Assume That a Partnership Had Assets with a Book Value

question 46

Multiple Choice

Assume that a partnership had assets with a book value of $240,000 and a market value of $195,000, outside liabilities of $70,000, loans payable to partner Able of $20,000, and capital balances for partners Able, Baker, and Chapman of $70,000, $30,000, and $50,000. If all outside creditors and loans to partners had been paid, how would the balance of the assets be distributed assuming that Chapman had already received assets with a value of $30,000 assuming profits and losses are allocated equally?

• A)Each of the partners would receive $25,000.
• B)Each of the partners would receive $40,000.
• C)Able: $70,000, Baker: $30,000, Chapman: $20,000
• D)Able: $55,000, Baker: $15,000, Chapman: $5,000

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Definitions:

Adjusting Entry

An adjusting entry is a journal entry made in accounting records at the end of an accounting period to allocate income and expenditures to the appropriate period.

Prepaid Expense

Payments made in advance for goods or services to be received in the future, recognized as assets until used.

Adjusting Entry

A financial record created at the close of an accounting period to assign earnings and expenses to the time they truly took place.

Interest Receivable

This represents the amount of interest income that has been earned but not yet received in cash by the company.