ACC 12-002: Self-Test Questions
Emil Andersson
Prof. Michael J. Abatemarco
ACC 12- 002
Spring 2015
01/27/2015
Self-test questions
1. A. The five characteristics of partnership are associations of individuals, mutual agency, limited life, unlimited liability and co-ownership of property. The income of the partnership is not taxed as a regular entity. It is taxable on each partner’s personal tax rates, which is called associations of individuals.
2. C. Basis for splitting partnership income taxes is not part of a partnership agreement. The income is taxable on each partner’s personal tax rate.
3. B. Unlimited liability is rather a disadvantage than an advantage of a partnership. Unlimited liabilities are worrying for owners in partnership since their personal assets are at …show more content…
B. Creekville sells its noncash assets, that has a value of 95 000, for only 85 000, which makes the sale to a loss of 10 000. That in return affects Elly’s allocation of cash, since she has to pay 40% of the loss of 10 000, which leads an allocation of only 48 000 (52 000- 4000).
12. If a partner with a capital deficiency is unable to pay the amount owed to the partnership, then the other partner’s must go in and take care of the loss. The sale results in a loss of 35 000. Loss allocation: Harriet 23 000-(35 000x20%)=14 000, Mike 8000-(35 000x40%)= -6000, Elly 52 000-(35 000x40%)= 38 000. Mike’s deficiency is 6000 and Elly has to take responsibility for 2/3 of that (6000x2/3=4000). That leaves Elly with 38 000-4000=34 000.
13. D. Santiago purchase 50% of Lemon’s capital interest of the company, which is 15000. Santiago’s capital balance therefore is 15 000.
14. D. Net assets and total capital increases with 60 000 when Oleg invest in the company. The partnership allocates the bonus caused by the investment with the former income ratios, which only makes the old partners able to collect bonus. The total capital of the new partnership is 210 000. The new owner’s capital credit becomes 210000x25%=52 500. To determine the bonus => 60 000-52 500=7500. Therefore, Mills allocates a bonus of 7500x20%=
Prof. Michael J. Abatemarco
ACC 12- 002
Spring 2015
01/27/2015
Self-test questions
1. A. The five characteristics of partnership are associations of individuals, mutual agency, limited life, unlimited liability and co-ownership of property. The income of the partnership is not taxed as a regular entity. It is taxable on each partner’s personal tax rates, which is called associations of individuals.
2. C. Basis for splitting partnership income taxes is not part of a partnership agreement. The income is taxable on each partner’s personal tax rate.
3. B. Unlimited liability is rather a disadvantage than an advantage of a partnership. Unlimited liabilities are worrying for owners in partnership since their personal assets are at …show more content…
B. Creekville sells its noncash assets, that has a value of 95 000, for only 85 000, which makes the sale to a loss of 10 000. That in return affects Elly’s allocation of cash, since she has to pay 40% of the loss of 10 000, which leads an allocation of only 48 000 (52 000- 4000).
12. If a partner with a capital deficiency is unable to pay the amount owed to the partnership, then the other partner’s must go in and take care of the loss. The sale results in a loss of 35 000. Loss allocation: Harriet 23 000-(35 000x20%)=14 000, Mike 8000-(35 000x40%)= -6000, Elly 52 000-(35 000x40%)= 38 000. Mike’s deficiency is 6000 and Elly has to take responsibility for 2/3 of that (6000x2/3=4000). That leaves Elly with 38 000-4000=34 000.
13. D. Santiago purchase 50% of Lemon’s capital interest of the company, which is 15000. Santiago’s capital balance therefore is 15 000.
14. D. Net assets and total capital increases with 60 000 when Oleg invest in the company. The partnership allocates the bonus caused by the investment with the former income ratios, which only makes the old partners able to collect bonus. The total capital of the new partnership is 210 000. The new owner’s capital credit becomes 210000x25%=52 500. To determine the bonus => 60 000-52 500=7500. Therefore, Mills allocates a bonus of 7500x20%=