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Solution to Chapter 15 Sample Quiz

# Solution to Chapter 15 Sample Quiz - Solution to Chapter 15...

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Solution to Chapter 15 Sample Quiz PARTNERSHIPS – FORMATION, OPERATIONS, AND CHANGES IN OWNERSHIP INTERESTS Multiple Choice Questions 1. c Willis: [(\$100,000 x 6) + (\$88,000 x 1) + (\$128,000 x 5)]/12 = \$110,667 Rite: [(\$120,000 x 5) + (\$105,000 x 5) + (\$155,000 x 2)]/12 = \$119,583 2. b Capital: (\$112,000 + \$119,000)x(10%) = \$23,100 Salary: (\$20,000 + \$30,000) = \$50,000 Total: \$23,100 + \$50,000 = \$73,100 3. b Willis: (\$100,000 x 10%) + \$20,000 + *\$24,000 = \$54,000 Rite: (\$120,000 x 10%) + \$30,000 + *\$24,000 = \$66,000 \$120,000 - (\$10,000 + \$20,000) + (\$12,000 + \$30,000) = \$48,000 4. b Interest: (\$500,000 x 10%) = \$50,000 Salary: (\$10,000 + \$20,000) = \$30,000 Bonus: Condition not met = \$0 Total allocations = \$80,000 and over-allocations = \$80,000 - \$60,000 = \$20,000 5. b Rogers: Interest allocation: \$20,000 Salary allocation: \$10,000 Smith: Interest allocation: \$30,000 Salary allocation: \$20,000 There is a total of \$80,000 for positive allocations. To bring them down to a \$20,000 loss, a residual adjustment of (\$100,000) is needed which is allocated (\$40,000) to Rogers and (\$60,000) to Smith. After these amounts are assigned to the partners, each partner’s capital account will be reduced by a net \$10,000. 6. c The assets will be valued upward by \$180,000 which, allocated on a 2:3:5 basis, yields \$36,000 to Able, \$54,000 to Baker, and \$90,000 to Charlie.

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7. d After the revaluation, the assets will be recorded at \$1,205,000. If Delta is
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