partner

Q: Horizontal analysis (trend analysis) percentages for Harley Company’s sales, cost of goods sold, and expenses are listed here.InstructionsExplain whether Harley’s net income increased, decreased, or remained unchanged over the 3-year period.

Q: What amount will be recorded to the building account? a. $24,000 b. $14,000 c. $40,000 d. $44,000

Q: If Farlington Company had net income of $540,000 in 2012 and it experienced a 20% increase in net income over 2011, what was its 2011 net income?

Q: When a new partner is admitted to a partnership, a bonus a. may be attributable to the existing partners b. may only result from more cash being given by the new partner than the value of the assets being purchased c. agreed upon by the partners is recorded as an asset so long as the amount is within the range set by the SEC d. is not recordedUse this information to answer the questions that follow.Sandra and Kelsey are forming a partnership. Sandra will invest a piece of equipment with a book value of $7,500 and a fair market value of $18,000. Kelsey will invest a building with a book value of $40,000 and a fair market value of $44,000.