Question 1

A ________ is a form of business organization that combines the advantages of both a partnership and a corporation.

Accepted Answer

A) limited liability company 
B) limited liability partnership 
C) C Corporation 
D) general partnership 
A) limited liability company 
B) limited liability partnership 
C) C Corporation 
D) general partnership A

Question 2

Hillary, Bruce, and Cindy own a partnership firm. Hillary has an ownership of $25,000; Bruce has an ownership of $40,000; and Cindy has an ownership of $31,000. In the process of liquidation, the partnership sells non-cash assets and registers a gain of $30,000. The profit-loss sharing agreement is 1/6 to Hillary; 2/6 to Bruce; and 3/6 to Cindy. Which of the following is true when a journal entry for the allocation of gain is recorded?

Accepted Answer

A) Hillary, Capital is credited for $10,000. 
B) Cindy, Capital is credited for $15,000. 
C) Hillary, Capital is debited for $10,000. 
D) Cindy, Capital is credited for $10,000. 
A) Hillary, Capital is credited for $10,000. 
B) Cindy, Capital is credited for $15,000. 
C) Hillary, Capital is debited for $10,000. 
D) Cindy, Capital is credited for $10,000. B

Question 3

Edwin and Darren have decided to form a partnership. Edwin contributes $80,000 cash and merchandise inventory with a current market value of $20,000. Darren contributes $2,100 cash and office furniture with a current market value of $2,800. While journalizing this transaction:

Accepted Answer

A) Office Furniture will be debited for $1,120. 
B) Office Furniture will be credited for $2,800. 
C) Office Furniture will be debited for $2,800. 
D) Office Furniture will be credited for $1,120. 
A) Office Furniture will be debited for $1,120. 
B) Office Furniture will be credited for $2,800. 
C) Office Furniture will be debited for $2,800. 
D) Office Furniture will be credited for $1,120. C

Question 4

In a limited liability partnership, each partner is not personally liable for the malpractice committed by another partner.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a disadvantage of partnership firms?

Accepted Answer

A) These cannot be dissolved without the permission of SEC. 
B) These are taxed at multiple levels: corporate level and individual level. 
C) These have more difficulty in raising capital as compared to a sole proprietorship. 
D) These have a mutual agency which creates personal obligations for each partner. 
A) These cannot be dissolved without the permission of SEC. 
B) These are taxed at multiple levels: corporate level and individual level. 
C) These have more difficulty in raising capital as compared to a sole proprietorship. 
D) These have a mutual agency which creates personal obligations for each partner.

Question 6

Shaun and Rick are partners. Shaun has a capital balance of $10,000 and Rick has a capital balance of $8,000. Edwin invests a building with a current market value of $6,000 to acquire an interest in the new partnership. Which of the following is true of the effect of the transaction on the balance sheet? (Assume no bonus to any partner.)

Accepted Answer

A) Both assets and equity will increase by $6,000. 
B) Both assets and liabilities will decrease by $6,000. 
C) Both assets and equity will decrease by $6,000. 
D) Both assets and liabilities will increase by $6,000. 
A) Both assets and equity will increase by $6,000. 
B) Both assets and liabilities will decrease by $6,000. 
C) Both assets and equity will decrease by $6,000. 
D) Both assets and liabilities will increase by $6,000.

Question 7

Which of the following is an advantage of a partnership?

Accepted Answer

A) Partnerships are less expensive to organize than a corporation. 
B) The owners of a partnership are generally exempted from personal taxes. 
C) The owners who contribute an asset to the partnership retain absolute claim on the asset. 
D) Partnerships have a higher cost of financial distress than those of a corporation. 
A) Partnerships are less expensive to organize than a corporation. 
B) The owners of a partnership are generally exempted from personal taxes. 
C) The owners who contribute an asset to the partnership retain absolute claim on the asset. 
D) Partnerships have a higher cost of financial distress than those of a corporation.

Question 8

Which of the following is an advantage of a limited liability company compared to a corporation?

Accepted Answer

A) Unlike a corporation, the members of a limited liability company are not personally liable for the business's debts. 
B) Unlike a corporation, the members of a limited liability company need not file articles of organization with the state. 
C) Unlike a corporation, the members of a limited liability company cannot participate actively in management of the business. 
D) Unlike a corporation, the members of a limited liability company are taxed at the individual level only. 
A) Unlike a corporation, the members of a limited liability company are not personally liable for the business's debts. 
B) Unlike a corporation, the members of a limited liability company need not file articles of organization with the state. 
C) Unlike a corporation, the members of a limited liability company cannot participate actively in management of the business. 
D) Unlike a corporation, the members of a limited liability company are taxed at the individual level only.

Question 9

Which of the following businesses is most likely to be organized as an LLP?

Accepted Answer

A) a bookstore run by two partners 
B) an international retail chain 
C) an accounting firm run by two partners 
D) a stationery store owned by an individual 
A) a bookstore run by two partners 
B) an international retail chain 
C) an accounting firm run by two partners 
D) a stationery store owned by an individual

Question 10

Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows:   They agreed to admit Ramelow into the business for a one-third interest in the new partnership. He had to bring in a cash contribution of $20,000 for the same. Assuming that Floyd and Merriam shared profits and losses equally before the admission of Ramelow. Which of the following is the correct journal entry to record the above admission?

Accepted Answer

A)    
B)    
C)    
D)    
A)    
B)    
C)    
D)

Question 11

The balance sheet of Ryan, James and Peter firm as on December 31, 2014, is given below.   Ryan, Peter, and James share profits in the ratio 3:2:1. They have decided to liquidate the partnership with immediate effect. The furniture and the equipment were sold at a cumulative loss of $6,000. The accounts receivable were duly received in cash and the other assets were written off as worthless. The accounts payable and other liabilities were paid off at book value. James argued that he should receive a portion of the remaining cash, but Peter and Ryan argued otherwise. How much cash should James receive or pay?

Accepted Answer

A) He should receive $2,500. 
B) He should not receive or pay any money. 
C) He should pay $7,500. 
D) He should pay $500. 
A) He should receive $2,500. 
B) He should not receive or pay any money. 
C) He should pay $7,500. 
D) He should pay $500.

Question 12

When a new partner is admitted at a higher-than-book-value contribution, the existing partners will receive a bonus amount.

Accepted Answer

A) True 
 B)False

Question 13

Gary, Peter, and Chris and have capital balances of $25,000, $40,000, and $31,000, respectively. As per the partnership agreement, Gary gets a profit share of 2/9; Peter gets 4/9; and Chris gets 3/9. The partnership agrees to pay $22,000 as the final settlement to Gary. How much bonus does Peter receive as a result of this transaction?

Accepted Answer

A) $1,714 
B) $1,286 
C) $1,667 
D) $1,333 
A) $1,714 
B) $1,286 
C) $1,667 
D) $1,333

Question 14

Harry, Tony, and Liza run a partnership firm. In the process of liquidation, the partnership sells non-cash assets, having a book value of $75,000, for $90,000. Which of the following is true of the journal entries?

Accepted Answer

A) Cash will be credited by $15,000. 
B) Non-cash assets will be credited for $90,000. 
C) Cash will be credited for $75,000. 
D) Non-cash assets will be credited for $75,000. 
A) Cash will be credited by $15,000. 
B) Non-cash assets will be credited for $90,000. 
C) Cash will be credited for $75,000. 
D) Non-cash assets will be credited for $75,000.

Question 15

The income of a limited liability company cannot be taxed to the members as though they were partners.

Accepted Answer

A) True 
 B)False

Question 16

Steve and Roger allocate 2/3 of the profits and losses to Steve and 1/3 to Roger. If the net income of the firm is $30,000, calculate the share of Roger's net income.

Accepted Answer

A) $20,000 
B) $10,000 
C) $30,000 
D) $25,000 
A) $20,000 
B) $10,000 
C) $30,000 
D) $25,000

Question 17

Before the start of the liquidation process, the books are adjusted and closed.

Accepted Answer

A) True 
 B)False

Question 18

An S corporation pays no corporate income tax.

Accepted Answer

A) True 
 B)False

Question 19

Ruby and Anita are partners. Ruby has a capital balance of $250,000 and Anita has a capital balance of $200,000. Denis invests a building with a current market value of $150,000 to acquire an interest in the new partnership. Which of the following is true of the journal entry to record this transaction? (Assume no bonus to any partner.)

Accepted Answer

A) Building will be debited for $150,000, Ruby, Capital and Anita, Capital will be credited for $75,000 each. 
B) Building will be debited for $150,000 and Denis, Capital will be credited for $150,000. 
C) Ruby, Capital and Anita, Capital will be debited for $75,000 each and Denis, Capital will be credited for $150,000. 
D) Ruby, Capital and Anita, Capital will be credited for $75,000 each and Denis, Capital will be debited for $150,000. 
A) Building will be debited for $150,000, Ruby, Capital and Anita, Capital will be credited for $75,000 each. 
B) Building will be debited for $150,000 and Denis, Capital will be credited for $150,000. 
C) Ruby, Capital and Anita, Capital will be debited for $75,000 each and Denis, Capital will be credited for $150,000. 
D) Ruby, Capital and Anita, Capital will be credited for $75,000 each and Denis, Capital will be debited for $150,000.

Question 20

Andy and Ian formed a partnership on April 1, 2015. Andy contributes equipment, purchased at a price of $85,000 on April 1, 2014, to the business. The accumulated depreciation of the equipment is $15,000. The current market value of the equipment is $75,000. The value of the equipment recorded in the partnership journal is ________.

Accepted Answer

A) $70,000 
B) $75,000 
C) $60,000 
D) $85,000 
A) $70,000 
B) $75,000 
C) $60,000 
D) $85,000

A ________ is a form of business organization that combines the advantages of both a partnership and a corporation.

Edwin and Darren have decided to form a partnership. Edwin contributes $80,000 cash and merchandise inventory with a current market value of $20,000. Darren contributes $2,100 cash and office furniture with a current market value of $2,800. While journalizing this transaction:

In a limited liability partnership, each partner is not personally liable for the malpractice committed by another partner.

Which of the following is a disadvantage of partnership firms?

Which of the following is an advantage of a partnership?

Which of the following is an advantage of a limited liability company compared to a corporation?

Which of the following businesses is most likely to be organized as an LLP?

When a new partner is admitted at a higher-than-book-value contribution, the existing partners will receive a bonus amount.

Harry, Tony, and Liza run a partnership firm. In the process of liquidation, the partnership sells non-cash assets, having a book value of $75,000, for $90,000. Which of the following is true of the journal entries?

The income of a limited liability company cannot be taxed to the members as though they were partners.

Steve and Roger allocate 2/3 of the profits and losses to Steve and 1/3 to Roger. If the net income of the firm is $30,000, calculate the share of Roger's net income.

Before the start of the liquidation process, the books are adjusted and closed.

An S corporation pays no corporate income tax.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters

Exam 12: Partnerships

A ________ is a form of business organization that combines the advantages of both a partnership and a corporation.

Edwin and Darren have decided to form a partnership. Edwin contributes $80,000 cash and merchandise inventory with a current market value of $20,000. Darren contributes $2,100 cash and office furniture with a current market value of $2,800. While journalizing this transaction:

In a limited liability partnership, each partner is not personally liable for the malpractice committed by another partner.

Which of the following is a disadvantage of partnership firms?

Which of the following is an advantage of a partnership?

Which of the following is an advantage of a limited liability company compared to a corporation?

Which of the following businesses is most likely to be organized as an LLP?

When a new partner is admitted at a higher-than-book-value contribution, the existing partners will receive a bonus amount.

Harry, Tony, and Liza run a partnership firm. In the process of liquidation, the partnership sells non-cash assets, having a book value of $75,000, for $90,000. Which of the following is true of the journal entries?

The income of a limited liability company cannot be taxed to the members as though they were partners.

Steve and Roger allocate 2/3 of the profits and losses to Steve and 1/3 to Roger. If the net income of the firm is $30,000, calculate the share of Roger's net income.

Before the start of the liquidation process, the books are adjusted and closed.

An S corporation pays no corporate income tax.

Accounting and the Business Environment

Recording Business Transactions

The Adjusting Process

Completing the Accounting Cycle

Merchandising Operations

Merchandise Inventory

Accounting Information Systems

Internal Control and Cash

Receivables

Plant Assets, Natural Resources, and Intangibles

Current Liabilities and Payroll

Corporations

Long-Term Liabilities

Investments

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit Analysis

Master Budgets

Flexible Budgets and Standard Cost Systems

Cost Allocation and Responsibility Accounting

Short-Term Business Decisions

Capital Investment Decisions

Filters