Question 1

Profits and losses in a partnership must be shared based on each partner's capital balances.

Accepted Answer

A) True 
 B)False

Question 2

Upon liquidation of a partnership, the cash received from the sale of assets is first used to return the capital balances of the partners. The remaining cash is then used to pay off the liabilities of the business.

Accepted Answer

A) True 
 B)False

Question 3

Capital deficiency occurs when a partner's capital account has a credit balance.

Accepted Answer

A) True 
 B)False

Question 4

When a new partner enters into a partnership by purchasing an existing partner's interests, the total assets and equity of the business increase.

Accepted Answer

A) True 
 B)False

Question 5

Upon liquidation, if there is a sale of assets at a loss, the loss must be allocated to the partners' capital accounts based on their profit-and-loss-sharing ratio.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following will result in the dissolution of a partnership?

Accepted Answer

A) admission of a new partner 
B) purchase of plant assets for the business 
C) contribution of an asset by an existing partner 
D) partner withdrawal of cash 
A) admission of a new partner 
B) purchase of plant assets for the business 
C) contribution of an asset by an existing partner 
D) partner withdrawal of cash

Question 7

Keith and Jim are partners. Keith has a capital balance of $50,000 and Jim has a capital balance of $35,000. Jim sells $15,000 of his ownership to Bill. Which of the following is true of the journal entry to admit Bill?

Accepted Answer

A) Bill, Capital will be debited for $20,000. 
B) Jim, Capital will be debited for $20,000. 
C) Jim, Capital will be credited for $15,000. 
D) Bill, Capital will be credited for $15,000. 
A) Bill, Capital will be debited for $20,000. 
B) Jim, Capital will be debited for $20,000. 
C) Jim, Capital will be credited for $15,000. 
D) Bill, Capital will be credited for $15,000.

Question 8

Which of the following is true of the assets of a partnership?

Accepted Answer

A) The partner who is more actively involved in the daily business affairs is considered to be the sole owner of the partnership's assets. 
B) Any new assets purchased by the partnership are jointly owned by each partner. 
C) When a partner contributes a particular asset to the firm, he is considered to be the sole owner of the asset. 
D) In case of liquidation of assets, the partners must be paid based on the profit sharing ratio of the partnership. 
A) The partner who is more actively involved in the daily business affairs is considered to be the sole owner of the partnership's assets. 
B) Any new assets purchased by the partnership are jointly owned by each partner. 
C) When a partner contributes a particular asset to the firm, he is considered to be the sole owner of the asset. 
D) In case of liquidation of assets, the partners must be paid based on the profit sharing ratio of the partnership.

Question 9

Which of the following is a specification in the articles of partnership?

Accepted Answer

A) procedure for withdrawal of assets by the partners 
B) procedure for distribution of dividends 
C) method of valuation of the assets 
D) selection of an appropriate depreciation method 
A) procedure for withdrawal of assets by the partners 
B) procedure for distribution of dividends 
C) method of valuation of the assets 
D) selection of an appropriate depreciation method

Question 10

In a partnership business, Jack has an ownership of 60% and Teresa has an ownership of 40%. For developing the business, Jack contributed $7,000 and Teresa contributed $3,000 on July 1. Which of the following is true of this scenario?

Accepted Answer

A) Either the total contribution of $10,000 or the contribution in the ownership ratio will be recorded. 
B) Only the total contribution of $10,000 will be recorded. 
C) Individual contribution of $7,000 by Jack and $3,000 by Teresa will be recorded. 
D) 60% of Jack's contribution and 40% of Teresa's contribution will be recorded. 
A) Either the total contribution of $10,000 or the contribution in the ownership ratio will be recorded. 
B) Only the total contribution of $10,000 will be recorded. 
C) Individual contribution of $7,000 by Jack and $3,000 by Teresa will be recorded. 
D) 60% of Jack's contribution and 40% of Teresa's contribution will be recorded.

Question 11

The statement of partners' equity shows the changes in each partner's capital account for a specific period of time.

Accepted Answer

A) True 
 B)False

Question 12

How is the accounting equation affected when a partner withdraws cash?

Accepted Answer

A) Both equity and assets decrease; liabilities are not affected. 
B) Assets increase and equity decreases; liabilities are not affected. 
C) Both assets and liabilities decrease; equity is not affected. 
D) Liabilities decrease and assets increase; equity is not affected. 
A) Both equity and assets decrease; liabilities are not affected. 
B) Assets increase and equity decreases; liabilities are not affected. 
C) Both assets and liabilities decrease; equity is not affected. 
D) Liabilities decrease and assets increase; equity is not affected.

Question 13

The withdrawal accounts of a partnership are closed at the end of the period, exactly as they are for a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 14

The purchase of an existing partner's interest is not a personal transaction between the two individuals and is between the partnership and the new partner.

Accepted Answer

A) True 
 B)False

Question 15

If a partner's capital account is credited with a certain amount that he contributed in cash, which of the following statements will be affected?

Accepted Answer

A) withdrawal statement 
B) bank reconciliation statement 
C) statement of partners' equity 
D) interest payment schedule 
A) withdrawal statement 
B) bank reconciliation statement 
C) statement of partners' equity 
D) interest payment schedule

Question 16

In a general partnership, the general partners have unlimited personal liability for the debts of the business.

Accepted Answer

A) True 
 B)False

Question 17

Neil and Paul formed a partnership business. During the year, Neil and Paul withdrew $15,000 and $7,000, respectively. Provide the journal entry to close the withdrawals.

Accepted Answer

The answer of Neil and Paul formed a partnership business....

Question 18

Raul and Bianca are partners. Raul has a capital balance of $50,000 and Bianca has a capital balance of $36,000. Bianca sells half of her ownership interest to Bill and Bianca accepts $20,000 from Bill. Which of the following is true of the journal entry to record this transaction?

Accepted Answer

A) Bianca, Capital is credited for $20,000 and Raul, Capital is debited for $18,000. 
B) Bill, Capital is credited for $18,000 and Raul, Capital is debited for $20,000. 
C) Bill, Capital is credited for $18,000 and Bianca, Capital is debited for $18,000. 
D) Bianca, Capital is credited for $20,000 and Raul, Capital is debited for $20,000. 
A) Bianca, Capital is credited for $20,000 and Raul, Capital is debited for $18,000. 
B) Bill, Capital is credited for $18,000 and Raul, Capital is debited for $20,000. 
C) Bill, Capital is credited for $18,000 and Bianca, Capital is debited for $18,000. 
D) Bianca, Capital is credited for $20,000 and Raul, Capital is debited for $20,000.

Question 19

While liquidating a partnership, the cash remaining after paying all liabilities is paid to the partners based on their profit-and-loss-sharing agreement.

Accepted Answer

A) True 
 B)False

Question 20

Bob and Bill allocate 2/3 of the profits and losses to Bob and 1/3 to Bill. The net income of the firm is $30,000. The journal entry to close the Income Summary will include:

Accepted Answer

A) credit to Income Summary for $20,000. 
B) debit to Bob, Capital for $10,000. 
C) credit to Bob, Capital for $20,000. 
D) credit to Income Summary for $30,000. 
A) credit to Income Summary for $20,000. 
B) debit to Bob, Capital for $10,000. 
C) credit to Bob, Capital for $20,000. 
D) credit to Income Summary for $30,000.

Exam 12: Partnerships

Profits and losses in a partnership must be shared based on each partner's capital balances.

Upon liquidation of a partnership, the cash received from the sale of assets is first used to return the capital balances of the partners. The remaining cash is then used to pay off the liabilities of the business.

Capital deficiency occurs when a partner's capital account has a credit balance.

When a new partner enters into a partnership by purchasing an existing partner's interests, the total assets and equity of the business increase.

Upon liquidation, if there is a sale of assets at a loss, the loss must be allocated to the partners' capital accounts based on their profit-and-loss-sharing ratio.

Which of the following will result in the dissolution of a partnership?

Keith and Jim are partners. Keith has a capital balance of $50,000 and Jim has a capital balance of $35,000. Jim sells $15,000 of his ownership to Bill. Which of the following is true of the journal entry to admit Bill?

Which of the following is true of the assets of a partnership?

Which of the following is a specification in the articles of partnership?

In a partnership business, Jack has an ownership of 60% and Teresa has an ownership of 40%. For developing the business, Jack contributed $7,000 and Teresa contributed $3,000 on July 1. Which of the following is true of this scenario?

The statement of partners' equity shows the changes in each partner's capital account for a specific period of time.

How is the accounting equation affected when a partner withdraws cash?

The withdrawal accounts of a partnership are closed at the end of the period, exactly as they are for a sole proprietorship.

The purchase of an existing partner's interest is not a personal transaction between the two individuals and is between the partnership and the new partner.

If a partner's capital account is credited with a certain amount that he contributed in cash, which of the following statements will be affected?

In a general partnership, the general partners have unlimited personal liability for the debts of the business.

Neil and Paul formed a partnership business. During the year, Neil and Paul withdrew $15,000 and $7,000, respectively. Provide the journal entry to close the withdrawals.

Raul and Bianca are partners. Raul has a capital balance of $50,000 and Bianca has a capital balance of $36,000. Bianca sells half of her ownership interest to Bill and Bianca accepts $20,000 from Bill. Which of the following is true of the journal entry to record this transaction?

While liquidating a partnership, the cash remaining after paying all liabilities is paid to the partners based on their profit-and-loss-sharing agreement.

Bob and Bill allocate 2/3 of the profits and losses to Bob and 1/3 to Bill. The net income of the firm is $30,000. The journal entry to close the Income Summary will include:

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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