Answered: 1. Seth and Rachel have original…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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1. Seth and Rachel have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investments at 15%; salary allowances of $24,000 and $20,000, respectively; and the remainder to be divided equally. How much of the net income of $90,000 is allocated to Seth?

a.$47,750

b.$45,000

c.$42,750

d.$43,250

2. Seth and Beth have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remainder to be divided equally. How much of the net income of $42,000 is allocated to Seth?

a.$32,000

b.$23,000

c.$20,000

d.$0

3. Tucker and Titus are partners who share income in the ratio of 3:1 (3/4 to Tucker and 1/4 to Titus). Their capital balances are $31,500 and $61,000, respectively. The partnership generated net income of $48,000 for the year. What is Tucker's capital balance after closing the revenue and expense accounts to the capital accounts?

a.$67,500

b.$81,000

c.$40,500

d.$54,000

4. Xavier and Yolanda have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remaining income (loss) equally. How much of the net loss of $(6,000) is allocated to Yolanda?

a.$(3,000)

b.$0

c.$(5,000)

d.$(1,000)

5. Xavier and Yolanda have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $38,000 and $28,000, respectively; and the remainder to be divided equally. How much of the net income of $77,000 is allocated to Xavier?

a.$43,000

b.$66,000

c.$36,000

d.$41,000

6. Tomas and Saturn are partners who share income in the ratio of 3:1 (3/4 to Tomas and 1/4 to Saturn). Their capital balances are $80,000 and $120,000, respectively. The partnership generated net income of $30,000. What is Saturn’s capital balance after closing the revenue and expense accounts to the capital accounts?

a.$127,500

b.$102,500

c.$112,500

d.$120,000

7. Patty and Paul are partners who share income in the ratio of 3:2 (3/5 to Patty and 2/5 to Paul). Their capital balances are $90,000 and $130,000, respectively, on January 1. The partnership generated net income of $40,000 for the year. What is Paul’s capital balance after closing the revenue and expense accounts to the capital accounts?

a.$164,000

b.$120,000

c.$160,000

d.$146,000

8. Hannah Johnson contributed equipment, inventory, and $59,900 cash to a partnership. The equipment had a book value of $25,300 and a market value of $35,300. The inventory had a book value of $58,200 but only had a market value of $13,400 due to obsolescence. The partnership also assumed a $13,300 note payable owed by Hannah that was originally used to purchase the equipment.

What amount should be recorded to Hannah's capital account?

a.$95,300

b.$130,100

c.$153,400

d.$121,900

9. Paradise Architects had total revenue of $5,400,000 and revenue per employee of $200,000 in 20Y1. In 20Y2, total revenue increased to $5,700,000 and the number of employees expanded to 30. Did employee efficiency increase or decrease with the expansion, and by how much?

a.decreased by $100,000

b.decreased by $10,000

c.increased by $10,000

d.increased by $300,000

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, and drawings of a partner.

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