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Chapter 1: Partnership Formation On January 1, 2015, Ernie and Bert both sole proprietors decided to form a partnership to expand both of their businesses. According to their agreement, they will split profits and losses 75:25 and their initial capital wi$7.49
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Chapter 1: Partnership Formation On January 1, 2015, Ernie and Bert both sole proprietors decided to form a partnership to expand both of their businesses. According to their agreement, they will split profits and losses 75:25 and their initial capital wi
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Course
Nursing (AUD411)
Institution
Howard Univesity
Book
Wiley Series 24 Exam Review 2015 + Test Bank
Chapter 1: Partnership Formation
On January 1, 2015, Ernie and Bert both sole proprietors decided to form a partnership to expand both
of their businesses. According to their agreement, they will split profits and losses 75:25 and their initial
capital will also reflectthatratio.
The following ...
ernie and bert both sole proprietors decided to form a partnership to expand both of their businesses according to their agreement
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, Chapter 1: Partnership Formation
On January 1, 2015, Ernie and Bert both sole proprietors decided to form a partnership to e
of their businesses. According to their agreement, they will split profits and losses 75:25 and
capital will also reflect that ratio.
The following are Ernie and Bert’s Statement of Financial Position:
Ernie Proprietor
Statement of Financial Position
December 31, 2014
ASSETS LIABILITIES AND EQUITY
Bert Proprietor
Statement of Financial Position
December 31, 2014
ASSETS LIABILITIES AND EQUITY
Cash 30,000 Accounts Payable 75
Accounts receivable 110,000 Accrued expenses 90
Inventories 85,000 Notes Payable 10
Equipment 300,000 Bert, Capital 16
Accumulated Depreciation- Equipment (100,000)
TOTAL ASSETS 425,000 TOTAL LIABILITIES&EQUITY 4
The values reflected in the Statement of Financial Position are already at fair values except
following accounts:
Ernie’s Accounts Receivable is now 20,000 less than what is stated in his Statement of Finan
Both inventories of Ernie and Bert are now 90,000 and 70,000 respectively. Equipment fo
assessed value of 275,000, appraised value of 250,000 and book value of 200,000. Additi
expenses are to be established in the amount of 10,000 for Bert only while additional accou
in the amount of 5,000 for Ernie. It is also agreed that all liabilities will be assumed by the p
except for the notes payable of Bert which will be personally paid by him.
1. How much is the adjusted capital balance of Bert upon formation?
A. 91,250
B. 185,000
C. 285,000
, 2. How much is the capital credit to Ernie upon formation?
A. 80,000
B. 273,750
C. 292,000
D. 255,500
Answer: ( B )
3. How much should Ernie invest as additional cash to be in conformity with their init
agreement?
A. 193,750
B. 212,000
C. 175,500
D. 205,000
Answer: ( A )
Bonnie and Clyde enters into a partnership agreement in which Bonnie is to have 55% inter
partnership and 35% in the profits and losses, while Clyde will have 45% interest in the part
65% in the profits and losses. Bonnie contributed the following:
Cost Fair value
Building 235,000 255,000
Equipment 168,000 156,000
Land 500,000 525,000
The building and the equipment has a mortgage of 50,000 and 35,000 respectively. Clyde
contribute 150,000 cash and equipment. The partners agreed that only the building mortga
assumed by the partnership.
1. How much is the fair market value of the equipment which Clyde contributed?
A. 615,818
B. 989,143
C. 546,273
D. 574,909
Answer: ( D )
2. How much is the total asset of the partnership upon formation?
A. 1,892,143
B. 1,701,818
C. 1,660,909
D. 1,632,273
Answer: ( C )
, 2. How much is the capital credit to Ernie upon formation?
A. 80,000
B. 273,750
C. 292,000
D. 255,500
Answer: ( B )
3. How much should Ernie invest as additional cash to be in conformity with their init
agreement?
A. 193,750
B. 212,000
C. 175,500
D. 205,000
Answer: ( A )
Bonnie and Clyde enters into a partnership agreement in which Bonnie is to have 55% inter
partnership and 35% in the profits and losses, while Clyde will have 45% interest in the part
65% in the profits and losses. Bonnie contributed the following:
Cost Fair value
Building 235,000 255,000
Equipment 168,000 156,000
Land 500,000 525,000
The building and the equipment has a mortgage of 50,000 and 35,000 respectively. Clyde
contribute 150,000 cash and equipment. The partners agreed that only the building mortga
assumed by the partnership.
1. How much is the fair market value of the equipment which Clyde contributed?
A. 615,818
B. 989,143
C. 546,273
D. 574,909
Answer: ( D )
2. How much is the total asset of the partnership upon formation?
A. 1,892,143
B. 1,701,818
C. 1,660,909
D. 1,632,273
Answer: ( C )
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