On 1 July,Herb Block Purchased the Partnership Interest of James

question 54

Multiple Choice

On 1 July,Herb Block purchased the partnership interest of James Steinfort for $40 000.The balance in Steinfort's capital account prior to the purchase was $32 000.How will this transaction be reflected on the partnership's books?

• A)Partnership will debit cash for $8 000 and credit Block's account for $40 000.
• B)Partnership will close out Steinfort's capital account for $32 000 and will open up a new capital account for Block in the same amount.
• C)No entries will be made by the partnership because the purchase is a personal transaction between the two persons and does not involve the partnership books.
• D)Partnership will close out Steinfort's account for $32 000,open Block's account for $40 000 and record a gain of $8 000.

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Definitions:

Management Reserves

Funds set aside in a project budget by management for unforeseen work or risks, not part of the baseline budget but available for use as needed.

Cost Variance

The difference between the budgeted cost of work performed and the actual cost of work performed on a project.

Estimate To Complete

A financial analysis projecting the cost required to finish a project based on its current status and past performance.

Parametric Estimates

Estimation technique using statistical relationships between historical data and variables to calculate cost, duration, and resource requirements.