1.

Which of the following accounts could be found in the PQ partnership's general ledger? I. Due from P II. P, Drawing III. Loan Payable to Q A. I, II B. I, III C. II, III D. I, II, and III

2. When a partnership is formed, noncash assets contributed by partners should be recorded: I. at their respective book values for income tax purposes. II. at their respective fair values for financial accounting purposes. A. I only B. II only C. Both I and II D. Neither I nor II 3. When a new partner is admitted into a partnership and the new partner receives a capital credit less than the tangible assets contributed, which of the following explains the difference? I. The new partner's goodwill has been recognized. II. The old partners received a bonus from the new partner. A. I only B. II only C. Either I or II D. Neither I nor II 4. When a new partner is admitted into a partnership and the capital of the old partners decreases, which of the following explains the reason for the decrease? I. Undervalued liabilities were written up to their fair values. II. Undervalued assets were written up to their fair values. A. I only B. II only C. Both I and II D. Neither I nor II 5. A limited liability company (LLC): I. is governed by the laws of the state in which it is formed. II. provides liability protection to its investors. III. does not offer pass-through taxation benefits of partnerships. A. Both I and III. B. III

C. Both I and II D. I, II, and II

6. Cleary, Wasser, and Nolan formed a partnership on January 1, 2007, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2007 and $180,000 in 2008. Each partner withdrew $1,000 for personal use every month during 2007 and 2008. What was Wasser's share of income for 2007? A) $63,000. B) $53,000. C) $58,000. D) $29,000. E) $51,000.

7. The appropriate format of the January 31, 2008 closing entry for John & Hope Limited Liability Partnership, whose two partners had withdrawn their salaries from the partnership during January is

A) A Above. B) B Above. C) C Above. D) D Above.

8. When Danny withdrew from John, Daniel, Harry, and Danny LLP, he was paid $80,000, although his capital account balance was only $60,000. The four partners shared net income and losses equally. The journal entry of the partnership to record Danny's withdrawal preferably should include : A) $6,667 debit to John, Capital. B) $6,667 credit to John, Capital. C) $6,667 debit to John, Drawing. D) $5,000 debit to John, Capital. E) $5,000 credit to John, Capital. Feedback: ($80,000 $60,000) 3 = $6,667 9. Max, Jones and Waters shared profits and losses 20%, 40%, and 40% respectively and their partnership capital balance is $10,000, $30,000 and $50,000 respectively. Max has decided to withdraw from the partnership. An appraisal of the business and its property estimates the fair value to be $ 200,000. Land with a book value of $30,000 has a fair value of $45,000. Max has agreed to receive $20,000 in exchange for her partnership interest. What amount should land be recorded on the partnership books? A) $20,000. B) $30,000. C) $45,000. D) $50,000. E) $200,000. 10. The residual interest in a corporation belongs to the a. b. c. d. management. creditors. common stockholders. preferred stockholders.

1. When a corporation issues its capital stock in payment for services, the least appropriate basis for recording the transaction is the a.market value of the services received. b.par value of the shares issued. c.market value of the shares issued. d.Any of these provides an appropriate basis for recording the transaction.

2. If A is the total capital of a partnership before the admission of a new partner, B is the total capital of the partnership after the admission of the new partner, C is the amount of the new partner's investment, and D is the amount of capital credited to the new partner, then there is: A. goodwill to the new partner if B > (A + C) and D < C. B. goodwill to the old partners if B = A + C and D > C. C. a bonus to the new partner if B = A + C and D > C. D. neither bonus nor goodwill if B > (A + C) and D > C. 3. The partnership of X and Y shares profits and losses in the ratio of 60 percent to X and 40 percent to Y. For the year 2008, partnership net income was double X's withdrawals. Assume X's beginning capital balance was $80,000, and ending capital balance (after closing) was $140,000. Partnership net income for the year was: D. $600,000.

4. Anne retires and is paid $80,000 based on the terms of the original partnership agreement. If the goodwill method is used, what is the capital of Donald?40% of Goodwill = $30,000 .40 G = $30,000
G = $75,000Donald = 20% Goodwill = $15,000. $40,000 + $15,000 = $55,000. Todd = 40% Goodwill = $30,000. $30,000 + $30,000 = $60,000.

5. In the JAW partnership, Jane's capital is $100,000, Anne's is $80,000, and William's is $75,000. They share income in a 3:2:1 ratio, respectively. William is retiring from the partnership. Required Prepare journal entries to record William's withdrawal according to each of the following independent assumptions: a. William is paid $80,000, and no goodwill is recorded.

1. On September 1, 2008, Zelner Company reacquired 12,000 shares of its $10 par value common stock for $15 per share. Zelner uses the cost method to account for treasury stock. The journal entry to record the reacquisition of the stock should debit Treasury Stock 12,000 $15 = $180,000

2. Bloom and Carnes share profits and losses in a ratio of 2:3, respectively. Bloom and Carnes receive salary allowances of $10,000 and $20,000, also respectively, and both partners receive 10% interest based upon the balance in their capital accounts on January 1. Partners drawings are not used in determining the average capital balances. Total net income for 2006 is $60,000. If net income after deducting the interest and salary allocations is greater than $20,000, Carnes receives a bonus of 5% of the original amount of net income.

Bloom January 1 capital balances Yearly drawings ($1,500 a month) What are the total amounts for the allocation of interest? $ 200,000 18,000 $

Carnes 300,000 18,000

Interest: ($500,000 x 10%)

= $50,000

Salary: ($10,000 + $20,000) = $30,000 Bonus: Condition not met = $0

Total allocations = $80,000 and over-allocations = $80,000 - $60,000 = $20,000 3. At December 31, 2007 and 2008, Sloan Corp. had outstanding 2,000 shares of $100 par value 8% cumulative preferred stock and 10,000 shares of $10 par value common stock. At December 31, 2007, dividends in arrears on the preferred stock were $8,000. Cash dividends declared in 2008 totaled $30,000. What amounts were payable on each preferred stock?

($200,000 .08) + $8,000 = $24,000 4. Davis has decided to retire from the partnership of Davis, Eiser, and Foreman. The partnership will pay Davis $200,000. Goodwill is to be recorded in the transaction as implied by the excess payment to Davis. A summary balance sheet for the Davis, Eiser, and Foreman partnership appears below. Davis, Eiser, and Foreman share profits and losses in a ratio of 1:1:3, respectively.

Assets Cash Inventory Marketable securities Land Building-net Total assets Equities Davis, capital Eiser, capital Foreman, capital Total equities What goodwill will be recorded? d. $200,000.

75,000 82,000 38,000 150,000 255,000 600,000

160,000 140,000 300,000 600,000

5. How would the declaration and subsequent issuance of a 10% stock dividend by the issuer affect each of the following when the market value of the shares exceeds the par value of the stock? Additional Paid-in Capital No effect Increase No effect Increase

Common Stock a. No effect b. No effect c. Increase d. Increase