61. The partnership agreement for Smith Wesson & Davis, a general partnership, provided that profits be shared between the partners in the ratio of their financial contributions to the partnership. Smith contributed $100,000, Wesson contributed $60,000 and Davis contributed $20,000. In the partnership’s first year of operation, it incurred a loss of $210,000. What amount of the partnership’s loss, rounded to the nearest dollar, should be absorbed by Smith?
A. $70,000
B. $116,667
C. $23,333
D. $105,000
E. $52,500
62. Regina Harrison is a partner in Pressed for Time. An analysis of Regina Harrison’s capital account indicates that during the most recent year, she withdrew $20,000 from the partnership.
Her share of the partnership’s net loss was $16,000 and she made an additional equity contribution of $10,000. Her capital account ended the year at $150,000. What was her capital balance at the beginning of the year?
A. $124,000
B. $144,000
C. $192,000
D. $176,000
E. $134,000
63. The following information is available on Stewart Enterprises, a partnership, for the most recent fiscal year:
There are three partners in Stewart Enterprises: Stewart, Tedder and Armstrong. At the end of the year, the partners’ capital accounts were in the ratio of 2:1:2, respectively. Compute the ending capital balances of the three partners.
A. Stewart = $108,000; Tedder = $54,000; Armstrong = $108,000.
B. Stewart = $90,000; Tedder = $90,000; Armstrong = $90,000.
C. Stewart = $204,000; Tedder = $102,000; Armstrong = $204,000.
D. Stewart = $84,000; Tedder = $102,000; Armstrong = $84,000.
E. Stewart = $60,000; Tedder = $30,000; Armstrong = $60,000.
64. A partner can withdraw from a partnership by:
A. Selling his/her interest to another person for cash.
B. Selling his/her interest to another person in exchange for assets.
C. Receiving cash from the partnership in the amount of his/her interest.
D. Receiving assets from the partnership in the amount of his/her interest.
E. All of these.
65. A bonus may be paid:
A. By a new partner when the current value of a partnership is greater than the recorded amounts of equity.
B. By a withdrawing partner to remaining partners if the recorded value of the equity is overstated.
C. To a new partner with exceptional talents.
D. By remaining partners to a withdrawing partner if the recorded equity is understated.
E. All of these.
66. When a partner is added to a partnership:
A. The previous partnership ends.
B. The underlying business operations end.
C. The underlying business operations must close and then re-open.
D. The partnership must continue.
E. The partnership equity always increases.
67. A partnership recorded the following journal entry:
This entry reflects:
A. Acceptance of a new partner who invests $70,000 and receives a $20,000 bonus.
B. Withdrawal of a partner who pays a $10,000 bonus to each of the other partners.
C. Addition of a partner who pays a bonus to each of the other partners.
D. Additional investment into the partnership by Tanner and Jackson.
E. Withdrawal of $10,000 each by Tanner and Jackson upon the admission of a new partner.
68. Groh and Jackson are partners. Groh’s capital balance in the partnership is $64,000, and Jackson’s capital balance $61,000. Groh and Jackson have agreed to share equally in income or loss. Groh and Jackson agree to accept Block with a 20% interest. Block will invest $35,000 in the partnership. The bonus that is granted to Groh and Jackson equals:
A. $1,500 each.
B. $1,875 each.
C. $3,750 each.
D. 1,920 to Groh; $1,830 to Jackson.
E. $0, because Groh and Jackson actually grant a bonus to Block.
69. Groh and Jackson are partners. Groh’s capital balance in the partnership is $64,000, and Jackson’s capital balance $61,000. Groh and Jackson have agreed to share equally in income or loss. Groh and Jackson agree to accept Block with a 25% interest. Block will invest $35,000 in the partnership. The bonus that is granted to Block equals:
A. $5,000.
B. $2,500.
C. $6,667.
D. $3,333.
E. $0, because Block must actually grant a bonus to Groh and Jackson.
70. Mack, Harris, and Huss are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period’s ending capital account balances are Mack, $15,000, Harris, $15,000, Huss, $(2,000). After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $28,000 in cash to be distributed. Huss pays $2,000 to cover the deficiency in his account. The general journal entry to record the final distribution would be:
A. Debit Mack, Capital $15,000; debit Harris, Capital $15,000; credit Cash $30,000.
B. Debit Mack, Capital $14,000; debit Harris, Capital $14,000; credit Cash $28,000.
C. Debit Mack, Capital $15,000; debit Harris, Capital $15,000; credit Huss, Capital $2,000; credit Cash $28,000.
D. Debit Cash $28,000; debit Huss, Capital $2,000; credit Mack, Capital $15,000; credit Harris, Capital $15,000.
E. Debit Mack, Capital $9,334; debit Harris, Capital $9,333; debit Huss, Capital $9,333; credit Cash $28,000.
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