Ch.

14 HW

3. The disadvantages of the partnership form of business organization, compared to

corporations, include

A. the legal requirements for formation.

B. unlimited liability for the partners.
C. the requirement for the partnership to pay income taxes.
D. the extent of governmental regulation.
E. the complexity of operations.
7. Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, 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 2012 and
$180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012
and 2013.
What was Wasser's total share of net income for 2012?

A. $63,000.
B. $53,000.
C. $58,000.
D. $29,000.
E. $51,000.

10. Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, 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 2012 and
$180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012
and 2013.
What was Nolan's capital balance at the end of 2012?

A. $200,000.
B. $224,000.
C. $238,000.
D. $246,000.
E. $254,000.
12. Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, 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 2012 and
$180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012
and 2013.
What was Cleary's capital balance at the end of 2012?

A. $100,000.
B. $117,000.
C. $119,000.
D. $129,000.
E. $153,000.

14. Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, 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 2012 and
$180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012
and 2013.
What was the amount of interest attributed to Wasser for 2013?

A. $17,600
B. $18,800
C. $20,100
D. $17,800
E. $30,100
21. Cleary, Wasser, and Nolan formed a partnership on January 1, 2012, 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 2012 and
$180,000 in 2013. Each partner withdrew $1,000 for personal use every month during 2012
and 2013.
What was Cleary's capital account balance at the end of 2013?

A. $163,420.
B. $151,420.
C. $139,420.
D. $100,000.
E. $142,000.

26. A partnership began its first year of operations with the following capital balances:
Young, Capital: $143,000
Eaton, Capital: $104,000
Thurman, Capital: $143,000
The Articles of Partnership stipulated that profits and losses be assigned in the following
manner:
Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to
Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the
first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman,
respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of
$52,000 in the second year.
What was Young's total share of net loss for the first year?

A. $3,900 loss.
B. $11,700 loss.
C. $10,400 loss.
D. $24,700 loss.
E. $9,100 loss.

39. Partnerships have alternative legal forms including all of the following except:

A. General Partnership.
B. Limited Partnership.
C. Subchapter S Partnership.
D. Limited Liability Partnership.
E. Limited Liability Company.
40. Which of the following type of organization is classified as a partnership, or similar to a
partnership, for tax purposes?
(I.) Limited Liability Company
(II.) Limited Liability Partnership
(III.) Subchapter S Corporation

A. II only.
B. II and III.
C. I and II.
D. I and III.
E. I, II, and III.
41. Which of the following statements is correct regarding the admission of a new partner?

A. A new partner must purchase a partnership interest directly from the business.
B. The right of co-ownership in the business property can be transferred to a new partner
without the consent of other existing partners.
C. The right to participate in management of the business cannot be conveyed without the
consent of other existing partners.
D. The right to share in profits and losses can be sold to a new partner without the consent of
other existing partners.
E. A new partner always pays book value.

47. 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 after revaluation. At
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.
48. The capital account balances for Donald & Hanes LLP on January 1, 2013, were as follows:

Donald and Hanes shared net income and losses in the ratio of 3:2, respectively. The
partners agreed to admit May to the partnership with a 35% interest in partnership capital and
net income. May invested $100,000 cash, and no goodwill was recognized.
What is the balance of May's capital account after the new partnership is created?

A. $84,000.
B. $100,000.
C. $140,000.
D. $176,000.
E. $200,000.