Partnerships - Attributes
The withdrawals account of each partner is closed to which account?
That partner's capital account
Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $87,000. However, the building carries a $49,000 mortgage that will be assumed by the partnership. Smart is investing $34,000 cash. The balance of Maxwell's Capital account will be this.
$38,000
The following data were reported by a corporation:
Authorized shares 38,000
Issued shares 33,000
Treasury shares 12,500
The number of outstanding shares is this.
20,500 (33,000 issued - 12,500 treasury)
The carrying value of bonds at maturity always equals this.
The par value of the bond.
Morgan Company issues 9%, 20-year bonds with a par value of $750,000 that pay interest semiannually. The current market rate is 8%. The amount paid to the bondholders for each semiannual interest payment is this.
$33,750 ($750,000 x 9% x 1/2 year)
True or False: A partnership agreement is binding even if it is not in writing.
True
Reno contributed $239,000 in cash plus equipment valued at $39,000 to the RD Partnership. The journal entry to record the transaction for the partnership is this.
Debit Cash $239,000; debit Equipment $39,000; credit Reno, Capital $278,000.
A company paid $0.52 in cash dividends per share. Its earnings per share is $4.24 and its market price per share is $29.50. Its dividend yield equals this.
1.76% ($.52 cash dividends/$29.50 market price per share = .0176 = 1.76%)
The contract between the bond issuer and the bondholders identifying the rights and obligations of the parties, is called a(n)
Bond Indenture
A company issues 8% bonds with a par value of $40,000 at par on January 1. The market rate on the date of issuance was 7%. The bonds pay interest semiannually on January 1 and July 1. The cash paid on July 1 to the bond holder(s) is this.
$1,600 ($40,000 x 8% x 1/2 year)
In the absence of a partnership agreement, the law says that income (and loss) should be allocated based on this.
Equal Shares
Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $70,800, Davis contributing $59,000 and Singer contributing $47,200. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $102,000 for its first year of operation, this is the amount of income (rounded to the nearest thousand) that would be credited to Singer's capital account.
$27,200
Hutter Corporation declared a $0.50 per share cash dividend on its common shares. The company has 40,000 shares authorized, 21,000 shares issued, and 16,000 shares of common stock outstanding. The journal entry to record the dividend declaration is this.
Debit Retained Earnings $8,000; credit Common Dividends Payable $8,000.
(16,000 shares outstanding x $0.50 per share cash dividend)
1) These bonds have specific assets of the issuing company pledged as collateral
2) These bonds have an option exercisable by the issuer to retire them at a stated dollar amount prior to maturity
3) These bonds are Bonds owned by investors whose names and addresses are recorded by the issuing company, and for which interest payments are made with checks or cash transfers to the bondholders
4) These bonds are not collateralized but backed only by the issuer's general credit standing.
1) Secure Bonds; 2) Callable Bonds; 3) Registered Bonds; 4) Debenture Bonds
Adonis Corporation issued 10-year, 8% bonds with a par value of $200,000. Interest is paid semiannually. The market rate on the issue date was 7.5%. Adonis received $206,948 in cash proceeds. What is Adonis required to pay?
Adonis must pay $200,000 at maturity plus 20 interest payments of $8,000 each
Partnership accounting is the same as accounting for this type of business, except that separate capital and withdrawal accounts are kept for each partner.
A sole proprietorship
Debit Income Summary, $143,000; Credit Zheng, Capital, $76,500, Credit Murray, Capital, $66,500.
A corporation issued 5,200 shares of $10 par value common stock in exchange for some land with a market value of $74,000. The entry to record this exchange is this.
Debit Land $74,000; credit Common Stock $52,000; credit Paid-In Capital in Excess of Par Value, Common Stock $22,000.
These are the three advantages of bonds.
1) Bonds do not affect owner control; 2) Interest on bonds in tax deductible; 3) Bonds can increase return on equity.
On January 1, a company issues bonds dated January 1 with a par value of $300,000. The bonds mature in 5 years. The contract rate is 9%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $312,177. The journal entry to record the issuance of the bond is this.
Debit Cash $312,177; credit Premium on Bonds Payable $12,177; credit Bonds Payable $300,000.
A partnership in which all partners have mutual agency and unlimited liability is called a ____________________. A partnership that has two classes of partners, general and limited, where the limited partners have no personal liability beyond the amounts they invest in the partnership, and no active role in the partnership, except as specified in the partnership agreement is called a _______________________.
General Partnership; Limited Partnership
Charger Company's most recent balance sheet reports total assets of $27,000,000, total liabilities of $15,000,000 and total equity of $12,000,000. Also, its net income of $880,000; its weighted-average common shares outstanding are 176,000. Its dividend per share is $1.15, its market price per share is $102, and its book value per share is $97.00.
The debt to equity ratio for the period is ________ (rounded to two decimals) and the pricing-earnings ratio equals _________.
1.25; 20.40
Sweet Company’s outstanding stock consists of 1,400 shares of cumulative 6% preferred stock with a $100 par value and 10,400 shares of common stock with a $10 par value. During the first three years of operation, the corporation declared and paid the following total cash dividends.
Dividend Declared
year 1 $ 2,400
year 2 $ 6,400
year 3 $ 34,000
The amount of dividends paid to preferred and common shareholders in year 3 is this.
$16,400 preferred; $17,600 common.
Preferred: $8,400 per year (1,400 shares x $100 par value x 6%)
These are the two disadvantages of bond financing.
1) Bonds require payment of both periodic interest and the repayment of par value at maturity; 2) Bonds can decrease return on equity.
On January 1, a company issues bonds dated January 1 with a par value of $400,000. The bonds mature in 5 years. The contract rate is 7%, and interest is paid semiannually on June 30 and December 31. The market rate is 8% and the bonds are sold for $383,793. The journal entry to record the issuance of the bond is this.
Debit Cash $383,793; debit Discount on Bonds Payable $16,207; credit Bonds Payable $400,000