Accounting Midterm Exam ACG-2011: Question 104

Adidas issued 10-year, 11% bonds with a par value of $300,000. Interest is paid semiannually. The market rate on the issue date was 10%. Adidas received $318,696 in cash proceeds. Which of the following statements is True?

	Adidas must pay $300,000 at maturity and no interest payments.
	Adidas must pay $318,696 at maturity plus 20 interest payments of $16,500 each.
	Adidas must pay $300,000 at maturity plus 20 interest payments of $15,000 each.
	Adidas must pay $300,000 at maturity plus 20 interest payments of $16,500 each.
	Adidas must pay $318,696 at maturity and no interest payments.

Accounting Midterm Exam ACG-2011: Question 103

A company has bonds outstanding with a par value of $100,000. The unamortized discount on these bonds is $4,500. The company retired these bonds by buying them on the open market at 95. What is the gain or loss on this retirement?

	$5,000 gain.
	$5,000 loss.
	$0 gain or loss.
→	$500 gain.
	$500 loss.

Par value	$100,000
Unamortized discount	4,500
Carrying value of bonds	$ 95,500
Retirement price	95,000
Gain on retirement	$   500

Accounting Midterm Exam ACG-2011: Question 96

A company must repay the bank a single payment of $21,000 cash in 2 years for a loan it entered into. The loan is at 10% interest compounded annually. The present value factor for 2 years at 10% is 0.8264. The present value of the loan (closest to) is:

	$17,354.
	$25,200.
	$16,800.
	$21,000.
	$18,900.

$21,000 × 0.8264 = $17,354

Accounting Midterm Exam ACG-2011: Question 92

A company purchased equipment and signed a 7-year installment loan at 9% annual interest. The annual payments equal $9,000. The present value of an annuity for 7 years at 9% is 5.0330. The present value of the loan is:

	$45,297.
	$5,033.
	$63,000.
	$9,000.
	$57,330.

$9,000 x 5.0330= $45,297

Accounting Midterm Exam ACG-2011: Question 90

Amortizing a bond discount:

	Allocates a portion of the total discount to interest expense each interest period.
	Decreases the Bonds Payable account.
	Decreases interest expense each period.
	Increases cash flows from the bond.
	Increases the market value of the Bonds Payable.

Accounting Midterm Exam ACG-2011: Question 89

Pitt Corporation's most recent balance sheet reports total assets of $35,000,000 and total liabilities of $17,500,000. Management is considering issuing $5,000,000 of par value bonds (at par) with a maturity date of ten years and a contract rate of 7%. What effect, if any, would issuing the bonds have on the company's debt-to-equity ratio?

	Issuing the bonds would cause the firm's debt-to-equity ratio to improve from .5 to .8.
	Issuing the bonds would cause the firm's debt-to-equity ratio to improve from 1.0 to 1.3.
→	Issuing the bonds would cause the firm's debt-to-equity ratio to worsen from 1.0 to 1.3.
	Issuing the bonds would cause the firm's debt-to-equity ratio to remain unchanged.
	Issuing the bonds would cause the firm's debt-to-equity ratio to worsen from .5 to .8.

Current Situation:	Total Assets = Total Liabilities + Stockholders' Equity
	35,000,000    =   17,500,000    +   17,500,000
	Debt-to-equity ratio = 17.5 / 17.5 or 1.0.
If debt is issued:	Total Assets = Total Liabilities + Stockholders' Equity
	40,000,000   =   22,500,000    +  17,500,000
	Debt-to-equity ratio = 22.5 / 17.5 or 1.3.

Accounting Midterm Exam ACG-2011: Question 88

Which of the following statements is True?

	Bonds always increase return on equity.
	Bonds do not have to be repaid.
	Interest on bonds is not tax deductible.
	Dividends to stockholders are tax deductible.
	Interest on bonds is tax deductible.

Accounting Midterm Exam ACG-2011: Question 86

A company issues at par 9% bonds with a par value of $100,000 on April 1. The bonds pay interest semi-annually on January 1 and July 1. The cash received on July 1 by the bond holder(s) is:

	$6,000.
	$1,500.
	$7,500.
	$3,000.
→	$4,500.

$100,000 x .09 x 1/2 year = $4,500

Accounting Midterm Exam ACG-2011: Question 83

A bond sells at a discount when the:

	Contract rate is below the market rate.
	Bond has a short-term life.
	Bond pays interest only once a year.
	Contract rate is above the market rate.
	Contract rate is equal to the market rate.

Accounting Midterm Exam ACG-2011: Question 82

A corporation borrowed $125,000 cash by signing a 5-year, 9% installment note requiring equal annual payments each December 31 of $32,136. What journal entry would the issuer record for the first payment?

	Debit Interest Expense $11,250; debit Notes Payable $20,886; credit Cash $32,136.
	Debit Notes Payable $11,250; credit Cash $11,250.
	Debit Interest Expense $7,136; debit Notes Payable $25,000; credit Cash $32,136.
	Debit Notes Payable $32,136; debit Interest Payable $11,250; credit Cash $43,386.
	Debit Notes Payable $32,136; credit Cash $32,136.

Interest expense = $125,000 x 9% = $11,250
Principal reduction = $32,136 - $11,250 = $20,886

Accounting Midterm Exam ACG-2011: Question 81

Bonds can be issued:

	At par.
	At a premium.
	At a discount.
	Between interest payment dates.
	All of these.

Accounting Midterm Exam ACG-2011: Question 77

A company borrowed cash from the bank by signing a 5-year, 8% installment note. The present value of an annuity at 8% for 5 years is 3.9927. Each annuity payment equals $75,137.13. The present value of the note is (closest to):

	$94,013.13.
	$197,810.00.
	$75,137.13.
	$375,137.13.
	$300,000.00.

$75,137.13 x 3.9927 = $300,000

Accounting Midterm Exam ACG-2011: Question 76

Bonds that have interest coupons attached to their certificates, which the bondholders detach during each interest period and present to a bank for collection, are called:

	Callable bonds.
	Coupon bonds.
	Serial bonds.
	Convertible bonds.
	Registered bonds.

Accounting Midterm Exam ACG-2011: Question 74

Secured bonds:

	Have specific assets of the issuing company pledged as collateral.
	Are backed by the issuer's bank.
	Are subordinated to those of other unsecured liabilities.
	Are called debentures.
	Are the same as sinking fund bonds.

Accounting Midterm Exam ACG-2011: Question 73

All of the following statements regarding leases are True except:

	Capital leases do not transfer ownership of the asset under the lease, but operating leases often do.
	Capital leases create a long-term liability on the balance sheet, but operating leases do not.
	For a capital lease the lessee depreciates the asset acquired under the lease, but for an operating lease the lessee does not.
	For a capital lease the lessee records the leased item as its own asset.
	For an operating lease the lessee reports the lease payments as rental expense.

Accounting Midterm Exam ACG-2011: Question 72

A company has bonds outstanding with a par value of $100,000. The unamortized premium on these bonds is $2,700. If the company retired these bonds at a call price of 99, the gain or loss on this retirement is:

	$1,000 gain.
	$3,700 gain.
	$2,700 gain.
	$1,000 loss.
	$2,700 loss.

Par value	$100,000
Unamortized premium	2,700
Carrying value of bonds	$102,700
Retirement price	99,000
Gain on retirement	$   3,700

Accounting Midterm Exam ACG-2011: Question 68

A corporation sold 17,500 shares of its $10 par value common stock at a cash price of $15 per share. The entry to record this transaction would include:

	A debit to Paid-in Capital in Excess of Par Value, Common Stock for $87,500.
	A debit to Cash for $175,000.
	A credit to Common Stock for $262,500.
	A credit to Paid-in Capital in Excess of Par Value, Common Stock for $262,500.
→	A credit to Common Stock for $175,000.

Accounting Midterm Exam ACG-2011: Question 67

A company has 725 shares of $50 par value preferred stock outstanding, and the call price of its preferred stock is $64 per share. It also has 29,000 shares of common stock outstanding, and the total value of its stockholders' equity is $1,015,000. The company's book value per common share equals:

	$50.00.
	$32.59.
	$35.00.
	$34.15.
	$33.40.

($1,015,000 – (725 preferred shares × $64))/29,000 common shares = $33.40/common share

Accounting Midterm Exam ACG-2011: Question 64

The following data has been collected about a company's stockholders' equity accounts:
 

Common stock $10 par value 26,000 shares authorized and   13,000 shares issued, 1,600 shares in treasury	$130,000
Paid-in-capital in excess of par value, common stock	56,000
Retained earnings	31,000
Treasury stock	19,360

  

The treasury shares were all purchased at the same price.

The cost per share of the treasury stock is:

	$1.49.
	$11.10.
	$1.70.
	$12.10.
	$10.00.

$19,360/1,600 = $12.10, the cost per share of treasury stock.

Accounting Midterm Exam ACG-2011: Question 63

A company had a beginning balance in retained earnings of $44,300. It had net income of $7,300 and paid out cash dividends of $5,950 in the current period. The ending balance in retained earnings equals:

	$57,550.
	$51,600.
	$13,250.
	$45,650.
	$42,950.

Beginning balance	$ 44,300
Plus net income	7,300
Less dividends	(5,950)
Ending balance	$ 45,650

Accounting Midterm Exam ACG-2011: Question 61

A company's board of directors votes to declare a cash dividend of $1.15 per share. The company has 23,000 shares authorized, 18,000 issued, and 17,500 shares outstanding. The total amount of the cash dividend is:

	$40,825.
	$20,125.
	$20,700.
	$26,450.
	$25,450.

$1.15 × 17,500 shares = $20,125

Accounting Midterm Exam ACG-2011: Question 60

A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of paid-in capital is:

→	$7,000.
	$1,000.
	$6,000.
	$600.
	$100.

Accounting Midterm Exam ACG-2011: Question 59

Corporations often buy back their own stock:

	To avoid a hostile take-over.
	To have shares available for a merger or acquisition.
	To have shares available for employee compensation.
	To maintain market value for the company stock.
	All of these.

Accounting Midterm Exam ACG-2011: Question 58

The retirement of stock:

	Reduces the number of issued shares.
	Does not reduce the number of authorized shares.
	Removes all paid-in capital amounts related to the retired shares.
	Reduces retained earnings if the purchase price exceeds the net amount removed from paid-in capital.
→	All of these.

Accounting Midterm Exam ACG-2011: Question 55

Retained earnings:

	Generally consists of a company's cumulative net income less any net losses and dividends declared since its inception.
	Can only be appropriated by setting aside a cash fund.
	Represent an amount of cash available to pay shareholders.
	Are never adjusted for anything other than net income or dividends.
	All of these.

Accounting Midterm Exam ACG-2011: Question 52

Achieving an increased return on common stock by paying dividends on preferred stock at a rate that is less than the rate of return earned with the assets invested from the preferred stock issuance is called:

	Financial leverage.
	Discount on stock.
	Preemptive right.
	Premium on stock.
	Capital gain.

Accounting Midterm Exam ACG-2011: Question 51

A company declared a $0.50 per share cash dividend. The company has 20,000 shares authorized, 9,000 shares issued, and 8,000 shares of common stock outstanding. The journal entry to record the dividend declaration is:

	Debit Common Dividends Payable $4,500; credit Cash $4,500.
	Debit Retained Earnings $4,000; credit Common Dividends Payable $4,000.
	Debit Retained Earnings $4,500; credit Common Dividends Payable $4,500.
	Debit Common Dividends Payable $4,000; credit Cash $4,000.
	Debit Retained Earnings $10,000; credit Common Dividends Payable $10,000.

$0.50 x 8,000 shares = $4,000

Accounting Midterm Exam ACG-2011: Question 49

Preferred stock on which the right to receive dividends is forfeited for any year that the dividends are not declared is referred to as:

	Cumulative preferred stock.
	Callable preferred stock.
	Convertible preferred stock.
	Participating preferred stock.
	Noncumulative preferred stock.

Accounting Midterm Exam ACG-2011: Question 48

A corporation had 50,000 shares of $20 par value common stock outstanding on July 1. Later that day the board of directors declared a 10% stock dividend when the market value of each share was $27. The entry to record this dividend is:

	Debit Retained Earnings $100,000; credit Common Stock Dividend Distributable $100,000.
	Debit Retained Earnings $135,000; credit Cash $135,000.
	Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $135,000.
	No entry is made until the stock is issued.
→	Debit Retained Earnings $135,000; credit Common Stock Dividend Distributable $100,000; credit Paid-In Capital in Excess of Par Value, Common Stock $35,000.

Retained earnings: 50,000 shares x 10% x $27 = $135,000
Common Stock Dividend Distributable: 50,000 shares x 10% x $20 = $100,000
Paid-in Capital in Excess of Par Value, Common Stock: 50,000 shares x 10% x $7 = $35,000

Accounting Midterm Exam ACG-2011: Question 45

A corporation was formed on January 1. The corporate charter authorized 100,000 shares of $10 par value common stock. During the first month of operation, the corporation issued 300 shares to its attorneys in payment of a $5,000 charge for drawing up the articles of incorporation. The entry to record this transaction would include:

	A credit to Common Stock for $5,000.
	A debit to Organization Expenses for $5,000.
	A credit to Paid-in Capital in Excess of Par Value, Common Stock for $5,000.
	A debit to Paid-in Capital in Excess of Par Value, Common Stock for $2,000.
	A debit to Organization Expenses for $3,000.

Accounting Midterm Exam ACG-2011: Question 44

Shamrock Company had net income of $30,000. The weighted-average common shares outstanding were 8,000. The company declared a $2,700 dividend on its noncumulative, nonparticipating preferred stock. There were no other stock transactions. The company's earnings per share is:

	$3.41.
	$2.73.
	$3.75.
	$3.16.
	$2.87.

($30,000 - $2,700)/8,000 = $3.41

Accounting Midterm Exam ACG-2011: Question 42

A company issued 60 shares of $100 par value stock for $7,000 cash. The total amount of paid-in capital in excess of par is:

	$600.
	$7,000.
	$6,000.
	$100.
	$1,000.

Accounting Midterm Exam ACG-2011: Question 40

A company has net income of $850,000. It has 125,000 weighted-average common shares outstanding, a market value per share of $115, and a book value of $100 per share. The company's price-earnings ratio equals:

	8.0.
	14.7.
	13.5.
	92.0.
	16.9.

$115/($850,000/125,000 shares) = 16.9

Accounting Midterm Exam ACG-2011: Question 35

Trump and Hawthorne have decided to form a partnership. Trump is going to contribute a depreciable asset to the partnership as his equity contribution to the partnership. The following information regarding the asset to be contributed by Trump is available:   

Historical cost of the asset	$82,000
Accumulated depreciation on the asset	$43,000
Note payable secured by the asset*	$25,000
Agreed-upon market value of the asset	$48,000

*will be assumed by the partnership

Based on this information, Trump's beginning equity balance in the partnership will be:

→	$23,000
	$48,000
	$39,000
	$82,000
	$25,000

$48,000 market value of the asset – $25,000 of debt (note payable) assumed by the partnership = $23,000.

Accounting Midterm Exam ACG-2011: Question 32

Smith, West, and Krug form a partnership. Smith contributes $198,000, West contributes $165,000, and Krug contributes $297,000. Their partnership agreement calls for a 5% interest allowance on the partner's capital balances with the remaining income or loss to be allocated equally. If the partnership reports income of $195,000 for its first year, what amount of income is credited to West's capital account?

	$63,900.
	$62,250.
	$65,000.
	$68,850.
	$54,000.

$660,000 × 0.05 = $33,000 for interest allowance

$195,000 – $33,000 = $162,000 / 3 = $54,000 remainder divided equally

$165,000 × 0.05 = $8,250 interest allowance for West

$8,250 + $54,000 = $62,250

Accounting Midterm Exam ACG-2011: Question 31

Rice, Hepburn, and DiMarco formed a partnership with Rice contributing $62,400, Hepburn contributing $52,000 and DiMarco contributing $41,600. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $81,000 for its first year of operation, what amount of income would be credited to DiMarco's capital account? (Do not round your intermediate calculations. Round your final answer to the nearest thousand.)

	$81,000.
	$41,600.
	$27,000.
	$32,400.
	$21,600.

$81,000 × ($41,600 / ($62,400 + $52,000 + $41,600)) = $21,600

Accounting Midterm Exam ACG-2011: Question 30

Renee Jackson is a partner in Sports Promoters. Her beginning partnership capital balance for the current year is $55,400, and her ending partnership capital balance for the current year is $62,400. Her share of this year's partnership income was $5,650. What is her partner return on equity?

	9.59%
	11.04%
	9.05%
	10.20%
	9.81%

$5,650 / [($55,400 + $62,400) / 2] = 9.59%

Accounting Midterm Exam ACG-2011: Question 26

Mack, Harris, and Huss are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Mack, $15,600, Harris, $15,600, Huss, $(2,600). After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $28,600 in cash to be distributed. Huss pays $2,600 to cover the deficiency in his account. The general journal entry to record the final distribution would be:

→	Debit Mack, Capital $15,600; debit Harris, Capital $15,600; credit Cash $31,200.
	Debit Mack, Capital $9,534; debit Harris, Capital $9,533; debit Huss, Capital $9,533; credit Cash $28,600.
	Debit Cash $28,600; debit Huss, Capital $2,600; credit Mack, Capital $15,600; credit Harris, Capital $15,600.
	Debit Mack, Capital $15,600; debit Harris, Capital $15,600; credit Huss, Capital $2,600; credit Cash $28,600.
	Debit Mack, Capital $14,300; debit Harris, Capital $14,300; credit Cash $28,600.

		Capital
	Cash	Mack	Harris	Huss
	$28,600	$15,600	$15,600	$(2,600)
Contribution by Huss	2,600			2,600
Allocate cash	(31,200)	(15,600)	(15,600)	0

Accounting Midterm Exam ACG-2011: Question 27

The partnership agreement for Smith Wesson & Davis, a general partnership, provided that profits be shared between the partners in the ratio of their financial contributions to the partnership. Smith contributed $80,000, Wesson contributed $48,000 and Davis contributed $16,000. In the partnership's first year of operation, it incurred a loss of $198,000. What amount of the partnership's loss, should be absorbed by Smith? (Do not round your intermediate calculations and round your final answer to the nearest whole dollar amount.)

	$22,000
	$110,000
	$49,500
	$99,000
	$66,000

If the partnership agreement does not specifically address how losses are to be allocated between the partners, the losses are to be shared in the same manner as profits.

Therefore, since Smith's capital contribution ($80,000) represented 5/9 of the total capital upon formation ($80,000 + $48,000 + $16,000), Smith should be allocated 5/9 of the $198,000 loss or $110,000.

Accounting Midterm Exam ACG-2011: Question 25

Renee Jackson is a partner in Sports Promoters. Her beginning partnership capital balance for the current year is $55,000, and her ending partnership capital balance for the current year is $62,000. Her share of this year's partnership income was $5,250. What is her partner return on equity?

	9.54%
	10.47%
	8.47%
	10.60%
	8.97%

$5,250/[($55,000 + $62,000)/2] = 8.97%

Accounting Midterm Exam ACG-2011: Question 23

Groh and Jackson are partners. Groh's capital balance in the partnership is $64,000, and Jackson's capital balance is $61,000. Groh and Jackson have agreed to share equally in income or loss. Groh and Jackson agree to accept Block with a 20% interest. Block will invest $35,000 in the partnership. The bonus that is granted to Groh and Jackson equals:

	$1,875 each.
	1,920 to Groh; $1,830 to Jackson.
	$3,750 each.
→	$1,500 each.
	$0, because Groh and Jackson actually grant a bonus to Block.

Total partnership equity = $64,000 + $61,000 + $35,000 = $160,000.
Equity of Block (20% × 160,000) = $ 32,000.
Bonus available for the old partners = ($35,000 − 32,000)/2 = $1,500 each.

Accounting Midterm Exam ACG-2011: Question 21

Shelby and Mortonson formed a partnership with capital contributions of $300,000 and $400,000, respectively. Their partnership agreement calls for Shelby to receive a $60,000 per year salary. Also, each partner is to receive an interest allowance equal to 10% of a partner's beginning capital investments. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Shelby and Mortonson's respective shares are:

	$35,000; $100,000.
	$67,500; $67,500.
	$92,500; $42,500.
	$57,857; $77,143.
	$90,000; $40,000.

	Shelby	Mortonson	Total
Net income			$135,000
Salary allowance	$60,000		(60,000)
Interest allowance	30,000	$40,000	(70,000)
Balance of income			5,000
Balance divided equally	2,500	2,500	(5,000)
Total	$92,500	$42,500	$         0

Accounting Midterm Exam ACG-2011: Question 19

Nee High and Low Jack are partners in an accounting firm and share net income and loss equally. High's beginning partnership capital balance for the current year is $285,000, and Jack's beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. High withdrew $90,000 during the year and Jack withdrew $100,000. What is Jack's return on equity?

	33.8%
	32.7%
	43.9%
	36.5%
	41.3%

$370,000 + $125,000 - $100,000 = $395,000 ending capital $125,000/[($370,000 + $395,000)/2] = 32.7%

Accounting Midterm Exam ACG-2011: Question 17

A partnership that has two classes of partners, general and limited, where the limited partners have no personal liability beyond the amounts they invest in the partnership, and no active role in the partnership, except as specified in the partnership agreement is a:

	Limited partnership.
	General partnership.
	Limited liability company.
	Mutual agency partnership.
	Limited liability partnership.

Accounting Midterm Exam ACG-2011: Question 15

A partnership recorded the following journal entry:

Cash	70,000
B. Tanner, Capital	10,000
R. Jackson, Capital	10,000
H. Rivera, Capital		90,000

This entry reflects:
rev: 02-03-2011

	Additional investment into the partnership by Tanner and Jackson.
	Withdrawal of $10,000 each by Tanner and Jackson upon the admission of a new partner.
	Acceptance of a new partner who invests $70,000 and receives a $20,000 bonus.
	Addition of a partner who pays a bonus to each of the other partners.
	Withdrawal of a partner who pays a $10,000 bonus to each of the other partners.

Accounting Midterm Exam ACG-2011: Question 14

Partnership accounting:

	Uses a capital account for each partner.
	Uses a withdrawals account for each partner.
	Allocates net income to each partner according to the partnership agreement.
	Allocates net loss to each partner according to the partnership agreement.
	All of these.

Accounting Midterm Exam ACG-2011: Question 12

Sam, Bart, and Lex are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Sam, $45,000; Bart, $37,000; and Lex, $(5,000). After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Lex is unable to pay the deficiency. The journal entry to record the distribution should be:

	Debit Sam, Capital $45,000; debit Bart, Capital $37,000; credit Lex, Capital $5,000; credit Cash $77,000.
	Debit Sam, Capital $42,500; debit Bart, Capital $34,500; credit Cash $77,000.
	Debit Cash $77,000; credit Sam, Capital $25,667; credit Bart, Capital $25,667; credit Lex, Capital $25,666.
	Debit Sam, Capital $25,667; debit Bart, Capital $25,667; debit Lex, Capital $25,666; credit Cash $77,000.
	Debit Cash $77,000, debit Lex, Capital $5,000, credit Sam, Capital $45,000, credit Bart, Capital $37,000.

		Capital
	Cash	Sam	Bart	Lex
	$77,000	$45,000	$37,000	$(5,000)
Allocate deficiency		(2,500)	(2,500)	5,000
Allocate cash	(77,000)	(42,500)	(34,500)	0

Accounting Midterm Exam ACG-2011: Question 11

Chase and Hatch are partners and share equally in income or loss. Chase's current capital balance is $135,000 and Hatch's is $120,000. Chase and Hatch agree to accept Flax with a 30% interest in the partnership. Flax invests $115,000 in the partnership. The balances in Chase's and Hatch's capital accounts after admission of the new partner equal:

	Chase $135,000; Hatch $120,000.
	Chase $137,000; Hatch $122,000
	Chase $133,000; Hatch $118,000.
	Chase $135,000; Hatch $124,000.
	Chase $139,000; Hatch $120,000.

$135,000 + $120,000 + $115,000 = $370,000 x .30 = $111,000
$115,000 - $111,000 = $4,000/2 = $2,000 bonus to each partner
$135,000 + $2,000 = $137,000
$120,000 + $2,000 = $122,000

Accounting Midterm Exam ACG-2011: Question 10

Partners' withdrawals of assets are:

	Debited to their asset accounts.
	Credited to their withdrawals accounts.
	Credited to their retained earnings.
	Debited to their withdrawals accounts.
	Debited to their retained earnings.

Accounting Midterm Exam ACG-2011: Question 1

Nee High and Low Jack are partners in an accounting firm and share net income and loss equally. High's beginning partnership capital balance for the current year is $285,000, and Jack's beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. High withdrew $90,000 during the year and Jack withdrew $100,000. What is Jack's return on equity?

	43.9%
	32.7%
	41.3%
	36.5%
	33.8%

$370,000 + $125,000 - $100,000 = $395,000 ending capital $125,000/[($370,000 + $395,000)/2] = 32.7%