McGill and Smyth have capital balances on January 1 of $50,000 and $40,000, respectively. The partnership income-sharing agreement provides for (1) annual salaries of $22,000 for McGill and $13,000 for Smyth, (2) interest at 10% on beginning capital balances, and (3) remaining income or loss to be shared 60% by McGill and 40% by Smyth. Instructions (a)Prepare a schedule showing the distribution of net income, […]

Coburn (beginning capital, $60,000) and Webb (beginning capital $90,000) are partners. During 2014, the partnership earned net income of $80,000, and Coburn made drawings of $18,000 while Webb made drawings of $24,000. Instructions (a)Assume the partnership income-sharing agreement calls for income to be divided 45% to Coburn and 55% to Webb. Prepare the journal entry to record the allocation of net income. (b)Assume the partnership […]

Terry, Nick, and Frank are forming The Doctor Partnership. Terry is transferring $30,000 of personal cash and equipment worth $25,000 to the partnership. Nick owns land worth $28,000 and a small building worth $75,000, which he transfers to the partnership. There is a long-term mortgage of $20,000 on the land and building, which the partnership assumes. Frank transfers cash of $7,000, accounts receivable of $36,000, […]

Data for Sedgwick Company are presented, Sedgwick Company at December 31 has cash $20,000, noncash assets $100,000, liabilities $55,000, and the following capital balances: Floyd $45,000 and DeWitt $20,000. The firm is liquidated, and $105,000 in cash is received for the noncash assets. Floyd and DeWitt income ratios are 60% and 40%, respectively. Instructions Prepare the entries to record: (a)The sale of noncash assets. (b)The […]

Prior to the distribution of cash to the partners, the accounts in the VUP Company are: Cash $24,000; Vogel, Capital (Cr.) $17,000; Utech, Capital (Cr.) $15,000; and Pena, Capital (Dr.) $8,000. The income ratios are 5:3:2, respectively. Instructions (a)Prepare the entry to record (1) Pena”s payment of $8,000 in cash to the partnership and (2) the distribution of cash to the partners with credit balances. […]

N. Essex, C. Gilmore, and C. Heganbart have capital balances of $50,000, $40,000, and $30,000, respectively. Their income ratios are 5:3:2. Heganbart withdraws from the partnership under each of the following independent conditions. Essex and Gilmore agree to purchase Heganbart”s equity by paying $17,000 each from their personal assets. Each purchaser receives 50% of Heganbart”s equity. Gilmore agrees to purchase all of Heganbart”s equity by […]

B. Higgins, J. Mayo, and N. Rice have capital balances of $95,000, $75,000, and $60,000, respectively. They share income or loss on a 5:3:2 basis. Rice withdraws from the partnership under each of the following conditions. Rice is paid $64,000 in cash from partnership assets, and a bonus is granted to the retiring partner. Rice is paid $52,000 in cash from partnership assets, and bonuses […]

Which of the following miscellaneous itemized expenses is not subject to the 2% limit? a. Incorrect. Unreimbursed employee business expenses are subject to the 2% limit after figuring the deductible amount of such expenses on Form 2106, (or Form 2106-EZ). b. Incorrect. Fees for e-filing a state income tax return are subject to the 2% limit. c. Incorrect. Fees to submit an amended return or […]

Who cannot take the health coverage tax credit (assuming all other eligibility requirements are met): a. Correct. Even if a taxpayer is a TAA, ATAA, RTAA, or PBGC recipient, he or she is ineligible if claimed as a dependent by another person. b. Incorrect. An eligible trade adjustment assistance recipient can claim the credit. c. Incorrect. A reemployment TAA recipient is a category of taxpayer […]

Which of the following is deductible as a miscellaneous itemized deduction? a. Incorrect. ATM fees on a personal bank account are not deductible as a miscellaneous itemized expense, even if the account is interest bearing. b. Correct. If all funds in the Roth IRA account have been withdrawn and the taxpayer has no other accounts, the difference between the amount contributed and the amount withdrawn […]