The balance sheet of the Troy Partnership at September 30, 2020, shows: Various assets$500,000Various liabilities$100,000
Capital, Thomas160,000
Capital, Renee120,000
Capital, Oscar80,000
Capital, Yvonne40,000
TOTAL$500,000TOTAL$500,000
The partners share income equally. Zeke invests $150,000 and is admitted as an equal partner.
1. The bonus method is used. Capital accounts of the partners after Zeke's admission are
a) Thomas $160,000, Renee $120,000, Oscar $80,000, Yvonne $40,000, Zeke $150,000.
b) Thomas $172,500, Renee $132,500, Oscar $92,500, Yvonne $52,500, Zeke $100,000.
c) Thomas $170,000, Renee $130,000, Oscar $90,000, Yvonne $50,000, Zeke $110,000.
d) Thomas $210,000, Renee $170,000, Oscar $130,000, Yvonne $90,000, Zeke $150,000.
2. The goodwill method is used. Capital accounts of the partners after Zeke's admission are
a) Thomas $160,000, Renee $120,000, Oscar $80,000, Yvonne $40,000, Zeke $150,000.
b) Thomas $172,500, Renee $132,500, Oscar $92,500, Yvonne $52,500, Zeke $100,000.
c) Thomas $170,000, Renee $130,000, Oscar $90,000, Yvonne $50,000, Zeke $110,000.
d) Thomas $210,000, Renee $170,000, Oscar $130,000, Yvonne $90,000, Zeke $150,000.
3. The partners share income equally. Renee decides to retire as a partner. The remaining partners agree to pay Renee $300,000 from partnership funds, and to use the bonus method. The capital accounts of the remaining partners after Renee’s retirement are
a) Thomas $160,000, Oscar $80,000, Yvonne $40,000.
b) Thomas $60,000, Oscar $(20,000), Yvonne $(60,000).
c) Thomas $100,000, Oscar $20,000, Yvonne $(20,000).
d) Thomas $90,000, Oscar $10,000, Yvonne $0.
4. Renee decides to retire as a partner. The remaining partners agree to pay Renee $300,000 from partnership funds, and to use the partial goodwill approach. The capital accounts of the remaining partners after Renee’s retirement are
a) Thomas $160,000, Oscar $80,000, Yvonne $40,000.
b) Thomas $400,000, Oscar $320,000, Yvonne $280,000.
c) Thomas $260,000, Oscar $180,000, Yvonne $140,000.
d) Thomas $220,000, Oscar $140,000, Yvonne $100,000.
5. The partners share income equally. The Troy Partnership decides to terminate operations and liquidate. To begin the process, assets with a book value of $292,000 are sold for $184,000. Under a safe payment approach, how much will be distributed to the partners?
a) Thomas $62,000, Renee $22,000, Oscar $0, Yvonne $0
b) Thomas $92,000, Renee $92,000, Oscar $0, Yvonne $0
c) Thomas $87,000, Renee $47,000, Oscar $25,000, Yvonne $25,000
d) Thomas $46,000, Renee $46,000, Oscar $46,000, Yvonne $46,000
6. The partners share income equally. Under a cash distribution plan, how would the first $150,000 be distributed?
a) $100,000 to creditors, $50,000 equally among the four partners
b) $100,000 to creditors, $50,000 equally among Thomas, Renee, and Oscar
c) $100,000 to creditors, $50,000 equally to Thomas and Oscar
d) $100,000 to creditors, $45,000 to Thomas, $5,000 to Renee