Homework Lance
1. Cherryhill and Hace had been partners for several years, and they decided to admit Quincy to the partnership. The accountant for the partnership believed that the dissolved partnership and the newly formed partnership were two separate entities. What method would the accountant have used for recording the admission of Quincy to the partnership?
A) The bonus method.
B) The equity method.
C) The goodwill method.
D) The proportionate method.
E) The cost method.
Answer: C
Learning Objective: 14-07
Topic: Partnership dissolution―Concepts
Difficulty: 1 Easy
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Legal
AICPA: FN Measurement
[QUESTION]
2. When the hybrid method is used to record the withdrawal of a partner, the partnership
A) Revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner.
B) Revalues liabilities but not assets, and no goodwill is recorded.
C) Can recognize goodwill but does not revalue assets and liabilities.
D) Revalues assets but not liabilities, and records goodwill to the continuing partner but not to the withdrawing partner.
E) Revalues assets and liabilities but does not record goodwill.
Answer: E
Learning Objective: 14-10
Topic: Partnership dissolution―Concepts
Difficulty: 1 Easy
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Legal
AICPA: FN Measurement
[QUESTION]
3. The disadvantages of the partnership form of business organization, compared to corporations, include
A) The legal requirements for formation.
B) Unlimited liability for the partners.
C) The requirement for the partnership to pay income taxes.
D) The extent of governmental regulation.
E) The complexity of operations.
Answer: B
Learning Objective: 14-01
Topic: Advantages and disadvantages of partnerships
Difficulty: 1 Easy
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Legal
AICPA: FN Measurement
[QUESTION]
4. The advantages of the partnership form of business organization, compared to corporations, include
A) Single taxation.
B) Ease of raising capital.
C) Mutual agency.
D) Limited liability.
E) Difficulty of formation.
Answer: A
Learning Objective: 14-01
Topic: Advantages and disadvantages of partnerships
Difficulty: 1 Easy
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Legal
AICPA: FN Measurement
[QUESTION]
5. The dissolution of a partnership occurs
A) Only when the partnership sells its assets and permanently closes its books.
B) Only when a partner leaves the partnership.
C) At the end of each year, when income is allocated to the partners.
D) Only when a new partner is admitted to the partnership.
E) When there is any change in the individuals who make up the partnership.
Answer: E
Learning Objective: 14-07
Topic: Partnership dissolution―Concepts
Difficulty: 1 Easy
Blooms: Remember
AACSB: Reflective Thinking
AICPA: BB Legal
AICPA: FN Measurement
[QUESTION]
6. The partnership of Clapton, Seidel, and Thomas is insolvent and will be unable to pay $30,000 in liabilities that are currently due. What recourse is available to the partnership’s creditors?
A) They must present equal claims to the three partners as individuals.
B) They must try to obtain payment from the partner with the largest capital account balance.
C) They cannot seek remuneration from the partners as individuals.
D) They may seek remuneration from any partner they choose.
E) They must present their claims to the three partners in descending order based on the partners’ capital account balances.
Answer: D
Learning Objective: 14-01
Topic: Advantages and disadvantages of partnerships
Difficulty: 1 Easy
Blooms: Understand
AACSB: Reflective Thinking
AICPA: BB Legal
AICPA: FN Risk Analysis
REFERENCE: 14-01
Cleary, Wasser, and Nolan formed a partnership on January 1, 2017, and made capital contributions of $100,000 (Cleary), $150,000 (Wasser), and $200,000 (Nolan), respectively. With respect to the division of income, they agreed to the following: (1) interest of an amount equal to 10% of the that partner’s beginning capital balance for the year; (2) annual compensation of $10,000 to Wasser; and (3) the remainder of the income or loss to be split among the partners in the following percentages: (a) 20% for Cleary; (b) 40% for Wasser; and (c) 40% for Nolan. Net income was $150,000 in 2017 and $180,000 in 2018. Each partner withdrew $1,000 for personal use every month during 2017 and 2018.
[QUESTION]
REFER TO: 14-01
7. What was Wasser’s total share of net income for 2017?
A) $63,000.
B) $53,000.
C) $58,000.
D) $29,000.
E) $51,000.
Answer: A
Learning Objective: 14-06
Topic: Net income allocation―Interest-salary-bonus
Difficulty: 1 Easy
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Interest on Wasser’s beginning balance of capital contribution ($150,000 × 10% = $15,000) + Salary ($10,000) + 40% of the Remaining net income (calculated below) ($38,000) = $63,000.
Remaining net income: $150,000 – $45,000 (10% of $450,000) − $10,000 (Wasser Salary) = $95,000, of which 40% is allocated to Wasser = $38,000.
[QUESTION]
REFER TO: 14-01
8. What was Nolan’s total share of net income for 2017?
A) $63,000.
B) $53,000.
C) $58,000.
D) $29,000.
E) $51,000.
Answer: C
Learning Objective: 14-06
Topic: Net income allocation―Interest-salary-bonus
Difficulty: 1 Easy
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Interest on Nolan’s beginning balance of capital contribution ($200,000 × 10% = $20,000) + Salary ($0) + 40% of the Remaining net income (calculated below) ($38,000) = $58,000.
Remaining net income: $150,000 – $45,000 (10% of $450,000) − $10,000 (Wasser Salary) = $95,000, of which 40% is allocated to Nolan = $38,000.
[QUESTION]
REFER TO: 14-01
9. What was Cleary’s total share of net income for 2017?
A) $63,000.
B) $53,000.
C) $58,000.
D) $29,000.
E) $51,000.
Answer: D
Learning Objective: 14-06
Topic: Net income allocation―Interest-salary-bonus
Difficulty: 1 Easy
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Interest on Cleary’s beginning balance of capital contribution ($100,000 × 10% = $10,000) + Salary ($0) + 20% of the Remaining net income (calculated below) ($19,000) = $29,000.
Remaining net income: $150,000 – $45,000 (10% of $450,000) − $10,000 (Wasser Salary) = $95,000, of which 20% is allocated to Cleary = $19,000.
[QUESTION]
REFER TO: 14-01
10. What was Nolan’s capital balance at the end of 2017?
A) $200,000.
B) $224,000.
C) $238,000.
D) $246,000.
E) $254,000.
Answer: D
Learning Objective: 14-05
Learning Objective: 14-06
Topic: Net income allocation―Partner ending balance
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Beginning 2017 balance $200,000 + Interest $20,000 + Salary $0 + 40% of the Remaining net income $38,000 – Withdrawals $12,000 = $246,000
[QUESTION]
REFER TO: 14-01
11. What was Wasser’s capital balance at the end of 2017?
A) $150,000.
B) $160,000.
C) $165,000.
D) $213,000.
E) $201,000.
Answer: E
Learning Objective: 14-05
Learning Objective: 14-06
Topic: Net income allocation―Partner ending balance
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Beginning 2017 balance $150,000 + Interest $15,000 + Salary $10,000 + 40% of the Remaining net income $38,000 – Withdrawals $12,000 = $201,000
[QUESTION]
REFER TO: 14-01
12. What was Cleary’s capital balance at the end of 2017?
A) $100,000.
B) $117,000.
C) $119,000.
D) $129,000.
E) $153,000.
Answer: B
Learning Objective: 14-05
Learning Objective: 14-06
Topic: Net income allocation―Partner ending balance
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Beginning 2017 balance $100,000 + Interest $10,000 + Salary $0 + 20% of the Remaining net income $19,000 – Withdrawals $12,000 = $117,000
[QUESTION]
REFER TO: 14-01
13. What was the total capital balance for the partnership at December 31, 2017?
A) $600,000.
B) $564,000.
C) $535,000.
D) $523,000.
E) $545,000.
Answer: B
Learning Objective: 14-05
Learning Objective: 14-06
Topic: Net income allocation―Partner ending balance
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Cleary $117,000 + Wasser $201,000 + Nolan $246,000 = $564,000.
Alternatively, beginning capital balances ($100,000 + $150,000 + $200,000) = $450,000 + net income $150,000 − withdrawals $36,000 = $564,000.
[QUESTION]
REFER TO: 14-01
14. What was the amount of interest attributed to Wasser in the income distribution for 2018?
A) $17,600.
B) $18,800.
C) $20,100.
D) $17,800.
E) $30,100.
Answer: C
Learning Objective: 14-06
Topic: Net income allocation―Interest-salary-bonus
Difficulty: 3 Hard
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Beginning Wasser 2017 capital balance $150,000 + 2017 Interest $15,000 + 2017 Salary $10,000 + 40% of the 2017 Remaining net income $38,000 – 2017 Withdrawals $12,000 = $201,000 (2018 Wasser beginning balance). Beginning $201,000 × 10% = $20,100.
[QUESTION]
REFER TO: 14-01
15. What was Wasser’s total share of net income for 2018?
A) $34,420.
B) $75,540.
C) $65,540.
D) $70,040.
E) $61,420.
Answer: B
Learning Objective: 14-06
Topic: Net income allocation―Interest-salary-bonus
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Interest $20,100 + Salary $10,000 + 40% of the 2018 Remaining net income (calculated below) $45,440 = $75,540.
Remaining net income = $180,000 − $56,400 (10% of $564,000) − $10,000 (Wasser Salary) = $113,600 × 40% = $45,440.
[QUESTION]
REFER TO: 14-01
16. What was the remainder portion of net income allocated to Nolan for 2018?
A) $45,440.
B) $58,040.
C) $70,040.
D) $72,000.
E) $82,040.
Answer: A
Learning Objective: 14-06
Topic: Net income allocation―Interest-salary-bonus
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Remainder of 2018 Net Income = $180,000 − $56,400 (10% of $564,000) − $10,000 (Wasser Salary) = $113,600 × 40% = $45,440
[QUESTION]
REFER TO: 14-01
17. What was Nolan’s total share of net income for 2018?
A) $34,420.
B) $75,540.
C) $65,540.
D) $70,040.
E) $61,420.
Answer: D
Learning Objective: 14-06
Topic: Net income allocation―Interest-salary-bonus
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Interest $24,600 (10% of $246,000) + Salary ($0) + 40% of the 2018 Remaining net income $45,440 = $70,040.
Remaining net income = $180,000 − $56,400 (10% of $564,000) − $10,000 (Wasser Salary) = $113,600 × 40% = $45,440.
[QUESTION]
REFER TO: 14-01
18. What was Cleary’s total share of net income for 2018?
A) $34,420.
B) $75,540.
C) $65,540.
D) $70,040.
E) $61,420.
Answer: A
Learning Objective: 14-06
Topic: Net income allocation―Interest-salary-bonus
Difficulty: 2 Medium
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: Interest $11,700 (10% of $117,000) + Salary $0 + 20% of Remaining 2018 Net Income $22,720 = $34,420.
Remaining 2018 net income = $180,000 − $56,400 (10% of $564,000) − $10,000 (Wasser Salary) = $113,600 × 20% = $22,720.
[QUESTION]
REFER TO: 14-01
19. What was Nolan’s capital balance at the end of 2018?
A) $139,420.
B) $246,000.
C) $276,540.
D) $279,440.
E) $304,040.
Answer: E
Learning Objective: 14-05
Learning Objective: 14-06
Topic: Net income allocation―Partner ending balance
Difficulty: 3 Hard
Blooms: Apply
AACSB: Knowledge Application
AICPA: BB Legal
AICPA: FN Measurement
Feedback: 2018 Beginning Nolan capital balance $246,000 + Interest $24,600 + Salary $0 + 40% of Remaining 2018 net income (see below) $45,440 – 2018 Withdrawals $12,000 = $304,040.
Remaining 2018 Net Income = $180,000 − $56,400 (10% of $564,000) − $10,000 (Wasser Salary) = $113,600 × 40% = $45,440.
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