Xavier and Yolonda 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 15%, salary allowances of $22,000 and $20,000 respectively, and the remainder equally. How much of the net income of $90,000 is allocated to Xavier?Answer$30,250$47,750$45,000$42,2502 pointsQuestion 2Xavier and Yolonda 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 equally. How much of the net income of $40,000 is allocated to Xavier?Answer$20,000$22,000$32,000$02 pointsQuestion 3Which of the following below is not one of the four major forms of business entities that are discussed in this chapter?AnswerSole proprietorshipCorporationPartnershipSubchapter S corporation2 pointsQuestion 4When an additional partner is admitted to a partnership by contribution of assets to the partnershipAnswerthe total assets of the partnership do not changeno liabilities can be contributed at the same timethe amount of the cash contribution is the same as the amount of the debit to the new partner’s capital accountthe total of the owner’s equity accounts increases2 pointsQuestion 5When a partnership is formed, assets contributed by the partners should be recorded on the partnership books at theirAnswerbook values on the partners’ books prior to their being contributed to the partnershipfair market value at the time of the contributionoriginal costs to the partner contributing themassessed values for property purposes2 pointsQuestion 6When a new partner is admitted to a partnership, there should be a(n)Answerrevaluation of assetsrealization of assetsallocation of assetsreturn of assets2 pointsQuestion 7Use the following information to answer the following questions.Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $5,000 and a fair market value of $15,000. Marta will invest a building with a book value of $30,000 and a fair market value of $35,000.At what amount will Marta’s capital account be recorded?Answer$50,000$15,000$30,000$35,0002 pointsQuestion 8Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $80,000 and $120,000 respectively. Income Summary has a credit balance of $30,000. What is Tomas’ capital balance after closing Income Summary to Capital?Answer$102,500$22,500$57,500$127,5002 pointsQuestion 9The remaining cash of a partnership (after creditors have been paid) upon liquidation is divided among partners according to theirAnswercapital balancescontribution of assetsdrawing balancesincome sharing ratio2 pointsQuestion 10The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is calledAnswerunlimited liabilityease of formationmutual agencydissolution2 pointsQuestion 11The balance sheet of Morgan and Rockwell was as follows immediately prior to the partnership’s being liquidated: cash, $20,000; other assets, $160,000; liabilities, $40,000; Morgan capital, $60,000; Rockwell capital, $80,000. The other assets were sold for $139,000. Morgan and Rockwell share profits and losses in a 2:1 ratio. As a final cash distribution from the liquidation, Morgan will receive cash totalingAnswer$46,000$51,000$60,000$49,5002 pointsQuestion 12The Craig-Doran Partnership owns inventory that was purchased for $85,000, has a current replacement cost of $54,500, and is priced to sell for $98,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted?Answer$98,000$54,500$85,000$79,1672 pointsQuestion 13Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $130,000. What amount of loss on realization should be allocated to Soledad?Answer$60,000$27,500$92,500$32,5002 pointsQuestion 14Singer and McMann are partners in a business. Singer’s original capital was $40,000 and McMann’s was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will Singer’s share of the income be if the income for the year was $50,000?Answer$24,000$22,000$16,000$23,4002 pointsQuestion 15Samuel and Darci are partners. The partnership capital for Samuel is $50,000 and for Darci is $60,000. Josh is admitted as a new partner by investing $50,000 cash. Josh is given a 20% interest in return for his investment. The amount of the bonus to the old partners isAnswer$0$18,000$8,000$10,0002 pointsQuestion 16Radley and Smithers share income and losses in a 2:1 ratio after allowing for salaries to Radley of $24,000 and $30,000 to Smithers. Net income for the partnership is $48,000. Income should be divided as follows:AnswerRadley, $24,000; Smithers, $24,000Radley, $21,000; Smithers, $27,000Radley, $32,000; Smithers, $16,000Radley, $20,000; Smithers, $28,0002 pointsQuestion 17Partnership income and losses are usually divided on the basis of interest, salaries, and stated ratios becauseAnswerpartners seldom contribute time and resources equallythis method reflects the amount of time devoted to the partnership by the partnersit is simpler than following the legal rulesit prevents arguments among the partners2 pointsQuestion 18Nick is admitted to an existing partnership by investing cash. Nick agrees to pay a bonus for his ownership interest because of the past success of the partnership. When Nick’s investment in the partnership is recordedAnswerhis capital account will be credited for more than the cash he investedhis capital account will be credited for the amount of cash he investeda bonus will be credited for the amount of cash he investeda bonus will be distributed to the old partners’ capital accounts.2 pointsQuestion 19Lambert invests $10,000 for a 1/3 interest in a partnership in which the other partners have capital totaling $26,000 before admitting Lambert. After distribution of the bonus, what is Lambert’s capital?Answer$12,000$10,000$8,667$5,3332 pointsQuestion 20If there is no written agreement as to the way income will be divided among partnersAnswerthey will share income and losses equallythey will share income and losses according to their capital balancesthey will share income and losses according to the time devoted to the business.there really is no partnership agreement2 pointsQuestion 21Douglas pays Selena $39,000 for her 30% interest in a partnership with total net assets of $105,000. Following this transaction, Selena’s capital account should have a credit balance ofAnswer$31,500$39,000$35,250more than $39,0002 pointsQuestion 22A gain or loss on realization is divided among partners according to theirAnswerincome sharing ratiocapital balancesdrawing balancescontribution of assets2 pointsQuestion 23A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm. As a results of this transaction, the capital account balance of the other partners in the partnershipAnswerwill increasewill decreasewill remain the samemay increase, decrease, or remain the same2 pointsQuestion 24A partnership liquidation occurs whenAnswera new partner is admitteda partner diesthe ownership interest of one partner is sold to a new partnerthe assets are sold, liabilities paid, and business operations terminated2 pointsQuestion 25A ratio of 2:2:1 is the same asAnswer20%:20%:10%2/5:2/5:1/52/10:2/10:1/20both (a) and (c)