Rice Hepburn Dimarco Total
3. Rice, Hepburn, and DiMarco formed a partnership with Rice contributing $68,400, Hepburn contributing $57,000 and DiMarco contributing $45,600. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $96,000 for its first year of operation, what amount of income would be credited to DiMarco's capital account?
$45,600.
$38,400.
$25,600.
$32,000.
$96,000.
Rice Hepburn DiMarco Total
68,400 57,000 45,600 171,000
171,000 171,000 171,000
40% 33.3% 26.7%
DiMarco’s 26.7% * income of 96,000 = 25,600
4. Web Services is organized as a limited partnership, with David White as one of its partners. David's capital account began the year with a balance of $47,000. During the year, David's share of the partnership income was $9,500, and David received $6,000 in distributions from the partnership. What is David's partner return on equity?
19.5%
12.3%
20.2%
18.8%
12.8%
9,500
(47,000+50,500)/2 = 48,750
= 19.5%
5. Trump and Hawthorne have decided to form a partnership. Trump 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 Trump is available:
Historical cost of the asset $86,000
Accumulated depreciation on the asset $45,000
Note payable secured by the asset* $29,000
Agreed-upon market value of the asset $50,000
*will be assumed by the partnership
Based on this information, Trump's beginning equity balance in the partnership will be:
$29,000
$21,000
$41,000
$86,000
$50,000
50,000 – 29,000 = 21,000
6. Shelby and Mortonson formed a partnership with capital contributions of $350,000 and $450,000, respectively. Their partnership agreement calls for Shelby to receive a $65,000 per year salary. Also, each partner is to receive an interest allowance equal to 8% 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 $144,000, then Shelby and Mortonson's respective shares are:
$72,000; $72,000.
$63,000; $81,000.
$43,000; $101,000.
$93,000; $36,000.
$100,500; $43,500.
Shelby Mortonson
65,000 - salary
28, 000 = 350,000(.08) 36,000 = 450,000(.08) interest
7,500 7,500 see explanation below
100,500 43,500 respective shares of income
Income: 144,000
Salary: (65,000)
S Interest: (28,000)
M Interest: (36,000)
Remaining that will be split evenly = 15,000
15,000/2 = 7,500 to each partner
7. The following information is available regarding John Smith's capital account in Technology Consulting Group, a general partnership, for a recent year:
Beginning of the year balance $ 24,000
His share of partnership income $ 9,000
Withdrawals made during the year $ 6,200
What is Smith's partner return on equity during the year in question?
35.4%
56.7%
11.7%
11.0%
33.6%
9,000
(24,000+ 26,800)/2 = 25,400
= 35.4%
8. Chase and Hatch are partners and share equally in income or loss. Chase's current capital balance is $192,000 and Hatch's is $167,500. Chase and Hatch agree to accept Flax with a 30% interest in the partnership. Flax invests $172,000 in the partnership. The balances in Chase’s and Hatch’s capital accounts after admission of the new partner equal:
Chase $185,725; Hatch $161,225.
Chase $204,550; Hatch $167,500.
Chase $198,275; Hatch $173,775.
Chase $192,000; Hatch $167,500.
Chase $192,000; Hatch $180,050
192,000 + 167,500 + 172,000 = 531,500 (.30) = 159,450 *BV of new partner’s share
172,000 – 159,450 = 12,550/2 = 6,275 *original partners split the goodwill
Chase: 192,000 + 6,275 = 198,275
Hatch: 167,500 + 6,250 = 173,775
9. Badger and Fox are forming a partnership. Badger invests a building that has a market value of $370,000; the partnership assumes responsibility for a $135,000 note secured by a mortgage on the property. Fox invests $110,000 in cash and equipment that has a market value of $85,000. For the partnership, the amounts recorded for the building and for Badger's Capital account are:
Building $370,000; Badger, Capital $330,000.
Building $370,000; Badger, Capital $370,000.
Building $370,000; Badger, Capital $235,000.
Building $235,000; Badger, Capital $235,000.
Building $235,000; Badger, Capital $135,000.
Building – 370,000
Badger Capital – 370,000 – 135,000 = 235,000
10. The following information is available on Stewart Enterprises, a partnership, for the most recent fiscal year:
Total partnership capital at beginning of the year $189,000
Partnership net income for the year $159,000
Withdrawals by partners during the year $111,000
Additional investments by partners during the year $69,000
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.
Total partnership capital at beginning of the year $189,000
Partnership net income for the year $159,000
Withdrawals by partners during the year $111,000
Additional investments by partners during the year $69,000
Total partnership capital at year end – 306,000
Stewart (2/5)Tedder (1/5) Armstrong (2/5)
306,000 * (2/5) 306,000 *(1/5) 306,000 * (2/5)
122,400 61,200 122,400
Stewart = $63,600; Tedder = $31,800; Armstrong = $63,600.
Stewart = $211,200; Tedder = $105,600; Armstrong = $211,200.
Stewart = $102,000; Tedder = $102,000; Armstrong = $102,000.
Stewart = $90,600; Tedder = $105,600; Armstrong = $90,600.
Stewart = $122,400; Tedder = $61,200; Armstrong = $122,400.