17 the income loss agreement was ignored when closing the income summary and all inc 4303091

 

17) The income/loss agreement was ignored when closing the income summary and all income was distributed evenly. This error would cause:

A) the total owner's equity to be overstated.

B) the total owner's equity to be understated.

C) the total owner's equity to be unaffected.

D) the ending assets to be overstated.

 

18) Applying the ratio based on investment method, compute Taylor and Timmy's share of net income if Taylor invested $200,000 and Timmy invested $800,000. Net income was $75,000.

A) Taylor, $15,000; Timmy, $60,000

B) Taylor, $37,500; Timmy, $37,500

C) Taylor, $19,500; Timmy, $55,500

D) None of these answers is correct.

19) Partner B invested inventory using the retail selling price for valuation. This error would cause:

A) the period's net income to be overstated.

B) the period's net income to be understated.

C) the ending assets to be overstated.

D) Both A and C are correct.

 

20) Applying the profit and loss ratio method, compute Taylor and Timmy's share of net income if Taylor invested $200,000 and Timmy invested $800,000 and the profit and loss ratio is 3:2. Net income was $75,000.

A) Taylor, $15,000; Timmy, $60,000

B) Taylor, $37,500; Timmy, $37,500

C) Taylor, $45,000; Timmy, $30,000

D) None of these answers is correct.

 

21) Kate and Joe formed a partnership in 2012. Joe invested $60,000 and Kate invested $30,000. The partnership had $150,000 in income during 2012. There is no agreement as to how income is divided. Kate and Joe's share is:

A) Kate gets $100,000 and Joe gets $50,000.

B) Kate gets $50,000 and Joe gets $100,000.

C) Kate gets $75,000 and Joe gets $75,000.

D) some other division.

 

22) Partners are required to report their share of earnings on their personal tax return.

 

23) Before calculating salary and interest allowances, it is necessary to determine whether net income will cover these expenses.

24) The profit and loss ratio is required to be equally divided between and among the partners.

 

25) A loss occurs when net income is not large enough to cover salary and interest allowances for the partners.

 

26) An interest allowance is based on a partner's individual initial investment of capital.

 

 

 

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Regards,

Cathy, CS.