W. Mantle, N. Cash, and W. DiMaggio have a partnership called Outlaws. A dispute has arisen among the partners.Mantle has invested twice as much in assets as the other two partners, and he believes net income and net losses should be shared in accordance with the capital ratios.The partnership agreement does not specify the division of profits and losses. How will net income and net loss be divided?

W. Mantle, N. Cash, and W. DiMaggio have a partnership called Outlaws. A dispute has arisen among the partners.Mantle has invested twice as much in assets as the other two partners, and he believes net income and net losses should be shared in accordance with the capital ratios.The partnership agreement does not specify the division of profits and losses. How will net income and net loss be divided?

Income Tax Fundamentals 2020

38th Edition

ISBN:9780357391129

Author:WHITTENBURG

Publisher:WHITTENBURG

Chapter10: Partnership Taxation

Section: Chapter Questions

Problem 23MCQ

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Hewitt and Patel are partners, sharing gains and losses equally. They decide to terminate their partnership. Prior to realization, their capital balances are $28,000 and $18,000, respectively. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $35,000.a. What is the amount of a gain or loss on realization?b. How should the gain or loss be divided between Hewitt and Patel?c. How should the cash be divided between Hewitt and Patel?
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Jesse and Tim form a partnership by combining the assets of their separate businesses. Jesse contributes accounts receivable with a face amount of $50,000 and equipment with a cost of $180,000 and accumulated depreciation of $100,000. The partners agree that the equipment is to be valued at $58,000, that $3,500 of the accounts receivable are completely worthless and are not to be accepted by the partnership, and that $2,000 is a reasonable allowance for the uncollectibility of the remaining accounts receivable. Tim contributes cash of $21,000 and merchandise inventory of $44,500. The partners agree that the merchandise inventory is to be valued at $48,000. Required: Journalize the entries to record in the partnership accounts (a) Jesse’s investment and (b) Tim’s investment. Refer to the Chart of Accounts for exact wording of account titles.
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other. Cash $ 46,000 Liabilities $ 36,000 Land 160,000 Adams, capital 96,500 Building 150,000 Baker, capital 45,000 Carvil, capital 72,000 Dobbs, capital 106,500 Total assets $ 356,000 Total liabilities and capital $ 356,000 To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as an independent situation related to the partnership’s liquidation. The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 2:3:3:2 basis, respectively, how will the $10,000 be divided? The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and…