WRD_ch12_SV - 11-112-1Accounting for Partnerships and...

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Unformatted text preview: 11-112-1Accounting for Partnerships and Limited Liability Companies12Student Version11-212-2Describe the characteristics of proprietorships, partnerships, and limited liability companies.112-211-312-3A proprietorshipis a company owned by a single individual.ProprietorshipLawyersArchitectsRealtorsPhysicians111-412-4Characteristics of a Proprietorship1.Simple to form1.No limitation on legal liability1.Not taxable1.Limited life1.Limited ability to raise capital (funds)111-512-5A partnershipis an association of two or more individuals who own and manage a company for profit. PartnershipLess widely used than proprietorships.111-612-6Characteristics of a Partnership1.Moderate to form1.No limitation on legal liability1.Not taxable1.Limited life1.Limited ability to raise capital (funds)(continued)111-712-7Characteristics of a Partnership(continued)1.Co-ownership of partnership property1.Mutual agency1.Participation in income111-812-8Limited Liability CompaniesA limited liability company (LLC)is a form of legal entity that provides limited liability to its owners, but is treated as a partnership for tax purposes.111-912-9Characteristics of a Limited Liability Partnership1.Moderate to form1.Limited legal liability1.Not taxable1.Unlimited life1.Moderate ability to raise capital (funds)111-1012-10Describe and illustrate the accounting for forming a partnership and for dividing the net income and net loss of a partnership.212-1011-1112-11Forming a PartnershipJoseph Stevens and Earl Foster agree to combine their hardware businesses in a partnership. Each is to contribute certain amounts of cash and other assets. They also agree that the partnership is to assume the liabilities of the separate businesses.211-1212-12The entry to record the assets and liabilities contributed by Stevens is as follows:211-1312-13The partnership agreement of Jennifer Stone and Crystal Mills provides for Stone to receive a monthly allowance of $5,000 ($60,000 annually) and Mills is to receive $4,000 a month ($48,000 annually). If there is any remaining net income, it is to be divided equally. The firm had a net income of $150,000 for the year....
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WRD_ch12_SV - 11-112-1Accounting for Partnerships and...

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