Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #22 (Points:

7. Chapter 12—Accounting for Partnerships and Limited Liability Companies Question MC #22 Xavier and Yolonda 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 equally. How much of the net loss of $6,000 is allocated to Xavier? 1. $4,000 2. $3,000 3. $6,000 4. $1,000 1. $16,000. 2. $24,000. 3. $0. 4. $4,000. Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $40,000 and $60,000 respectively. Income Summary has a credit balance of $20,000. What is Saturn’s capital balance after closing Income Summary to Capital? 1. $45,000 2. $55,000 3. $65,000 4. $75,000 Accounting for the day-to-day activities for a partnership or Limited Liability Company is 1. is not the same as the accounting for any other form of business 2. the same as the accounting for any other form of business 3. the same as the accounting for a sole proprietorship only 4. the same as the accounting for a corporation only Samuel and Darci are partners. The partnership capital for Samuel is $50,000 and for 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 1. $18,000 2. $10,000 3. $8,000 4. $0 The capital accounts of Harrison and Marti have balances of $180,000 and $130,000, respectively, on January 1, 2010, 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 $248,000. The articles of partnership make no reference to the division of net income.Based on this information, the statement of partners’ equity for the 2010 for the partnership would show what amount in the capital account for Harrison on December 31, 2010? 1. $228,000 2. $176,000 3. $52,000 4. $404,000 Teri, Doug, and Brian are partners with capital balances of $20,000, $30,000, and $50,000 respectively. They share income in the ratio of 3:2:1. Income Summary with a debit balance of $30,000 is closed to the capital accounts. Doug withdraws from the partnership. How much cash does he get upon withdrawal? 1. $20,000 2. $40,000 3. $30,000 4. $24,000 A change in the ownership of a partnership results in the 1. liquidating of the partnership 2. dissolution of the partnership 3. consolidating of the partnership 4. realization of the partnership When a limited partnership is formed 1. all partners have limited liability 2. the partnership activities are limited 3. none of the partners have limited liability 4. some of the partners have limited liability Franco and Elisa share income equally. During the current year the partnership net income was $40,000. Franco made withdrawals of $12,000 and Elisa made withdrawals of $17,000. At the beginning of the year, the capital account balances were: Franco capital, $42,000; Elisa capital, $58,000. Elisa’s capital account balance at the end of the year is 1. $61,000 2. $95,000 3. $81,000 4. $50,000 Franco and Jason share income and losses in a 2:1 ratio after allowing for salaries to Franco of $15,000 and $30,000 to Jason. If the partnership suffers a $15,000 loss, by how much would Jason’s capital account increase? 1. $10,000 2. $40,000 3. $25,000 4. $20,000 Xavier and Yolonda 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 equally. How much of the net loss of $6,000 is allocated to Xavier? 1. $3,000 2. $4,000 3. $6,000 4. $1,000 When an additional partner is admitted to a partnership by contribution of assets to the partnership 1. no liabilities can be contributed at the same time 2. the amount of the cash contribution is the same as the amount of the debit to the new partner's capital account 3. the total of the owner's equity accounts increases 4. the total assets of the partnership do not change A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm. As a results of this transaction, the capital account balance of the other partners in the partnership 1. will increase 2. will remain the same 3. may increase, decrease, or remain the same 4. will decrease The articles of partnership for Paxton-Robson Partnership provide for a salary allowance of $5,000 per month for partner Robson, with the balance of net income to be divided equally. If Robson made an additional investment of $10,000 during the year and withdrew $4,000 per month, and net income for the year was $80,000, by what amount did Robson's capital increase during the year? 1. $32,000 2. $60,000 3. $12,000 4. $80,000 Compton and Danson form a partnership in which Compton contributes $50,000 in assets and agrees to devote half time to the partnership. Danson contributed $40,000 in assets and agrees to devote full time to the partnership. How will Compton and Danson share in the division of income? 1. 1:1 2. 5:4 3. 1:2 4. 5:8 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 is available for distribution to the partners? 1. $40,000 2. $30,000 3. $120,000 4. $90,000 Xavier and Yolonda 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 15%, salary allowances of $22,000 and $20,000 respectively, and the remainder equally. How much of the net income of $90,000 is allocated to Xavier? 1. $47,750 2. $30,250 3. $45,000 4. $42,250 Antonio and Barbara are partners who share income in the ratio of 1:2 and have capital balances of $40,000 and $70,000 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? 1. $80,000 2. $30,000 3. $10,000 4. $20,000 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 remaining profits and losses on a 3:2 ratio, what will Singer’s share of the income be if the income for the year was $50,000? 1. $22,000 2. $24,000 3. $23,400 4. $16,000 Partner A has a capital balance of $20,000 and devotes full time to the partnership. Partner B has a capital balance of $30,000 and devotes half time to the partnership. In what ratio is net income to be divided? 1. 1:2 2. 2:3 3. 1:1 4. 3:5 Lambert invests $10,000 for a 1/3 interest in a partnership in which the other partners have capital totaling $26,000 before admitting Lambert. After distribution of the bonus, what is Lambert’s capital? 1. $12,000 2. $8,667 3. $5,333 4. $10,000 Use the following information to answer the following questions.Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $5,000 and a fair market value of $15,000. Marta will invest a building with a book value of $30,000 and a fair market value of $35,000.At what amount will the building be recorded? 1. $30,000 2. $20,000 3. $25,000 4. $35,000 When a new partner is admitted to a partnership, there should be a(n) 1. new capital account is added to the ledger for the new partner 2. the cash received by the current partner represents the amount of the debit to that partner's capital account. 3. the total assets of the partnership increase 4. the total owner's equity of the partnership increases A new partner may be admitted to a partnership by 1. inheriting a partnership interest 2. contributing assets to the partnership 3. the consent of the majority of the current partners 4. purchasing a specific quantity of assets from the partnership 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 10%, salary allowances of $27,000 and $18,000 respectively, and the remainder equally. How much of the net loss of $6,000 is allocated to Yolanda? 1. $3,000 2. $1,000 3. $5,000 4. $0 Which of the following is not a right possessed by common stockholders of a corporation? 1. the right to vote in the election of the board of directors 2. the right to receive a minimum amount of dividends 3. the right to share in assets upon liquidation 4. the right to sell their stock to anyone they choose Dividend yield is most often computed on 1. all preferred stock 2. only common stock sold above par 3. both common and preferred stock 4. all common stock Miriah Inc. has 6,000 shares of 5%, $100 par value, cumulative preferred stock and 50,000 shares of $1 par value common stock outstanding at December 31, 2006. What is the annual dividend on the preferred stock? 1. $30,000 in total 2. $0.50 per share 3. $50 per share 4. $300 in total The par value per share of common stock represents 1. the minimum amount the stockholder will receive when the corporation is liquidated 2. the amount of dividends per share to be received each year 3. the minimum selling price of the stock established by the articles of incorporation. 4. an arbitrary amount established in the articles of incorporation The cumulative effect of the declaration and payment of a cash dividend on a company’s financial statements is to 1. increase total assets and stockholders’ equity. 2. decrease total liabilities and stockholders’ equity. 3. decrease total assets and stockholders’ equity. 4. increase total expenses and total liabilities. The net effect to a corporation of the declaration and payment of a cash dividend is to 1. increase assets and increase stockholders' equity 2. decrease liabilities and decrease stockholders' equity 3. decrease assets and decrease stockholders' equity 4. increase stockholders' equity and decrease liabilities The liability for a dividend is recorded on which of the following dates? 1. the date of record 2. the date of declaration 3. the date of payment 4. the date of announcement Treasury stock shares are 1. shares held by the U.S. Treasury Department 2. part of the total outstanding shares but not part of the total issued shares of a corporation 3. unissued shares that are held by the treasurer of the corporation 4. issued shares that are held by the treasurer of the corporation Alma Corp. issues 1,000 shares of $10 par value common stock at $16 per share. When the transaction is recorded, credits are made to: 1. Common Stock $10,000 and Paid-in Capital in Excess of Par Value $6,000. 2. Common Stock $10,000 and Retained Earnings $6,000. 3. Common Stock $16,000. 4. Common Stock $10,000 and Paid-in Capital in Excess of Stated Value $6,000. When a corporation completes a 3-for-1 stock split 1. b and c 2. the par value per share is decreased 3. the market price per share of the stock is decreased 4. the ownership interest of current stockholders is decreased Significant changes in stockholders' equity are reported in 1. retained earnings statement 2. income statement 3. statement of cash flows 4. statement of stockholders' equity The following information is available for Calvin Co.: 2009 Dividends per share of common stock $ 0.90 Market price per share of common stock 20.00 1. The dividend yield is roughly 22%, which is of interest to bondholders. 2. The dividend yield is 4.5 times the market price, which is important in solvency analysis. 3. The dividend yield is 4.5%, which is of interest to investors seeking an increase in market price of their stocks. 4. The dividend yield is 4.5%, which is of special interest to investors seeking current returns on their investments. The primary purpose of a stock split is to 1. reduce the market price of the stock per share 2. increase the market price of the stock per share 3. increase retained earnings 4. increase paid-in capital Based on the following information, calculate the dividend yield on common stock Market price per share $20.00 Earnings per share 4.00 Dividends per share 1.00 Investor's cost per share 15.00 1. 0.033 2. 0.067 3. 0.05 4. 0.20 Investors who are most interested in the dividend yield are those who invest for 1. neither market price appreciation or current income flow 2. current income flow 3. both market price appreciation and current income flow 4. market price appreciation If Everly Company issues 1,000 shares of $5 par value common stock for $75,000, the account 1. Paid-in Capital in excess of Par Value will be credited for $5,000. 2. Paid-in Capital in excess of Par Value will be credited for $70,000. 3. Cash will be debited for $70,000. 4. Common Stock will be credited for $75,000. A corporation has 50,000 shares of $28 par value stock outstanding that has a current market value of $150. If the corporation issues a 4-for-1 stock split, the market value of the stock will fall to approximately 1. $600 2. $37.50 3. $7 4. $112 What is the total stockholders' equity based on the following data?Common Stock $800,000 Excess of Issue Price Over Par 375,000 Retained Earnings (deficit) 25,000 1. $1,200,000 2. $1,150,000 3. $1,100,000 4. $1,175,000 A corporation has 60,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the number of shares outstanding will be: 1. 60,000 2. 300,000 3. 10,000 4. 30,000 The authorized stock of a corporation 1. is indicated in its by-laws. 2. must be recorded in a formal accounting entry. 3. only reflects the initial capital needs of the company. 4. is indicated in its charter. A corporation issues 1,500 shares of common stock for $ 32,000. The stock has a stated value of $10 per share. The journal entry to record the stock issuance would include a credit to Common Stock for 1. $2,000 2. $32,000 3. $17,000 4. $15,000 A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $150. If the corporation issues a 5-for-1 stock split, the market value of the stock will fall to approximately: 1. $5 2. $25 3. $30 4. no changed Stockholders' equity 1. is shown on the income statement 2. is usually equal to cash on hand 3. includes paid-in capital and liabilities 4. includes retained earnings and paid-in capital Which of the following accounts below is reported in the paid-in capital/stockholders' equity section of the corporate balance sheet? 1. Preferred Stock 2. Organizational Expenses 3. Stock Dividends 4. Cash One of the main disadvantages of the corporate form is the 1. professional management 2. corporation must issue stock 3. double taxation of dividends 4. charter Aaron and Kim form a partnership by combining the assets of their separate businesses. Aaron contributes accounts receivable with a face amount of $50,000 and equipment with a cost of $180,000 and accumulated depreciation of $100,000. The partners agree that the equipment is to be priced at $68,000, that $3,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $2,000 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Frank contributes cash of $21,000 and merchandise inventory of $44,500. The partners agree that the merchandise inventory is to be priced at $48,000. Journalize the entries to record in the partnership accounts (a) Aaron’s investment and (b) Kim’s investment.Paragraph Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in the year’s net income of $380,000 under each of the following independent assumptions:(a) No agreement concerning division of net income; (b) Divided in the ratio of original capital investment; (c) Interest at the rate of 15% allowed on original investments and the remainder divided in the ratio of 2:3; (d) Salary allowances of $50,000 and $70,000, respectively, and the balance divided equally; (e) Allowance of interest at the rate of 15% on original investments, salary allowances of $50,000 and $70,000, respectively, and the remainder divided equally. Paragraph A company had stock outstanding as follows during each of its first three years of operations: 2,500 shares of $10, $100 par, cumulative preferred stock and 50,000 shares of $10 par common stock. The amounts distributed as dividends are presented below. Determine the total and per share dividends for each class of stock for each year by completing the schedule.Preferred Common Year Dividends Total Per Share Total Per Share 1 $10,000 _________ _________ _________ _________ 25,000 _________ _________ _________ _________ 60,000 _________ _________ _________ _________ Paragraph The dates of importance in connection with a cash dividend of $65,000 on a corporation’s common stock are January 15, February 15, and March 15. Journalize the entries required on each date.Paragraph Indicate whether the following actions would (+) increase, (-) decrease, or (0) not affect a company's total assets, liabilities, and stockholders' equity.Stockholders' Assets Liabilities Equity (1) Declaring a cash dividend _______ _______ _______ (2) Paying the cash dividend declared in (1) _______ _______ _______ (3) Declaring a stock dividend _______ _______ _______ dividend declared in (3) _______ _______ _______ Paragraph