Question :
55. Harvey and Quick have decided to form a partnership. Harvey : 1257548
55. Harvey and Quick have decided to form a partnership. Harvey is going to contribute a depreciable asset to the partnership as his equity contribution to the partnership. The following information regarding the asset to be contributed by Harvey is available:
Historical cost of the asset$76,000
Accumulated depreciation on the asset$40,000
Note payable secured by the asset*$18,000
Agreed-upon market value of the asset$45,000
*will be assumed by the partnership
Based on this information, Harvey’s beginning equity balance in the partnership will be:
A. $76,000
B. $36,000
C. $18,000
D. $27,000
E. $45,000
56. Dalworth and Minor have decided to form a partnership. Minor is going to contribute a depreciable asset to the partnership as her equity contribution to the partnership. The following information regarding the asset to be contributed by Minor is available:
Historical cost of the asset…………………………………………….…$276,000
Accumulated depreciation on the asset………………………………….$140,000
Note payable secured by the asset and assumed by the partnership……..$118,000
Agreed-upon market value of the asset…………………………………..$245,000
Based on this information, Minor’s beginning equity balance in the partnership will be:
A. $276,000
B. $158,000
C. $136,000
D. $127,000
E. $18,000
57. In the absence of a partnership agreement, the law says that income (and loss) should be allocated based on:
A. A fractional basis.
B. The ratio of capital investments.
C. Salary allowances.
D. Equal shares.
E. Interest allowances.
58. In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner’s investment, the interest allowance:
A. Is ignored when earnings are not sufficient to pay interest.
B. Can make up for unequal capital contributions.
C. Is an expense of the business.
D. Must be paid because the partnership contract has unlimited life.
E. Legally becomes a liability of the general partner.
59. Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Singer’s capital account?
A. $20,000.
B. $25,000.
C. $30,000.
D. $40,000.
E. $75,000.
60. Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Wheadon’s capital account?
A. $20,000.
B. $25,000.
C. $30,000.
D. $40,000.
E. $75,000.
61. Christie and Jergens formed a partnership with capital contributions of $300,000 and $400,000, respectively. Their partnership agreement calls for Christieto receive a $60,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner’s beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Christie and Jergens’s respective shares are:
A. $67,500; $67,500.
B. $92,500; $42,500.
C. $57,857; $77,143.
D. $90,000; $40,000.
E. $35,000; $100,000.
62. Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000, respectively. Their partnership agreement calls for Farmer to receive a $70,000 per year salary. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Farmer and Taylor’s respective shares are:
A. $67,500; $67,500.
B. $130,000; $5,000.
C. $106,140; $28,860.
D. $90,000; $45,000.
E. $102,500; $32,500.
63. Which of the following statements is true?
A. Partners are employees of the partnership.
B. Salaries to partners are expenses on the partnership income statement.
C. Salary allowances usually reflect the relative value of services provided by partners.
D. Salary allowances are expenses.
E. Interest allowances are expenses.
64. Zheng invested $100,000 and Murray invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per year salary allowance to Murray, plus an interest allowance on the partners’ beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns $105,000 in income are:
A. $52,500 to Zheng; $52,500 to Murray.
B. $35,000 to Zheng; $70,000 to Murray.
C. $57,500 to Zheng; $47,500 to Murray.
D. $42,500 to Zheng; $62,500 to Murray.
E. $70,000 to Zheng; $60,000 to Murray.
