Question

1. Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership’s capital balances are Caitlin, $128,000; Chris, $88,000; and Molly, $108,000. Paul is admitted to the partnership on July 1 with a 15% equity and invests $168,000. The balance in Caitlin’s capital account immediately after Paul’s admission is:

A. 99,740 B. 125,680 C. 136,260 D. 156,260 E. 168,000

2. Mohr Company purchases a machine at the beginning of the year at a cost of $26,000. The machine is depreciated using the double-declining-balance method. The machine’s useful life is estimated to be 5 years with a $5,000 salvage value. The machine’s book value at the end of year 2 is:

A. 8,200 B. 10,400 C. 9,360 D. 15,600 E. 12,600

3. Zheng invested $156,000 and Murray invested $256,000 in a partnership. They agreed to share incomes and losses by allowing a $74,000 per year salary allowance to Zheng and a $54,000 per year salary allowance to Murray, plus an interest allowance on the partners’ beginning-year capital investments at 10%, with the balance to be shared equally. Assuming net income for the current year is $133,000, the journal entry to allocate net income is:

A. Debit Income Sum, 133,000; Credit Zheng, Capital, 46,200, Credit Murray, Capital, 86,800

B. Debit Zheng, Capital, 71,500, Debit Murray, Capital, 61,500; Credit Income Summary, 133,000

C. Debit Income Summary, 133,000; Credit Zheng, Capital, 45,300, Credit Murray, Capital, 87,700

D. Debit Income Summary, 133,000; Credit Zheng, Capital, 65,500, Credit Murrya, Capital, 66,500

E. Debit Income Summary, 133,000; Credit Zheng, Capital, 71,500, Credit Murray, Capital, 61,500

4. On January 1, a company issues bonds dated January 1 with a par value of $220,000. The bonds mature in 3 years. The contract rate is 6%, and interest is paid semiannually on June 30 and December 31. The market rate is 7%. Using the present value factors below, the issue (selling) price of the bonds is:

A. 214,139 B. 220,000 C. 225,861 D. 35,169 E.178,970

n=		i=			Present Value of an Annuity (series of payments)			Present value of 1 (single sum)
3		6.0	%			2.6730		0.8396
6		3.0	%			5.4172		0.8375
3		7.0	%			2.6243		0.8163
6		3.5	%			5.3286		0.8135

Answer 1