Question 1

How are partners' investments in a partnership recorded?

Accepted Answer

When partners invest in a partnership,th

Question 2

Sam and Dave's company is organized as a partnership.At the prior year-end,Sam's equity balance was $258,000 and Dave's was $212,000.For the current year,partnership net income is $125,000 ($75,000 allocated to Sam and $50,000 allocated to Dave); withdrawals are $77,000 ($40,000 for Sam and $37,000 for Dave).Compute the total partnership return on equity and the individual partner return on equity ratios.

Accepted Answer

Total partnership return on equity = Net

Question 3

A partnership has an unlimited life.

Accepted Answer

A) True 
 B)False

Question 4

Benson is a partner in B&D Company.Benson's share of the partnership income is $18,600 and her average partnership equity is $155,000.Her partner return on equity equals 8.33.

Accepted Answer

A) True 
 B)False

Question 5

If at the time of partnership liquidation,a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency,then that partner is entitled to share in the final distribution of cash.

Accepted Answer

A) True 
 B)False

Question 6

A capital deficiency can arise from liquidation losses,excessive withdrawals before liquidation,or recurring losses in prior periods.

Accepted Answer

A) True 
 B)False

Question 7

The withdrawals account of each partner is closed to retained earnings at the end of the accounting period.

Accepted Answer

A) True 
 B)False

Question 8

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:

Accepted Answer

A) Mutual agency partnership. 
B) Limited partnership. 
C) Limited liability partnership. 
D) General partnership. 
E) Limited liability company. 
A) Mutual agency partnership. 
B) Limited partnership. 
C) Limited liability partnership. 
D) General partnership. 
E) Limited liability company.

Question 9

Partners' withdrawals are credited to their separate withdrawals accounts.

Accepted Answer

A) True 
 B)False

Question 10

Mutual agency implies that each partner in a partnership is a fully authorized agent of the partnership.Which of the following statements is correct regarding the authority of a partner to bind the partnership in dealings with third parties?

Accepted Answer

A) The partner's authority must be derived from the partnership agreement. 
B) The partner's authority may be effectively limited by a formal resolution of the other partners, even if third parties are not aware of that limitation. 
C) Only a partner with a majority interest in a partnership has the authority to represent the partnership to third parties. 
D) A partner has authority to deal with third parties on the behalf of the other partners only if he has written permission to do so. 
E) A partner may be able to legally bind the partnership to actions even if the other partners are unaware of his actions. 
A) The partner's authority must be derived from the partnership agreement. 
B) The partner's authority may be effectively limited by a formal resolution of the other partners, even if third parties are not aware of that limitation. 
C) Only a partner with a majority interest in a partnership has the authority to represent the partnership to third parties. 
D) A partner has authority to deal with third parties on the behalf of the other partners only if he has written permission to do so. 
E) A partner may be able to legally bind the partnership to actions even if the other partners are unaware of his actions.

Question 11

If partners devote their time and services to their partnership,their salaries are expenses on the income statement.

Accepted Answer

A) True 
 B)False

Question 12

A partner can withdraw from a partnership by:

Accepted Answer

A) Selling his/her interest to another person for cash. 
B) Selling his/her interest to another person in exchange for assets. 
C) Receiving cash from the partnership in the amount of his/her interest. 
D) Receiving assets from the partnership in the amount of his/her interest. 
E) All of the options are correct. 
A) Selling his/her interest to another person for cash. 
B) Selling his/her interest to another person in exchange for assets. 
C) Receiving cash from the partnership in the amount of his/her interest. 
D) Receiving assets from the partnership in the amount of his/her interest. 
E) All of the options are correct.

Question 13

Admitting a partner by accepting assets is a personal transaction between one or more current partners and the new partner.

Accepted Answer

A) True 
 B)False

Question 14

Assets invested by a partner into a partnership remain the property of the individual partner.

Accepted Answer

A) True 
 B)False

Question 15

Chen and Wright are forming a partnership.Chen will invest a building that currently is being used by another business owned by Chen.The building has a market value of $90,000.Also,the partnership will assume responsibility for a $30,000 note secured by a mortgage on that building.Wright will invest $50,000 cash.For the partnership,the amounts to be recorded for the building and for Chen's Capital account are:

Accepted Answer

A) Building, $90,000 and Chen, Capital, $90,000. 
B) Building, $60,000 and Chen, Capital, $60,000. 
C) Building, $60,000 and Chen, Capital, $50,000. 
D) Building, $90,000 and Chen, Capital, $60,000. 
E) Building, $60,000 and Chen, Capital, $90,000. 
A) Building, $90,000 and Chen, Capital, $90,000. 
B) Building, $60,000 and Chen, Capital, $60,000. 
C) Building, $60,000 and Chen, Capital, $50,000. 
D) Building, $90,000 and Chen, Capital, $60,000. 
E) Building, $60,000 and Chen, Capital, $90,000.

Question 16

Paul and Peggy's company is organized as a partnership.At the prior year-end,Paul's equity balance was $352,000 and Peggy's was $256,000.For the current year,partnership net income is $137,000 ($77,000 allocated to Paul and $60,000 allocated to Peggy); withdrawals are $87,000 ($45,000 for Paul and $42,000 for Peggy).Compute the total partnership return on equity and the individual partner return on equity ratios.

Accepted Answer

Total partnership return on equity = Net

Question 17

When a partner is unable to pay a capital deficiency:

Accepted Answer

A) The partner must take out a loan to cover the deficient balance. 
B) The deficiency is absorbed by the remaining partners before distribution of cash. 
C) The partnership ends before distribution of cash. 
D) The deficient partner is relieved of the liability. 
E) The remaining partners must wait for the deficiency to be paid before cash is distributed. 
A) The partner must take out a loan to cover the deficient balance. 
B) The deficiency is absorbed by the remaining partners before distribution of cash. 
C) The partnership ends before distribution of cash. 
D) The deficient partner is relieved of the liability. 
E) The remaining partners must wait for the deficiency to be paid before cash is distributed.

Question 18

In closing the accounts at the end of a period,the partners' capital accounts are credited for their share of the partnership loss or debited for their share of the partnership net income.

Accepted Answer

A) True 
 B)False

Question 19

A partnership is an unincorporated association of two or more people to pursue a business for profit as co-owners.

Accepted Answer

A) True 
 B)False

Question 20

A _________________________ means that at least one partner has a debit balance in his/her capital account at the point of the final distribution of cash.

Accepted Answer

The answer of A _________________________ means that at least one...

Exam 12: Accounting for Partnerships

How are partners' investments in a partnership recorded?

A partnership has an unlimited life.

Benson is a partner in B&D Company.Benson's share of the partnership income is $18,600 and her average partnership equity is $155,000.Her partner return on equity equals 8.33.

If at the time of partnership liquidation,a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency,then that partner is entitled to share in the final distribution of cash.

A capital deficiency can arise from liquidation losses,excessive withdrawals before liquidation,or recurring losses in prior periods.

The withdrawals account of each partner is closed to retained earnings at the end of the accounting period.

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:

Partners' withdrawals are credited to their separate withdrawals accounts.

Mutual agency implies that each partner in a partnership is a fully authorized agent of the partnership.Which of the following statements is correct regarding the authority of a partner to bind the partnership in dealings with third parties?

If partners devote their time and services to their partnership,their salaries are expenses on the income statement.

A partner can withdraw from a partnership by:

Admitting a partner by accepting assets is a personal transaction between one or more current partners and the new partner.

Assets invested by a partner into a partnership remain the property of the individual partner.

When a partner is unable to pay a capital deficiency:

In closing the accounts at the end of a period,the partners' capital accounts are credited for their share of the partnership loss or debited for their share of the partnership net income.

A partnership is an unincorporated association of two or more people to pursue a business for profit as co-owners.

A _________________________ means that at least one partner has a debit balance in his/her capital account at the point of the final distribution of cash.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, natural Resources, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Managerial Accounting Concepts and Principles

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets and Planning

Flexible Budgets and Standard Costs

Performance Measurement and Responsibility Accounting

Capital Budgeting and Managerial Decisions

Time Value of Money B

Activity-Based Costing C

Filters