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Lear
n
i
O bj e n g
c
Desc
tive
r i be
the
prop
ch
r

and rietorsh haracte

ristic
i ps ,
l i mi t
p
ed li
s of
abili artners
h i ps
ty co
,
m pa
nies

Four Most Common Legal Forms of

Business

o _____________________________
o _____________________________
o _____________________________
o _____________________________

Proprietorship

o A _________________ is a company ________

by a single individual .
_________________
_________________
_________________
_________________

________________

o Characteristics of proprietorships include

the following:

_________________
_________________
_________________
_________________
_________________

Partnerships

o A ________ is an association of two or more

________ who ________ and ________ a
business for profit. Characteristics of a
________ include the following:
Moderately complex to form
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________
_____________________________________________________

Partnerships
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________

Partnerships

o In addition to the characteristics listed on

the previous slides, some unique aspects
of partnerships are:

________________________________________________
________________________________________________
________________________________________________

Limited Liability Companies

o A __________ __________ __________ (LLC) is a

__________ of legal entity that provides

__________ __________ to its __________ , but is
treated as a __________ for __________
purposes. Characteristics include:
________________________________________________
________________________________________________
________________________________________________
________________________________________________
________________________________________________

Lear
n
i
O bj e n g
c
t
i
v
acco
D
e
escr
unti
ibe a
ng f
and
for d for for and ill
u
m
ividi
ng t ing a p strate t
net he net artner he
loss
s
of a income hip
a
p a rt
ners nd
hi p

__________ a Partnership

o Joseph Stevens and Earl Foster, owners of

competing hardware stores, agree to

combine their businesses in a partnership.
Stevens agrees to contribute the
following:

Forming a Partnership
o The entry to record the _______ and _______
contributed by Stevens is as follows:

o The _______ assets are normally recorded at

_______ _______ _______ .

Forming a Partnership

o If a _______ _______ company is formed, the

following entry is made:

_______ _______ Services of Partners

o The partnership agreement of Jennifer

Stone and Crystal Mills provides for Stone

to receive a monthly salary allowance of
$5,000 ($60,000 annually) and Mills to
receive $4,000 a month ($48,000
annually). If there is any remaining net
income, it is to be _______ _______ .
Income
Income and
and losses
losses of
of the
the partnership
partnership
would
would have
have been
been divided
divided _______
_______ if
if _______
_______
_______
_______ agreement
agreement existed
existed or
or if
if the
the _______
_______
agreement
agreement did
did _______
_______ _______
_______ how
how the
the
division
division was
was to
to occur.
occur.

Dividing IncomeServices of Partners

o The firm had net income of $150,000 for

the year. Stone _______ the net income as

calculated below.
Annual salary allowance

J. Stone

C. Mills

12 x _______ _______ _______

_______

Total

Dividing IncomeServices of Partners

o The firm had net income of $150,000 for

the year. Stone shared the net income as

calculated below.
Annual salary allowance
Remaining income
Division of net income

J. Stone

C. Mills

$60,000

$48,000 $108,000

Total

Lear
n
i
O bj e n g
c
t
ive
D
e
acco
scrib
unti
e an
ng f
or

nd il
lustr
part
ate
ner
th e
a
d
miss
an d
ion
with
draw
al

Admitting a Partner

o A person may be _______ to a partnership

by either of the following:

__________________________________________
__________________________________________

Purchasing an _________ from ________

Partners

o On June 1, Tom Andrews and Nathan Bell

each _________ one-fifth of their

partnership equity of Bring It Consulting to
Joe Canter for $10,000 in cash. On June 1,
the partnership has net assets of
$100,000, and both existing partners have
capital balances of $50,000 each.

Purchasing an Interest from Existing

Partners

o The only entry required in the partnership

accounts is as follows:

o For a limited liability company, the

following entry is required:

Contributing _________ to a Partnership

o Partners Tom Andrews and Nathan Bell

each have capital balances of $50,000. On

June 1, Joe Canter _________ $20,000 cash
to Bring It Consulting for ownership equity
of $20,000.

Contributing Assets to a Partnership

o The entry to record this transaction is as

follows:

o For a limited liability company, the

following entry is required:

Revaluation of Assets

o If the partnerships asset accounts

_________ _________ _________ approximate

current market values when a new partner
is admitted, the accounts should be
adjusted (increased or decreased) before
the new partner is admitted.

Revaluation of Assets

o Partners Andrews and Bell each have

capital balances of $50,000. The balance

in Merchandise Inventory is $14,000, and
the current replacement value is $17,000.
The partners share net income equally.

Revaluation of Assets

o The entry to record this transaction is as

follows:

o For a limited liability company, the

following entry is required:

Partner Bonuses

Withdrawal of a Partner

o A partner may _________ or _________ from

a partnership. In such cases, the
withdrawing partners _________ is
normally sold to the:
_____________________________________
_____________________________________

_________ of a Partner

o If the existing partners purchase the

_________ _________ interest, the _________

and _________ of the partnership interest is
between the partners as _________ . The
only entry is:
______________________________________________
______________________________________________

Withdrawal of a Partner

o If the partnership purchases the _________

_________ interest, the _________ and the
_________ _________ of the partnership are
reduced by the _________ _________.

Death of a Partner

o When a partner _________ , the partnership

accounts should be _________ as of the
date of _________. The _________ _________
for the current period should then be
determined and _________ among the
partners _________ accounts.

Lear
n
i
O bj e n g
c
tive
Desc
acc ribe an
coun
n
ting d illustr
a
for l
iquid te the
a ti n g
pa r t
ners a
hip

Liquidating Partnerships

o When a partnership goes _________ of

_________ , the winding-up process is called

the _________ of the partnership.
Although _________ refers to the _________ of

liabilities, it includes the _________ winding-up

process.

When the partnership goes _________ of

_________ and the _________ operations are

_________ , the accounts should be _________ and
closed.

_________ Partnerships

o In liquidation, _________ is _________ to

_________ partner based on his or her final

_________ _________ .

Liquidating Partnerships

o Farley, Green, and Hall decide to liquidate

their partnership. On April 9, after
discontinuing business operations and
closing the accounts, the following trial
balance is prepared:

Gain on Realization

o Farley, Green, and Hall share income and

o

o
o

losses in a ratio of 5:3:2 (50%, 30%, 20%).

All noncash assets are sold in a single
transaction for $72,000, resulting in a gain of
$8,000. Partner capital accounts are credited
$4,000, $2,400, and $1,600 to
Farley, Green, and Hall, respectively.
Creditors are paid $9,000, and the remaining
cash of $74,000 is distributed to the partners.
A ____________________________, which
summarizes the liquidation process, is shown
in Exhibit 5.

Gain on _________
Sale
Sale of
of _________
_________ (Step
(Step 1)
1)

Gain on Realization
_______
_______ of
of _____
_____ (Step
(Step 2)
2)

Gain on Realization
_______
_______ of
of _______
_______ (Step
(Step 3)
3)

Gain on Realization
_______
_______ of
of _______
_______ to
to Partners
Partners (Step
(Step 4)
4)

Loss on Realization_______ _______

o The share of a loss on _______ may be

_______ than the balance in a partners

_______ account. The resulting _______
_______ in the _______ account is called a
_______ .

Partner Does Not Pay Deficiency

o If Farley does not pay her _______ , the

_______ would be _______ to Green and Hall

based on their ______-_______ _______ of
3:2. The remaining cash would be
distributed to Green and Hall.

Lear
n
i
O bj e n g
c
tive
Prep
are
th
he st
atem
pa r t
e nt
ners
of
hip e
quit
y

Statement of _______ _______

o The changes in the partners capital

accounts for a period of time are reported

in a _______ of _______ _______ .

o The _______ of _______ _______ for an LLC is

similar to that of a _______ . It reports the
_______ in _______ _______ for a period.

Lear
n
i
O bj e n g
Ana
ctive
lyze
and
inte
rpre
t em
ploy
ee
efc
i e nc
y

Revenue per Employee

o _______ _______ _______ is a measure of the

_______ of the _______ in _______ _______ .
Revenue per Employee =

r
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m
p
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m
o
C