Assume That a Partnership Had Assets with a Book Value

question 27

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. How would the first $100,000 of available assets be distributed assuming profits and losses are allocated equally?

• A)$70,000 to outside liabilities, $20,000 to Able, and the balance equally among the partners
• B)$70,000 to outside liabilities and $30,000 to Able
• C)$70,000 to outside liabilities, $25,000 to Able, and $5,000 to Chapman
• D)$40,000 to Able, $20,000 to Chapman, and the balance equally among the partners

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Definitions:

Retained Earnings

Retained earnings refer to the portion of net income which is retained by the corporation rather than distributed to its owners as dividends.

Closing Entries

Closing entries are journal entries made at the end of an accounting period to transfer temporary account balances to permanent accounts, preparing the books for the next period.

Closing Entry

A journal entry made at the end of an accounting period to transfer temporary account balances to permanent accounts.

Revenue Accounts

Revenue accounts are those used in accounting to track the income generated by a business from its normal operations.