Question 1

A partnership business is a:

Accepted Answer

A) firm listed in a stock exchange, in which no owner owns a majority of equity to control the firm. 
B) business with two or more owners that is not organized as a corporation. 
C) corporation in which the owners have limited liability for the corporation's liabilities. 
D) private firm in which all owners have equal ownership and limited liabilities in the event of a bankruptcy. 
A) firm listed in a stock exchange, in which no owner owns a majority of equity to control the firm. 
B) business with two or more owners that is not organized as a corporation. 
C) corporation in which the owners have limited liability for the corporation's liabilities. 
D) private firm in which all owners have equal ownership and limited liabilities in the event of a bankruptcy.

Question 2

The balance sheet of Ryan and Peter firm as on December 31, 2014, is given below.   Ryan and Peter share profits in the ratio 3:2. They have decided to liquidate the partnership with immediate effect. The accounts payable were settled at $12,000 due to the poor financial condition of the partnership firm. As a result, Ryan's capital account will be credited by:

Accepted Answer

A) $7,200. 
B) $9,000. 
C) $1,800. 
D) $3,000. 
A) $7,200. 
B) $9,000. 
C) $1,800. 
D) $3,000.

Question 3

In which of the following types of business organizations does the owners have unlimited personal liabilities for the business's debts?

Accepted Answer

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

Question 4

In a partnership business, George has an ownership of 60% and Ben has an ownership of 40%. For developing the business, they purchased equipment for $10,000. George contributes a sum of $7,000 and Ben makes a contribution of $3,000 on July 1. Based on the information provided, which of the following is true of the partnership balance sheet?

Accepted Answer

A) Both George, Capital and Ben, Capital will increase by $10,000. 
B) George, Capital will increase by $7,000 and Ben, Capital will increase by $3,000. 
C) George, Capital will increase by $10,000 and Ben, Capital will remain unchanged. 
D) George, Capital will increase by $6,000 and Ben, Capital will increase by $4,000. 
A) Both George, Capital and Ben, Capital will increase by $10,000. 
B) George, Capital will increase by $7,000 and Ben, Capital will increase by $3,000. 
C) George, Capital will increase by $10,000 and Ben, Capital will remain unchanged. 
D) George, Capital will increase by $6,000 and Ben, Capital will increase by $4,000.

Question 5

When a partner sells his interest to another party, the journal entry simply credits the withdrawing partner's capital account and debits the new partner's capital.

Accepted Answer

A) True 
 B)False

Question 6

Albert, Billy, and Cathy share profits and losses of their partnership as 2:5:3. If the net income is $50,000, calculate the profit share of Albert.

Accepted Answer

A) $20,000 
B) $15,000 
C) $25,000 
D) $10,000 
A) $20,000 
B) $15,000 
C) $25,000 
D) $10,000

Question 7

A written partnership agreement is also known as the articles of partnership.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is true of capital deficiency in the liquidation of a partnership?

Accepted Answer

A) It refers to a partnership's claim against a partner. 
B) It occurs when a partner's capital account has a credit balance. 
C) It refers to the partnership's inability to find capital. 
D) It occurs when a partner cannot find positive NPV projects. 
A) It refers to a partnership's claim against a partner. 
B) It occurs when a partner's capital account has a credit balance. 
C) It refers to the partnership's inability to find capital. 
D) It occurs when a partner cannot find positive NPV projects.

Question 9

In the process of liquidation, a partnership firm sells its non-cash assets of a book value of $50,000, for $75,000. Which of the following will be included in the entry to record the sale of assets at liquidation?

Accepted Answer

A) Gain on Disposal will be credited by $75,000. 
B) Gain on Disposal will be debited by $75,000. 
C) Gain on Disposal will be credited by $25,000. 
D) Gain on Disposal will be debited by $25,000. 
A) Gain on Disposal will be credited by $75,000. 
B) Gain on Disposal will be debited by $75,000. 
C) Gain on Disposal will be credited by $25,000. 
D) Gain on Disposal will be debited by $25,000.

Question 10

In a partnership, the entry to close net income:

Accepted Answer

A) increases assets. 
B) increases liabilities. 
C) decreases partners' capital accounts. 
D) decreases the Income Summary account. 
A) increases assets. 
B) increases liabilities. 
C) decreases partners' capital accounts. 
D) decreases the Income Summary account.

Question 11

The death of a partner dissolves the partnership.

Accepted Answer

A) True 
 B)False

Question 12

Adam, Bill, and Charlie are partners. The profit and rule sharing rule between them is 2:5:3, with Bill getting the most and Adam getting the least. The partnership incurs a net loss of $18,000. While closing the Income Summary:

Accepted Answer

A) Income Summary will be credited for $5,400. 
B) Adam, Capital will be debited for $5,400. 
C) Adam, Capital will be credited for $5,400. 
D) Charlie, Capital will be debited for $5,400. 
A) Income Summary will be credited for $5,400. 
B) Adam, Capital will be debited for $5,400. 
C) Adam, Capital will be credited for $5,400. 
D) Charlie, Capital will be debited for $5,400.

Question 13

Issac and Karl are partners. Issac has a capital balance of $25,000 and Karl has a capital balance of $20,000. Bill invested $15,000 to acquire an ownership interest of 30%. How does this transaction affect the balance sheet items?

Accepted Answer

A) Asset increases and the equity remains unchanged. 
B) Assets increase and the equity decreases. 
C) Both assets and equity increase. 
D) Assets increase, liabilities decrease, and the equity remain unchanged. 
A) Asset increases and the equity remains unchanged. 
B) Assets increase and the equity decreases. 
C) Both assets and equity increase. 
D) Assets increase, liabilities decrease, and the equity remain unchanged.

Question 14

The articles of partnership is a contract between partners that specifies such items as the name, location, and nature of the business; the name, capital contribution, and duties of each partner; and the method of sharing profits and losses among the partners.

Accepted Answer

A) True 
 B)False

Question 15

Allan and Ralph are partners. Allan has a capital balance of $92,000 and Ralph has a capital balance of $75,000. Carol invested $60,000 to acquire an ownership interest of $50,000. Which of the following is true of the impact of the transaction on the balance sheet?

Accepted Answer

A) Asset increases and the equity will remain unchanged. 
B) Both assets and equity will increase. 
C) Assets will increase and equity will decrease. 
D) Assets will increase and the equity will remain unchanged. 
A) Asset increases and the equity will remain unchanged. 
B) Both assets and equity will increase. 
C) Assets will increase and equity will decrease. 
D) Assets will increase and the equity will remain unchanged.

Question 16

Which of the following is true of a written partnership agreement?

Accepted Answer

A) It is an agreement in which the partners hold a direct agreement with the registration body, and the registration body acts as an interlocutor between the partners. 
B) It is an informal agreement between the partners and is not legally binding. 
C) It is a legally-binding agreement between the owners which explains the procedures for liquidating the partnership. 
D) It is a legally-binding agreement between the proprietors and the stock exchange where it is listed regarding the profit sharing between the owners. 
A) It is an agreement in which the partners hold a direct agreement with the registration body, and the registration body acts as an interlocutor between the partners. 
B) It is an informal agreement between the partners and is not legally binding. 
C) It is a legally-binding agreement between the owners which explains the procedures for liquidating the partnership. 
D) It is a legally-binding agreement between the proprietors and the stock exchange where it is listed regarding the profit sharing between the owners.

Question 17

Dominic and Morgan are partners. Dominic has a capital balance of $350,000 and Morgan has a capital balance of $245,000. Morgan sells $105,000 of his ownership to Lance. Which of the following is true of the items in balance sheet?

Accepted Answer

A) The total equity decreases by $105,000. 
B) The total equity remains unchanged. 
C) Assets will decrease by $105,000. 
D) Assets will increase by $105,000. 
A) The total equity decreases by $105,000. 
B) The total equity remains unchanged. 
C) Assets will decrease by $105,000. 
D) Assets will increase by $105,000.

Question 18

A(n)________ does not require any permission from the state to be set up.

Accepted Answer

A) LLC 
B) partnership 
C) S Corporation 
D) C Corporation 
A) LLC 
B) partnership 
C) S Corporation 
D) C Corporation

Question 19

If a withdrawing partner receives assets worth more than the book value of his equity, then he receives a bonus.

Accepted Answer

A) True 
 B)False

Question 20

In a general partnership business, each partner has limited personal liability for the debts of the business.

Accepted Answer

A) True 
 B)False

Exam 12: Partnerships

A partnership business is a:

In which of the following types of business organizations does the owners have unlimited personal liabilities for the business's debts?

When a partner sells his interest to another party, the journal entry simply credits the withdrawing partner's capital account and debits the new partner's capital.

Albert, Billy, and Cathy share profits and losses of their partnership as 2:5:3. If the net income is $50,000, calculate the profit share of Albert.

A written partnership agreement is also known as the articles of partnership.

Which of the following is true of capital deficiency in the liquidation of a partnership?

In the process of liquidation, a partnership firm sells its non-cash assets of a book value of $50,000, for $75,000. Which of the following will be included in the entry to record the sale of assets at liquidation?

In a partnership, the entry to close net income:

The death of a partner dissolves the partnership.

Adam, Bill, and Charlie are partners. The profit and rule sharing rule between them is 2:5:3, with Bill getting the most and Adam getting the least. The partnership incurs a net loss of $18,000. While closing the Income Summary:

Issac and Karl are partners. Issac has a capital balance of $25,000 and Karl has a capital balance of $20,000. Bill invested $15,000 to acquire an ownership interest of 30%. How does this transaction affect the balance sheet items?

The articles of partnership is a contract between partners that specifies such items as the name, location, and nature of the business; the name, capital contribution, and duties of each partner; and the method of sharing profits and losses among the partners.

Allan and Ralph are partners. Allan has a capital balance of $92,000 and Ralph has a capital balance of $75,000. Carol invested $60,000 to acquire an ownership interest of $50,000. Which of the following is true of the impact of the transaction on the balance sheet?

Which of the following is true of a written partnership agreement?

Dominic and Morgan are partners. Dominic has a capital balance of $350,000 and Morgan has a capital balance of $245,000. Morgan sells $105,000 of his ownership to Lance. Which of the following is true of the items in balance sheet?

A(n)________ does not require any permission from the state to be set up.

If a withdrawing partner receives assets worth more than the book value of his equity, then he receives a bonus.

In a general partnership business, each partner has limited personal liability for the debts of the business.

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

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