Question

1/

The following information is available regarding Grace Smit's capital account in Enterprise Consulting Group, a general partnership, for a recent year:

Beginning of the year balance	$	38,000
Share of partnership income	$	12,500
Withdrawals made during the year	$	7,600

What is Smit's partner return on equity during the year in question?

Multiple Choice

12.9%

12.1%

46.9%

30.9%

29.1%

2/ Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $54,000, Davis contributing $45,000 and Singer contributing $36,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $60,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Singer's capital account?

Multiple Choice

$60,000.

$36,000.

$24,000.

$16,000.

$20,000.

3/ Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Masters, $16,100, Hardy, $16,100, Rowen, $(3,100). After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $29,100 in cash to be distributed. Rowen pays $3,100 to cover the deficiency in his account. The general journal entry to record the final distribution would be:

Multiple Choice

Debit Masters, Capital $14,550; debit Hardy, Capital $14,550; credit Cash $29,100.

Debit Masters, Capital $16,100; debit Hardy, Capital $16,100; credit Cash $32,200.

Debit Masters, Capital $9,700; debit Hardy, Capital $9,700; debit Rowen, Capital $9,700; credit Cash $29,100.

Debit Cash $29,100; debit Rowen, Capital $3,100; credit Masters, Capital $16,100; credit Hardy, Capital $16,100.

Debit Masters, Capital $16,100; debit Hardy, Capital $16,100; credit Rowen, Capital $3,100; credit Cash $29,100.

Answer 1

Correct answer is D.

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Ending equity = opening balance + income – withdrawal

                         = 38000 + 12500 – 7600

                          = 42900

Return on equity = Income/average equity

                                = 12500/(38000 + 42900)/2

                                 = 12500/40450

                                 = 309 or 30.9%

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Hope that helps.

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