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1. After one year of operation of Smith & Kline partnership, Smith's capital account contains balance of $46,000 and Kline's capital account contains $54,000. Each partner originally invested $40,000 in firm. Partnership agreement gives for yearly salary allowances of $12,000 to Smith and $15,000 to Kline, with any balance to be shared equally. There were no extra investments during the year, and no withdrawals were made except for stipulated salary allowances. net income of the partnership should have been:

a. $ 27,000
b. $ 40,000
c. $ 45,000
d. $ 47,000
e. $100,000

2. J and K have partnership capital balances of $10,000 and $6,000, respectively. K decides to sell his interest to Z for $8,000, after receiving approval of J. Partnership entry to record this transaction is:

 

a Cash 8,000
  Z, Capital 8,000
b K, Capital 6,000
  Z, Capital 6,000
c K, Capital 8,000
  Z, Capital 8,000
d K, Capital 6,000
  J, Capital 2,000
  Z, Capital 8,000

3. Partners A, B, and C share profits and losses equally and have capital balances of $10,000, $20,000, and $30,000, respectively. B wants to withdraw from partnership, and has agreed to accept $15,000 from partnership for her interest. After this transaction, capital balance of C will:

a. Decrease to $27,500.
b. Increase to $32,500.
c. Increase to $35,000.
d. Remain unchanged.

4. Partnership recorded following journal entry:

a. Acceptance of new partner who invests $70,000 and receives a $20,000 bonus.
b. Withdrawal of partner who pays a $ 10,000 bonus to each of the other partners.
c. Addition of partner who pays a bonus to each of the other partners.
d. Additional investment into the partnership by Tanner and Jackson.
e. Withdrawal of $ 10,000 each by Tanner and Jackson upon the admission of a new partner.

5. Common stockholders have right:

a. To receive prescribed dividends.
b. To receive dividends before any dividends are paid to preferred stockholders.
c. To vote on many corporate matters.
d. To convert their shares into a stipulated number of preferred shares.

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M921817

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