Note: This Is a Kaplan CPA Review Question

question 29

Multiple Choice

Note: This is a Kaplan CPA Review Question
Cor-Eng Partnership was formed on January 2, 20X1. Under the partnership agreement, each partner has an equal initial capital balance accounted for under the goodwill method. Partnership net income or loss is allocated 60% to Cor and 40% to Eng. To form the partnership, Cor originally contributed assets costing $30,000 with a fair value of $60,000 on January 2, 20X1, while Eng contributed $20,000 in cash. Drawings by the partners during 20X1 totaled $3,000 by Cor and $9,000 by Eng. Cor-Eng's 20X1 net income was $25,000. Eng's initial capital balance in Cor-Eng is

• A) $25,000.
• B) $20,000.
• C) $60,000.
• D) $40,000.

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Definitions:

Hurdle Rate

The minimum rate of return on an investment that is required by a manager or investor to proceed with the investment.

Income Taxes

Taxes imposed by the government on the income generated by businesses and individuals.

Net Present Value

A financial metric that calculates the present value of all cash flows (both incoming and outgoing) associated with an investment, adjusted for time and interest.

Internal Rate of Return

A financial metric used to evaluate the profitability of an investment, indicating the annual return that makes the net present value of all cash flows from a particular project equal to zero.