Question 1

The financial statements of a partnership are similar to the statements of a sole proprietorship in all aspects.

Accepted Answer

A) True 
 B)False

Question 2

Marshall retires from the partnership of Marshall, Mark, and Dennis. Marshall had a capital balance of $25,000. If Marshall received $25,000 as final settlement, how will this transaction affect the balance sheet items?

Accepted Answer

A) Cash will increase. 
B) Liabilities will increase. 
C) Liabilities will decrease. 
D) Equity will decrease. 
A) Cash will increase. 
B) Liabilities will increase. 
C) Liabilities will decrease. 
D) Equity will decrease.

Question 3

New partners will always be admitted to a partnership at a contribution equal to or greater than the book value of their interest.

Accepted Answer

A) True 
 B)False

Question 4

Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows:   Floyd agrees to sell off half of his share to Ramelow in exchange for $30,000 cash. Which of the following is the correct journal entry in the books of the firm for the above transfer of interest?

Accepted Answer

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

Question 5

If a withdrawing partner receives assets worth more than the book value of her equity, the capital accounts of the remaining partners decrease.

Accepted Answer

A) True 
 B)False

Question 6

Tim and Michelle have decided to form a partnership. Tim contributes $8,000 cash and $2,000 in merchandise inventory. While journalizing this transaction:

Accepted Answer

A) Tim, Capital will be debited for $10,000. 
B) Tim, Capital will be credited for $10,000. 
C) Tim, Capital will be credited for $6,000 and Michelle, Capital will be credited for $4,000. 
D) Tim, Capital will be debited for $6,000 and Michelle, Capital will be debited for $4,000. 
A) Tim, Capital will be debited for $10,000. 
B) Tim, Capital will be credited for $10,000. 
C) Tim, Capital will be credited for $6,000 and Michelle, Capital will be credited for $4,000. 
D) Tim, Capital will be debited for $6,000 and Michelle, Capital will be debited for $4,000.

Question 7

Which of the following is true of ownership changes in a partnership?

Accepted Answer

A) Admitting a new partner does not change the core structure of the old partnership. 
B) The purchase of an existing partner's interest is a transaction between the new partner and the partnership firm. 
C) Any time the partner mix changes, the old partnership ceases to exist and a new partnership begins. 
D) A person can become a partner by purchasing an existing partner's interest, even without the approval of the other partners. 
A) Admitting a new partner does not change the core structure of the old partnership. 
B) The purchase of an existing partner's interest is a transaction between the new partner and the partnership firm. 
C) Any time the partner mix changes, the old partnership ceases to exist and a new partnership begins. 
D) A person can become a partner by purchasing an existing partner's interest, even without the approval of the other partners.

Question 8

If the partnership agreement specifies a method for sharing profits but not losses, then losses are shared the same way as profits.

Accepted Answer

A) True 
 B)False

Question 9

Unlike in a corporation, the owners of a partnership firm:

Accepted Answer

A) have limited claim on the profit made by the business. 
B) are restricted from dissolving the business without prior notice to the SEC. 
C) have an unlimited personal liability for the debts of the business. 
D) are taxed at two levels. 
A) have limited claim on the profit made by the business. 
B) are restricted from dissolving the business without prior notice to the SEC. 
C) have an unlimited personal liability for the debts of the business. 
D) are taxed at two levels.

Question 10

Keith and Jim are partners. Keith has a capital balance of $50,000 and Jim has a capital balance of $40,000. Bill invested $30,000 to acquire an ownership interest of 30%. Which of the following statements is true of this transaction?

Accepted Answer

A) Keith and Jim received a bonus of $3,000 each. 
B) Bill received a bonus of $5,000. 
C) Keith and Jim received a bonus of $2,500 each. 
D) Bill received a bonus of $6,000. 
A) Keith and Jim received a bonus of $3,000 each. 
B) Bill received a bonus of $5,000. 
C) Keith and Jim received a bonus of $2,500 each. 
D) Bill received a bonus of $6,000.

Question 11

In a partnership balance sheet, the each partner's assets, liabilities, and equity will be shown separately.

Accepted Answer

A) True 
 B)False

Question 12

In a partnership, the entry to close net loss:

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 13

Which of the following is true of a partnership?

Accepted Answer

A) All partnership firms are public firms. 
B) Partnership firms have a limited life. 
C) The owners of the partnership have limited liabilities for the partnership's debts. 
D) The maximum loss an owner of a partnership can incur is the invested amount. 
A) All partnership firms are public firms. 
B) Partnership firms have a limited life. 
C) The owners of the partnership have limited liabilities for the partnership's debts. 
D) The maximum loss an owner of a partnership can incur is the invested amount.

Question 14

The addition of a new partner to a firm does not dissolve the old partnership.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

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

Question 16

Which of the following is true if a withdrawing partner may receive assets worth more than the book value of his or her equity?

Accepted Answer

A) an increase in the remaining partners' capital accounts 
B) no change to the remaining partners' capital accounts 
C) a premium to existing partners 
D) a bonus to the withdrawing partner 
A) an increase in the remaining partners' capital accounts 
B) no change to the remaining partners' capital accounts 
C) a premium to existing partners 
D) a bonus to the withdrawing partner

Question 17

Simonsen, Paulson, and Richardson are partners in a firm with the following capital account balances:   Paulson is retiring from the partnership on December 31, 2013. The profit-and-loss-sharing ratio among Simonsen, Paulson, and Richardson is 1:3:2, in the order given. Paulson is paid $100,000 cash in full compensation for her capital account balance. Journalize the cash payment of $100,000 to Paulson upon retirement.

Accepted Answer

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

Question 18

Which of the following is true when a partner withdraws his interest from the partnership?

Accepted Answer

A) He is obliged to pay a bonus to the existing partners. 
B) The existing partners are obliged to pay a bonus to the withdrawing partner. 
C) The partner's capital account will be closed. 
D) He must get the book-value of his interest. 
A) He is obliged to pay a bonus to the existing partners. 
B) The existing partners are obliged to pay a bonus to the withdrawing partner. 
C) The partner's capital account will be closed. 
D) He must get the book-value of his interest.

Question 19

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

Accepted Answer

A) general partnership 
B) limited liability partnership 
C) limited partnership 
D) sole proprietorship 
A) general partnership 
B) limited liability partnership 
C) limited partnership 
D) sole proprietorship

Question 20

Which of the following is true of limited partners in a limited partnership?

Accepted Answer

A) They have limited liability for the debts of the business but their potential for profits is unlimited. 
B) They usually have first claim to profits and losses made by the business. 
C) They assume the same operational duties as that of the general partner. 
D) They have to assume a liability beyond their contribution in the business in the event of a bankruptcy. 
A) They have limited liability for the debts of the business but their potential for profits is unlimited. 
B) They usually have first claim to profits and losses made by the business. 
C) They assume the same operational duties as that of the general partner. 
D) They have to assume a liability beyond their contribution in the business in the event of a bankruptcy.

Exam 12: Partnerships

The financial statements of a partnership are similar to the statements of a sole proprietorship in all aspects.

Marshall retires from the partnership of Marshall, Mark, and Dennis. Marshall had a capital balance of $25,000. If Marshall received $25,000 as final settlement, how will this transaction affect the balance sheet items?

New partners will always be admitted to a partnership at a contribution equal to or greater than the book value of their interest.

If a withdrawing partner receives assets worth more than the book value of her equity, the capital accounts of the remaining partners decrease.

Tim and Michelle have decided to form a partnership. Tim contributes $8,000 cash and $2,000 in merchandise inventory. While journalizing this transaction:

Which of the following is true of ownership changes in a partnership?

If the partnership agreement specifies a method for sharing profits but not losses, then losses are shared the same way as profits.

Unlike in a corporation, the owners of a partnership firm:

Keith and Jim are partners. Keith has a capital balance of $50,000 and Jim has a capital balance of $40,000. Bill invested $30,000 to acquire an ownership interest of 30%. Which of the following statements is true of this transaction?

In a partnership balance sheet, the each partner's assets, liabilities, and equity will be shown separately.

In a partnership, the entry to close net loss:

Which of the following is true of a partnership?

The addition of a new partner to a firm does not dissolve the old partnership.

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

Which of the following is true if a withdrawing partner may receive assets worth more than the book value of his or her equity?

Which of the following is true when a partner withdraws his interest from the partnership?

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

Which of the following is true of limited partners in a limited partnership?

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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