Rowan and Sanjay Are Equal Partners in a Partnership,which Uses

question 144

Multiple Choice

Rowan and Sanjay are equal partners in a partnership,which uses the calendar year as its tax year.On September 1,this year,Hailley contributed $60,000 cash for a one-third interest in the partnership.The partnership reports $72,000 of ordinary income for the tax year ending on December 31 of this year.The income allocation to Hailley is (assume the elective proration method with a monthly convention)

• A)$24,000.
• B)$12,000.
• C)$0.
• D)$8,000.

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Definitions:

Working Capital

The difference between a company's current assets and current liabilities, indicating the available short-term assets to cover short-term debts.

Book Value

The value of an asset as recorded on the balance sheet, calculated as the cost of an asset minus accumulated depreciation.

Acid-test Ratio

Acid-test ratio is a financial metric that measures a company's ability to pay off its short-term liabilities with its quick assets (cash, marketable securities, and current receivables) without selling any inventory.

Debt-to-equity Ratio

A ratio illustrating the proportional use of shareholder equity and debt in the acquisition of a company's assets.