Accounting
27th Edition
ISBN: 9781337272094
Author: WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher: Cengage Learning,
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Question
Chapter 12, Problem 7DQ
a.
To determine
It is that form of organization which is owned and managed by two or more persons who invest and share the
To indicate: The accounts to be debited and credited in withdrawal of cash by partner lieu of salary.
b.
To determine
To explain: If the withdrawal of C will affect the division of the net income of the partnership.
c.
To determine
To indicate: The accounts to be debited and credited to record the division of net income among the partners.
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b. The articles of partnership provide for a salary allowance of $6,000 per month to partner
C. If C withdrew only $4,000 per month, would this affect the division of the partnership net
income? Explain.
Which of the following best describes the nature of salary and interest allowances in a partnership profit and loss sharing agreement?
A. A means of determining reasonable monthly withdrawals by each partner
B. The amount upon which each partner will have to pay personal income tax
C. A means of distributing profit in relation to services rendered and capital invested by the partners
D. Expenses of the business that should be deducted from revenue in determining profit
Which statement is CORRECT?
Select one:
A. Partners' salary is an allowable expenses
B. Tax returns are due in April the following year
C. A partnership is considered as a separate entity from the partners
D. Unabsorbed capital allowance can be claimed against the future income of LLP
Chapter 12 Solutions
Accounting
Ch. 12 - Prob. 1DQCh. 12 - Prob. 2DQCh. 12 - Prob. 3DQCh. 12 - Prob. 4DQCh. 12 - Prob. 5DQCh. 12 - Prob. 6DQCh. 12 - Prob. 7DQCh. 12 - Prob. 8DQCh. 12 - Prob. 9DQCh. 12 - Prob. 10DQ
Ch. 12 - Prob. 12.1APECh. 12 - Prob. 12.1BPECh. 12 - Prob. 12.2APECh. 12 - Prob. 12.2BPECh. 12 - Prob. 12.3APECh. 12 - Prob. 12.3BPECh. 12 - Prob. 12.4APECh. 12 - Prob. 12.4BPECh. 12 - Liquidating partnerships Prior to liquidating...Ch. 12 - Prob. 12.5BPECh. 12 - Prob. 12.6APECh. 12 - Prob. 12.6BPECh. 12 - Revenue per employee Niles and Cohen, CPAs earned ...Ch. 12 - Prob. 12.7BPECh. 12 - Prob. 12.1EXCh. 12 - Prob. 12.2EXCh. 12 - Prob. 12.3EXCh. 12 - Prob. 12.4EXCh. 12 - Prob. 12.5EXCh. 12 - Prob. 12.6EXCh. 12 - Prob. 12.7EXCh. 12 - LLC net income and statement of members equity...Ch. 12 - Prob. 12.9EXCh. 12 - Prob. 12.10EXCh. 12 - Prob. 12.11EXCh. 12 - Prob. 12.12EXCh. 12 - Prob. 12.13EXCh. 12 - Prob. 12.14EXCh. 12 - Prob. 12.15EXCh. 12 - Prob. 12.16EXCh. 12 - Statement of members' equity, admitting new member...Ch. 12 - Distribution of cash upon liquidation Hewitt and...Ch. 12 - Distribution of cash upon liquidation David Oliver...Ch. 12 - Prob. 12.20EXCh. 12 - Prob. 12.21EXCh. 12 - Liquidating partnershipscapital deficiency...Ch. 12 - Prob. 12.23EXCh. 12 - Prob. 12.24EXCh. 12 - Prob. 12.25EXCh. 12 - Revenue per professional staff The accounting firm...Ch. 12 - Revenue per employee Superior Cleaning Services,...Ch. 12 - Prob. 12.1APRCh. 12 - Prob. 12.2APRCh. 12 - Prob. 12.3APRCh. 12 - Prob. 12.4APRCh. 12 - Prob. 12.5APRCh. 12 - Prob. 12.6APRCh. 12 - Prob. 12.1BPRCh. 12 - Prob. 12.2BPRCh. 12 - Prob. 12.3BPRCh. 12 - Prob. 12.4BPRCh. 12 - Prob. 12.5BPRCh. 12 - Statement of partnership liquidation On August 3,...Ch. 12 - Prob. 12.1CPCh. 12 - Prob. 12.3CPCh. 12 - Prob. 12.4CP
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- Assume the partnership income-sharing agreement calls for income to be divided with a salary of $30,000 to Coburn and $25,000 to Webb, with the remainder divided 35% to Coburn and 65% to Webb. Prepare the journal entry to record the allocation of net income. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation > Debit Creditarrow_forwardin a partnership, a partner receives a salary allowance based on: a. amount of years the partner is in the business b. time devoted to the business c. amount of sales the business makes d. original investment made in businessarrow_forwardWhich of the following will increase the current assets of a partnership at the end of a financial year? O A. Rent income owed for the current financial year; Insurance premium paid for the next financial year, Commission income received in advance OB. Rent income owed for the current financial year; Insurance premium paid for the next financial year, Account of a debtor written off O C. Rent income owed for the current financial year; Insurance premium paid for the next financial year; A financial asset that is due to mature in the next financial year O D. Insurance premium paid for the next financial year; A financial asset that is due to mature in the next financial year; Increase in provision for bad debtsarrow_forward
- Coburn (beginning capital, $60,000) and Webb (beginning capital $86,000) are partners. During 2022, the partnership earned net income of $74,000, and Coburn made drawings of $20,000 while Webb made drawings of $22,000.arrow_forwardallowance of $6,000 per month to partner C. The articles of partnership provide for a salary If C withdrew only $4,000 per month, would a partner's cash withdrawal in lieu of edited to interest from another Dartner and (b) by contribu- tion of assets to the partnership. accoi what 9. Why is it important to state all partnership assets in terms of current prices at the time of the admission of a new partner? 10. Why might a partnership pay a bonus to a newly admitted partner? pactice Exercises PE 12-1A Journalizing partner's original investment Catrina Santana contributed a patent, accounts receivable, and $23,000 cash to a parthersinpa The patent had a book value of $8,000. However, the technology covered by the patent ap peared to have significant market potential. Thus, the patent was appraised at $85,000. The accounts receivable control account was $38.000, with an allowance for doubtful accounts of $2,000. The partnership also assumed a $10,000 account payable owed to a Santana…arrow_forwardWhich of the following expenses may a partnership elect to amortize? (a) Advertising expense from before the partnership began their first actual day of business. (b) Employment taxes paid by the partnership. (c) Professional fees paid after the partnership began business. (d) The purchase of a building and land.arrow_forward
- When bonus is given to old partners ____? a. old partners' capital accounts are credited. b. new partner's capital account is debited c. the bonus is divided based on P/L ratio d. all of the above When Billie retired from Billie, Ive, and Fromis partnership, he received cash in excess of his capital account balance. Under the bonus method, the excess received by Billie a. had no effect on the capital account balances of Ive and Fromis. b. was recognized as bonus to the old partners c. reduced the capital account balances of both Ive and Fromis d. was recognized as an operating expense Which of the following will not result in dissolution of a partnership? a. Incapacity of a partner b. admission of a new partner c. bankruptcy of a partner d.. negative capital balance of a partner When there are only two persons in the partnership, the sale of one's share to the other will make the partnership become a…arrow_forwardA partnership has the following accounting amounts: Sales Cost of Goods Sold General and Administrative Expenses Distribution costs Interest paid to banks Salary allowances to partners Partners' withdrawals 150,000 80,000 17,000 52,000 23,000 12,000 18,000 Compute the Partnership's net income (loss). Encode as a negative amount if the answer is a loss.arrow_forwardin the year ended the partner withdrawal closed in Select one: a. parter capital b. income statement c. expenses d. partner loanarrow_forward
- Which of the following expenses may a partnership elect to amortize? Advertising expense from before the partnership began their first actual day of business. Employment taxes paid by the partnership. Professional fees paid after the partnership began business. The purchase of a building and land.arrow_forwardThe ledger of Tyler Lambert and Jayla Yost, attorneys-at-law, contains the following accounts and balances after adjustments have been recorded on December 31, 20Y3: Lambert and Yost Trial Balance December 31, 20Y3 Debit Balances Credit Balances Cash 34,000 Accounts Receivable 47,800 Supplies 2,000 Land 120,000 Building Accumulated Depreciation-Building Office Equipment Accumulated Depreciation-Office Equipment Accounts Payable Salaries Payable Tyler Lambert, Capital Tyler Lambert, Drawing Jayla Yost, Capital Jayla Yost, Drawing 157,500 67,200 63,600 21,700 27,900 5,100 135,000 50,000 88,000 60,000 Professional Fees 395,300 Salary Expense Depreciation Expense-Building 154,500 15,700 Property Tax Expense 12,000 Heating and Lighting Expense Supplies Expense Depreciation Expense-Office Equipment Miscellaneous Expense 8,500 6,000 5,000 3,600 740,200 740,200 The balance in Yost's capital account includes an additional investment of $10,000 made on April 10, 2OY3. (Continued)arrow_forwardUnder what circumstances can the closing of the income summary account result in a debit to one partners’ capital account and credits to the other partners’ capital accounts? a. The results of operations are divided in a profit and loss ratio and the partnership sustained a loss for the period. b. The results of operations are allocated in a profit and loss ratio and the partnership’s net income was very low. c. The results of operations are divided in the average capital ratio and one partner had a low capital balance. d. The partnership agreement provides for interest on capital and salary allowances and net income is less than the sum of the interest and salary allowances.arrow_forward
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