Question

5/ Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $356,000; the partnership assumes responsibility for a $128,000 note secured by a mortgage on the property. Monroe invests $103,000 in cash and equipment that has a market value of $78,000. For the partnership, the amounts recorded for total assets and for total capital account are:

Multiple Choice

Total assets $409,000; total capital $537,000.

Total assets $409,000; total capital $409,000.

Total assets $665,000; total capital $665,000.

Total assets $537,000; total capital $537,000.

Total assets $537,000; total capital $409,000.

6/ Peters, Chong, and Aaron are dissolving their partnership. Their partnership agreement allocates each partner an equal share of all income and losses. The current period's ending capital account balances are Peters, $66,000; Chong, $54,000; and Aaron, $(12,000). After all assets are sold and liabilities are paid, there is $108,000 in cash to be distributed. Aaron is unable to pay the deficiency. The journal entry to record the distribution should be:

Multiple Choice

Debit Cash $108,000, debit Aaron, Capital $12,000, credit Peters, Capital $66,000, credit Chong, Capital $54,000.

Debit Peters, Capital $66,000; debit Chong, Capital $42,000; credit Cash $108,000.

Debit Cash $108,000; credit Peters, Capital $36,000; credit Chong, Capital $36,000.

Debit Peters, Capital $66,000; debit Chong, Capital $54,000; credit Cash $120,000.

Debit Peters, Capital $60,000; debit Chong, Capital $48,000; credit Cash $108,000.

7/ Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $306,000, and Atkins' beginning partnership capital balance for the current year is $350,000. The partnership had net income of $130,000 for the year. Barber withdrew $75,000 during the year and Atkins withdrew $118,000. What is Barber's return on equity?

Multiple Choice

21.6%

10.8%

21.2%

22.0%

20.1%

8/ Cox, North, and Lee form a partnership. Cox contributes $195,000, North contributes $162,500, and Lee contributes $292,500. Their partnership agreement calls for a 6% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $162,000 for its first year, what amount of income is credited to North's capital account?

Multiple Choice

$54,000.

$50,750.

$52,700.

$41,000.

$58,550.

Answer 1

Answer 5-e. Total assets $537,000; total capital $409,000.
	Assets	Liabilities	Capital
Fontaine	356,000.00	128,000.00	228,000.00
Monroe	181,000.00	-	181,000.00
Total	537,000.00	128,000.00	409,000.00
Answer 6. Debit Peters, Capital $60,000; debit Chong, Capital $48,000; credit Cash $108,000.
	Peters	Chong	Aaron
Capital Balance	66,000.00	54,000.00	(12,000.00)
Aaron Deficieny Distributed	(6,000.00)	(6,000.00)	12,000.00
Balance	60,000.00	48,000.00	-
Allocate Cash	(60,000.00)	(48,000.00)	-
Balance	-	-	-
Answer 7-a. 21.6%
Barber Beginning Equity = $306,000
Barber Ending Equity = $306,000 + $65,000 (Share of Profit) - $75,000 (Withdrawl)
Barber Ending Equity = $296,000
Average Barber Equity = ($306,000 + $296,000) / 2 = $301,000
Barber Return on Equity = $65,000 (Share of Net Income) / $301,000 (average Capital)
Barber Return on Equity = 21.59% or say 21.6%(approx.)
Answer 8-b. $50,750
	Cox	North	Lee	Total
Net Income (Loss)				162,000.00
Interest Allowance	11,700.00	9,750.00	17,550.00	39,000.00
Balance of Income (Loss)				123,000.00
Balance allocated equally	41,000.00	41,000.00	41,000.00	123,000.00
Balance of Income (Loss)				-
Shares to partners	52,700.00	50,750.00	58,550.00