1- Xavier and Yolanda have original investments of $50,000 and $100,000, respect
ID: 2530291 • Letter: 1
Question
1- Xavier and Yolanda have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 20%; salary allowances of $27,000 and $18,000, respectively; and the remainder to be divided equally. How much of the net income of $81,000 is allocated to Xavier?
a. $40,000
b. $37,000
c. $42,000
d. $42,500
2- Sandra and Kelsey are forming a partnership. Sandra will invest a piece of equipment with a book value of $7,000 and a fair market value of $16,000. Kelsey will invest a building with a book value of $38,100 and a fair market value of $58,400.
What amount will be recorded to Kelsey's capital account?
a. $16,000
b. $7,000
c. $58,400
d. $38,100
Explanation / Answer
1.
The answer is - a.
2.
Cash or property contributed by partners = Carryover basis of partner to the partnership
Kelsey basis = 38,100
Kelsey's capital account = 38,100
The answer is d.
Xavier Yolanda To allocate Net income 81,000 Interest 10,000 (50,000*20%) 20,000 (100,000*20%) (30,000) Salary allowances 27,000 18,000 (45,000) Subtotal 6,000 Profit sharing 3,000 3,000 (6,000) Allocation 40,000 41,000 0Related Questions
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