Test bank advanced financial accounting 8th chap015

To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership Chapter 15 Partnerships: Formation, Operation, and Changes in Membership Multiple Choice Questions A partnership is a(n): I accounting entity II taxable entity A I only B II only C Neither I nor II D Both I and II A partner's tax basis in a partnership is comprised of which of the following items? I The partner's tax basis of assets contributed to the partnership II The amount of the partner's liabilities assumed by the other partners III The partner's share of other partners' liabilities assumed by the partnership A I plus II minus III B I plus II plus III C I minus II plus III D I minus II minus III In the ABC partnership (to which Daniel seeks admittance), the capital balances of Albert, Bert, and Connell, who share income in the ratio of 5:3:2 are: Based on the preceding information, if no goodwill or bonus is recorded, how much should Daniel invest for a 20 percent interest? A $400,000 B $200,000 C $300,000 D $250,000 15-1 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership Based on the preceding information, what amount of goodwill will be recorded if Daniel invests $450,000 for a one-third interest? A $0 B $10,000 C $50,000 D $100,000 Jones and Smith formed a partnership with each partner contributing the following items: Assume that for tax purposes Jones and Smith agree to share equally in the liabilities assumed by the Jones and Smith partnership Refer to the above information What is each partner's tax basis in the Jones and Smith partnership? A Option A B Option B C Option C D Option D 15-2 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership Refer to the above information What is the balance in each partner's capital account for financial accounting purposes? A Option A B Option B C Option C D Option D Griffin and Rhodes formed a partnership on January 1, 2009 Griffin contributed cash of $120,000 and Rhodes contributed land with a fair value of $160,000 The partnership assumed the mortgage on the land which amounted to $40,000 on January Rhodes originally paid $90,000 for the land On July 31, 2009, the partnership sold the land for $190,000 Assuming Griffin and Rhodes share profits and losses equally, how much of the gain from sale of land should be credited to Griffin for financial accounting purposes? A $0 B $15,000 C $35,000 D $45,000 Which of the following accounts could be found in the general ledger of a partnership? A Option A B Option B C Option C D Option D 15-3 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership Which of the following accounts could be found in the PQ partnership's general ledger? I Due from P II P, Drawing III Loan Payable to Q A I, II B I, III C II, III D I, II, and III 10 The DEF partnership reported net income of $130,000 for the year ended December 31, 2008 According to the partnership agreement, partnership profits and losses are to be distributed as follows: How should partnership net income for 2008 be allocated to D, E, and F? A Option A B Option B C Option C D Option D 15-4 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 11 The JPB partnership reported net income of $160,000 for the year ended December 31, 2008 According to the partnership agreement, partnership profits and losses are to be distributed as follows: How should partnership net income for 2008 be allocated to J, P, and B? A Option A B Option B C Option C D Option D The APB partnership agreement specifies that partnership net income be allocated as follows: Average capital balances for the current year were $50,000 for A, $30,000 for P, and $20,000 for B 15-5 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 12 Refer to the information given Assuming a current year net income of $150,000, what amount should be allocated to each partner? A Option A B Option B C Option C D Option D 13 Refer to the information given Assuming a current year net income of $50,000, what amount should be allocated to each partner? A Option A B Option B C Option C D Option D 15-6 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 14 RD formed a partnership on February 10, 2009 R contributed cash of $150,000, while D contributed inventory with a fair value of $120,000 Due to R's expertise in selling, D agreed that R should have 60 percent of the total capital of the partnership R and D agreed to recognize goodwill What is the total capital of the RD partnership and the capital balance of R after the goodwill is recognized? A Option A B Option B C Option C D Option D 15 A joint venture may be organized as a: I Partnership II Corporation III Undivided interest A I only B II only C I or III only D I, II, or III 16 Refer to the above information Which statement below is correct if a new partner receives a bonus upon contributing assets into the partnership? A B < A and D = C - A B B > A and D = C + A C A = B and A = D + C D B > A and C = D + A 15-7 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 17 Refer to the above information Which statement below is correct if the old partners receive a bonus upon the contribution of assets into the partnership by a new partner? A B < A and D = C - A B B + A and D > C + A C B < A and D = C + A D B > A and D = C + A 18 Refer to the above information Which statement below is correct if goodwill of the old partners is recognized upon the contribution of assets into the partnership by a new partner? A B = A and D < C + A B B = A and D > C + A C B < A and D = C + A D B > A and D < C + A 19 Refer to the above information Which statement below is correct if a new partner purchases an interest in capital directly from the old partners? A C < D B C = D C C = D and B = A D C < D and B = A 20 Refer to the above information Which statement below is correct if a new partner's goodwill is recognized upon contributing assets into the partnership? A B = A and D > C + A B B < A and D < C + A C B > A and D = C + A D B > A and D > C + A 21 When a partnership is formed, noncash assets contributed by partners should be recorded: I at their respective book values for income tax purposes II at their respective fair values for financial accounting purposes A I only B II only C Both I and II D Neither I nor II 15-8 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 22 When a new partner is admitted into a partnership and the new partner receives a capital credit less than the tangible assets contributed, which of the following explains the difference? I The new partner's goodwill has been recognized II The old partners received a bonus from the new partner A I only B II only C Either I or II D Neither I nor II 23 When a new partner is admitted into a partnership and the new partner receives a capital credit greater than the tangible assets contributed, which of the following explains the difference? I The old partners' goodwill is being recognized II The new partner's goodwill is being recognized A I only B II only C Either I or II D Both I and II 24 When a new partner is admitted into a partnership and the capital of the old partners decreases, which of the following explains the reason for the decrease? I Undervalued liabilities were written up to their fair values II Undervalued assets were written up to their fair values A I only B II only C Both I and II D Neither I nor II 25 When a partner retires from a partnership and the retiring partner is paid more than the capital balance in her account, which of the following explains the difference? I The retiring partner is receiving a bonus from the other partners II The retiring partner's goodwill is being recognized A I only B II only C Either I or II D Neither I nor II 15-9 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 26 When the old partners receive a bonus upon admission of a new partner into a partnership, the bonus is allocated to: I all the partners in their profit and loss sharing ratio II the existing partners in their profit and loss sharing ratio A I only B II only C Either I or II D Neither I nor II 27 When a new partner is admitted into a partnership and the old partners' goodwill is recognized, the goodwill is allocated to: I all the partners in their profit-and-loss-sharing ratio II the old partners in their profit and loss sharing ratio A I only B II only C Either I or II D Neither I nor II In the RST partnership, Ron's capital is $80,000, Stella's is $75,000, and Tiffany's is $50,000 They share income in a 3:2:1 ratio, respectively Tiffany is retiring from the partnership Each of the following questions is independent of the others 28 Refer to the above information Tiffany is paid $60,000, and no goodwill is recorded In the journal entry to record Tiffany's withdrawal: A Tiffany, Capital will be credited for $60,000 B Ron, Capital will be debited for $5,000 C Stella, Capital will be debited for $4,000 D Cash will be debited for $60,000 29 Refer to the above information Tiffany is paid $60,000, and no goodwill is recorded What is the Ron's capital balance after Tiffany withdraws from the partnership? A $74,000 B $71,000 C $75,000 D $86,000 15-10 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 47 Net income for Levin-Tom partnership for 2009 was $125,000 Levin and Tom have agreed to distribute partnership net income according to the following plan: Additional Information for 2009 follows: Levin began the year with a capital balance of $75,000 Tom began the year with a capital balance of $100,000 On March 1, Levin invested an additional $25,000 into the partnership On October 1, Tom invested an additional $20,000 into the partnership Throughout 2009, each partner withdrew $200 per week in anticipation of partnership net income The partners agreed that these withdrawals are not to be included in the computation of average capital balances for purposes of income distributions Required: a Prepare a schedule that discloses the distribution of partnership net income for 2009 Show supporting computations in good form b Prepare the statement of partners' capital at December 31, 2009 c How would your answer to part a change if all of the provisions of the income distribution plan were the same except that the salaries were $45,000 to Levin and $60,000 to Jack? 15-41 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership a) 15-42 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership AACSB: Analytic AICPA: Measurement 15-43 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 48 Paul and Ray sell musical instruments through their partnership To bring in additional funds and expertise, they decide to admit Janet to the partnership Paul's capital is $400,000, Ray's capital is $200,000, and they share income in a ratio of 7:3, respectively Required Record Janet's admission for each of the following independent situations: a) Janet invests $180,000 for a one-fourth interest Goodwill is to be recorded b) Paul and Ray agree that some of the inventory is obsolete The inventory account is decreased before Janet is admitted Janet invests $190,000 for a one-fourth interest 15-44 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 15-45 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership AACSB: Analytic AICPA: Measurement 15-46 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 49 Two sole proprietors, L and M, agreed to form a partnership on January 1, 2009 The trial balance for each proprietorship is shown below as of January 1, 2009 The LM partnership will take over the assets and assume the liabilities of the proprietors as of January 1, 2009 Required: a) Prepare a balance sheet, for financial accounting purposes, for the LM partnership as of January 1, 2009 b) In addition, assume that M agreed to recognize the goodwill generated by L's business Accordingly, M agreed to recognize an amount for L's goodwill such that L's capital equalled M's capital on January 1, 2009 Given this alternative, how does the balance sheet prepared for requirement A change? 15-47 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership a) b) Assets change due to the addition of goodwill of $34,000 Total assets are now $1,128,000 ($1,094,000 + $34,000 goodwill) L, Capital and M, Capital are each $294,000 if L's goodwill is recognized Total capital is $588,000, and total liabilities and capital amount to $1,128,000 AACSB: Analytic AICPA: Measurement 15-48 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 50 The PQ partnership has the following plan for the distribution of partnership net income (loss): Required: Calculate the distribution of partnership net income (loss) for each independent situation below (for each situation, assume the average capital balance of P is $140,000 and of Q is $240,000) Partnership net income is $360,000 Partnership net income is $240,000 Partnership net loss is $40,000 15-49 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership Situation 1: Net income is $360,000 Situation 2: Net income is $240,000 Situation 3: Net loss is $40,000 AACSB: Analytic AICPA: Measurement 15-50 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 51 Miller and Davis, partners in a consulting business, share profits and losses in the ratio of 3:2, respectively Prior to recording the admission of Shaw as a new partner, Miller has a capital balance of $80,000, and Davis has a capital balance of $40,000 Required: For each of the following independent cases, prepare the journal entry that was made to record the admission of Shaw into the partnership 1) Shaw purchased 20 percent of the respective capital balances of Miller and Davis, paying $20,000 cash directly to each of them 2) Shaw invested $30,000 cash in the partnership for a 20 percent ownership interest Total capital after recording his admission was $150,000 3) Shaw invested $40,000 cash into the partnership for a 20 percent ownership interest Total capital after recording his admission was $160,000 4) Shaw invested $50,000 into the partnership for a 20 percent interest Goodwill is to be recognized AACSB: Analytic AICPA: Measurement 15-51 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 52 In the JAW partnership, Jane's capital is $100,000, Anne's is $80,000, and William's is $75,000 They share income in a 3:2:1 ratio, respectively William is retiring from the partnership Required Prepare journal entries to record William's withdrawal according to each of the following independent assumptions: a William is paid $80,000, and no goodwill is recorded b William is paid $85,000, and only his share of the goodwill is recorded c William is paid $78,000, and all implied goodwill is recorded 15-52 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 15-53 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership AACSB: Analytic AICPA: Measurement 53 Apple and Betty are planning on beginning a new business They plan on forming a partnership Apple will contribute $300,000 and will not be working Betty will be working full time They plan on splitting profits equally They approach you, as an accounting major, to confirm their thoughts What you recommend? Students should recognize that partners can agree to any form of profit allocation However, since one partner, Apple, has contributed money and Betty hasn't, they might want to consider some form of interest on the capital balance Also, since one partner, Betty, is working full time, Apple is not, they might want to consider having a salary or a bonus opportunity for Apple AACSB: Communication AICPA: Critical Thinking 15-54 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 54 The ABC partnership had net income of $100,000 for 2009 They allocate profits and losses in the ratio 5:3:2 After closing the 12/31/2009 books they discovered that $30,000 was spent on a piece of land in December 2009 and was expensed What should happen? Since the books are closed then the correction must be made against the capital accounts The following journal entry would be made: AACSB: Analytic AICPA: Critical Thinking 15-55 ... respective fair values for financial accounting purposes A I only B II only C Both I and II D Neither I nor II 15-8 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com... to Griffin for financial accounting purposes? A $0 B $15,000 C $35,000 D $45,000 AACSB: Analytic AICPA: Decision Making 15-24 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com... ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 15 - Partnerships: Formation, Operation, and Changes in Membership 45 Shue, a partner in the Financial Brokers Partnership,