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Lecture 6

ACC 442 Lecture Notes - Lecture 6: Capital Account, Net Income, Income Statement


Department
Accounting
Course Code
ACC 442
Professor
Jens
Lecture
6

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Jell and Dell were partners with capital balances of $600 and $800 and an income sharing ratio of 2:3.
They admitted Zell to a 30% interest in the partnership, and the total amount of goodwill credited to the
original partners was $700. What amount did Zell contribute to the business?
A) $ 560.
B) 630.
C) 590.
D) 900.
E) 600
C) Frequent reporting by the accountant is rarely necessary.
Which of the following statements is false concerning the partnership Schedule of Liquidation?
A. The Schedule of Liquidation provides a listing of transactions to date, current cash, and capital
balances.
B. Liquidations may take a considerable length of time to complete.
C. Frequent reporting by the accountant is rarely necessary.
D. The Schedule of Liquidation keeps creditors and partners apprised of the results of the process of
dissolution
E. The Schedule of Liquidation provides a listing of property still held by the partnership as well as
liabilities remaining unpaid.
E. A partnership requires written Articles of Partnership.
Which of the following is not a characteristic of a partnership?
A. It is easy to form a partnership.
B. The partnership itself pays no income taxes.
C. Any partner can be held personally liable for all debts of the business.
D. Each partner has the power to obligate the partnership for liabilities.
E. A partnership requires written Articles of Partnership.
C) $25,000
P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the
profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a
20% interest.
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If C is to contribute an amount equal to his book value share of the new partnership, how much should C
contribute?
A) $ 18000
B) $10000
C) $25,000
D) $20000
E) $22000
C. $264,540.
Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, with investments of $100,000,
$150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the
beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the
remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net
income was $150,000 in 2012 and $180,000 in 2013.
What is Wasser's capital balance at the end of 2013?
A. $313,780.
B. $263,520.
C. $264,540.
D. $201,000.
E. $304,040.
A) option A
The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering
liquidation:
cash 100000, noncash assets 210000; total 310000. Liabilities 40000, Keaton, cap 90000, Lewis, cap
60000; Meador, cap 120000; total 310000.
Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. The partnership feels confident it
will be able to eventually sell the noncash assets and wants to distribute some cash before paying
liabilities. How much would each partner receive of a total $60,000 distribution of cash?
A) Keaton 40000, Lewis 0, Meador 20000;
B) Keaton 12000, Lewis 24000, M 24000;
c) K 20000, L 13333, M 26667;
D) K 60000, L 0, M 0;
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E) K 10000, L 0, M 50000.
A) option A
B) option B
C) Option C
D) Option D
E) option E
E) 1, 2, and 3
Which of the following could result in the termination and liquidation of a partnership?
1) Partners are incompatible and choose to cease operations.
2) There are excessive losses that are expected to continue.
3) Retirement of a partner.
A) 1 only
B) 1 and 2 only
C) 2 and 3 only
D) 3 only
E) 1, 2, and 3
E) Abrams and Creighton
The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following
balance sheet:
Cash 16,000
Noncash asset 434,000
Total- 450,000
Liability-150000
Abrams-80,000
Bartle- 90,000
Creighton-130,000
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