Question 1

Irrespective of the original profit-and-loss-sharing ratio,the bonus received by existing partners-by admitting a new partner-will be allocated equally.

Accepted Answer

A) True 
 B)False  False

Question 2

Simonsen,Paulson,and Richardson are partners in a firm with the following capital account balances: $$\begin{array} { | l | l | } 
\hline \text { Simonsen } & \$ 40,000 \
\hline \text { Paulson } & 160,000 \
\hline \text { Richardson } & 120,000 \
\hline
\end{array}$$ The profit-and-loss-sharing ratio among Simonsen,Paulson,and Richardson is 1:3:2,in the order given.Paulson is retiring from the partnership on December 31,2017.Paulson is paid $230,000 cash in full compensation for her capital account balance.Which of the following is TRUE of the journal entry prepared at the time of retirement? (Round the final answer to the nearest dollar.)

Accepted Answer

A)  Debit Paulson's capital account by $230,000. 
B)  Debit Richardson's capital account by $35,000. 
C)  Debit Simonsen's capital account by $23,333. 
D)  Debit Income Summary by $70,000. 
A)  Debit Paulson's capital account by $230,000. 
B)  Debit Richardson's capital account by $35,000. 
C)  Debit Simonsen's capital account by $23,333. 
D)  Debit Income Summary by $70,000. C

Question 3

Raul and Bianca are partners.Raul has a capital balance of $50,000 and Bianca has a capital balance of $37,000.Bianca sells half of her ownership interest to Bill for $20,500.Which of the following is TRUE of the journal entry to record this transaction?

Accepted Answer

A)  Bianca, Capital is credited for $18,500 and Raul, Capital is debited for $18,500. 
B)  Bill, Capital is credited for $20,500 and Raul, Capital is debited for $20,500. 
C)  Bill, Capital is credited for $18,500 and Bianca, Capital is debited for $18,500. 
D)  Bianca, Capital is credited for $20,500 and Raul, Capital is debited for $20,500. 
A)  Bianca, Capital is credited for $18,500 and Raul, Capital is debited for $18,500. 
B)  Bill, Capital is credited for $20,500 and Raul, Capital is debited for $20,500. 
C)  Bill, Capital is credited for $18,500 and Bianca, Capital is debited for $18,500. 
D)  Bianca, Capital is credited for $20,500 and Raul, Capital is debited for $20,500. C

Question 4

Which of the following is TRUE of a partnership balance sheet?

Accepted Answer

A)  Unlike a corporation's balance sheet, it includes all income statement account information. 
B)  It excludes any current liabilities. 
C)  It reports a separate capital account for each partner. 
D)  It details the interest expenses of the business. 
A)  Unlike a corporation's balance sheet, it includes all income statement account information. 
B)  It excludes any current liabilities. 
C)  It reports a separate capital account for each partner. 
D)  It details the interest expenses of the business.

Question 5

When an existing partner sells his interest to another party in a personal transaction ________.

Accepted Answer

A)  it is considered a transaction between the partnership and the new party 
B)  the old partnership will continue functioning, since the partner is replaced by another party without diluting the old partnership 
C)  the journal entry simply debits the withdrawing partner's capital account and credits the new partner's capital 
D)  the equity and assets in the balance sheet always increase by the same amount 
A)  it is considered a transaction between the partnership and the new party 
B)  the old partnership will continue functioning, since the partner is replaced by another party without diluting the old partnership 
C)  the journal entry simply debits the withdrawing partner's capital account and credits the new partner's capital 
D)  the equity and assets in the balance sheet always increase by the same amount

Question 6

When a partner withdraws his or her equity for cash,the corresponding capital account will be closed.

Accepted Answer

A) True 
 B)False

Question 7

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

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is TRUE of a 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

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 cannot 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 are double-taxed. 
D)  Unlike a partnership, the members of a limited liability company do not need to file articles of organization with the state. 
A)  Unlike a partnership, the members of a limited liability company cannot 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 are double-taxed. 
D)  Unlike a partnership, the members of a limited liability company do not need to file articles of organization with the state.

Question 10

Neil and Paul formed a partnership.During the year,Neil and Paul withdrew $13,000 and $6,000,respectively.Provide the journal entry to close the withdrawal accounts.Omit explanation.

Accepted Answer

\[\begin{array} { | l | r | r | } 
\hlin

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Admission of a new partner to a partnership,by purchasing an existing partner's interest,simply transfers capital from one partner's account to another.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following is an advantage of a partnership?

Accepted Answer

A)  Partnerships are less expensive to organize than corporations. 
B)  The owners of a partnership are generally exempted from personal income taxes. 
C)  The owners who contribute an asset to the partnership retain absolute claim on the asset. 
D)  Mutual agency creates personal obligations for each partner. 
A)  Partnerships are less expensive to organize than corporations. 
B)  The owners of a partnership are generally exempted from personal income taxes. 
C)  The owners who contribute an asset to the partnership retain absolute claim on the asset. 
D)  Mutual agency creates personal obligations for each partner.

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 $78,000,for $86,000.Which of the following is TRUE of the journal entries?

Accepted Answer

A)  Cash will be credited by $8000. 
B)  Non-cash assets will be credited for $86,000. 
C)  Cash will be credited for $78,000. 
D)  Non-cash assets will be credited for $78,000. 
A)  Cash will be credited by $8000. 
B)  Non-cash assets will be credited for $86,000. 
C)  Cash will be credited for $78,000. 
D)  Non-cash assets will be credited for $78,000.

Question 15

Adam,Bill,and Charlie are partners.The profit and loss sharing rule between them is 4:6:1,with Bill receiving the largest share and Charlie receiving the smallest.The partnership incurs a net loss of $72,000.While closing the Income Summary ________.(Do not round any intermediate calculations.)

Accepted Answer

A)  Income Summary will be debited for $72,000 
B)  Adam, Capital will be debited for $26,182 
C)  Adam, Capital will be credited for $39,273 
D)  Charlie, Capital will be credited for $39,273 
A)  Income Summary will be debited for $72,000 
B)  Adam, Capital will be debited for $26,182 
C)  Adam, Capital will be credited for $39,273 
D)  Charlie, Capital will be credited for $39,273

Question 16

Nancy and Peter enter into a partnership and decide to share profits and losses as follows: 1.The first allocation is a salary allowance with Nancy receiving $13,000 and Peter receiving $11,000.
2)The second allocation is 15% of the partners' capital balances at year end.On December 31,2019,the capital balances for Nancy and Peter are $82,000 and $18,000,respectively.
3)Any remaining profit or loss is allocated equally.
For the year ending December 31,2019,the partnership reported a net loss of $147,000.What is Peter's share of the net loss?

Accepted Answer

A)  $13,700 
B)  $54,000 
C)  $5800 
D)  $67,700 
A)  $13,700 
B)  $54,000 
C)  $5800 
D)  $67,700

Question 17

A partnership is liquidating.The partners share profits and losses equally.After liquidating the assets and paying the liabilities,the partners' capital accounts are as follows: $$\begin{array} { | l | l | } 
\hline \text { Partner } & \text { Capital Balance } \
\hline \text { Blaine, Capital } & \$ 43,000 \text { Credit } \
\hline \text { Farmer, Capital } & \$ 20,000 \text { Credit } \
\hline \text { Fleet, Capital } & \$ 14,000 \text { Debit } \
\hline
\end{array}$$ Assume Fleet does not contribute the capital deficiency.How much cash is available to distribute to the partners?

Accepted Answer

A)  $43,000 
B)  $49,000 
C)  $63,000 
D)  $77,000 
A)  $43,000 
B)  $49,000 
C)  $63,000 
D)  $77,000

Question 18

The death of a partner dissolves the partnership.

Accepted Answer

A) True 
 B)False

Question 19

A partnership began on January 1,2020,with two partners Kelly Simmons and Dawn Jones.The partnership is called Simmons and Jones Partnership.Kelly contributed $40,000 cash and Dawn contributed equipment with a fair market value of $70,000.The partners share profits and losses 50:50.Partners' withdrawals were $10,000 by Kelly and $5,000 by Dawn.Net income for 2020 was $60,000.
Required:
Prepare the statement of partner's equity for the year ending December 31,2020.

Accepted Answer

Simmons and Jones Partnership
Statement

Question 20

Keith and Jim are partners.Keith has a capital balance of $51,000 and Jim has a capital balance of $39,000.Bill contributes a building with a fair market value of $27,000 to the partnership for an ownership interest of 20%.How much is the total bonus for the existing partners?

Accepted Answer

A)  $12,000 
B)  $13,500 
C)  $3600 
D)  $27,000 
A)  $12,000 
B)  $13,500 
C)  $3600 
D)  $27,000

Exam 12: Partnerships

Irrespective of the original profit-and-loss-sharing ratio,the bonus received by existing partners-by admitting a new partner-will be allocated equally.

Raul and Bianca are partners.Raul has a capital balance of $50,000 and Bianca has a capital balance of $37,000.Bianca sells half of her ownership interest to Bill for $20,500.Which of the following is TRUE of the journal entry to record this transaction?

Which of the following is TRUE of a partnership balance sheet?

When an existing partner sells his interest to another party in a personal transaction ________.

When a partner withdraws his or her equity for cash,the corresponding capital account will be closed.

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

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

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

Neil and Paul formed a partnership.During the year,Neil and Paul withdrew $13,000 and $6,000,respectively.Provide the journal entry to close the withdrawal accounts.Omit explanation.

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

Admission of a new partner to a partnership,by purchasing an existing partner's interest,simply transfers capital from one partner's account to another.

Which of the following is an advantage of a partnership?

Harry,Tony,and Liza run a partnership firm.In the process of liquidation,the partnership sells non-cash assets,having a book value of $78,000,for $86,000.Which of the following is TRUE of the journal entries?

Adam,Bill,and Charlie are partners.The profit and loss sharing rule between them is 4:6:1,with Bill receiving the largest share and Charlie receiving the smallest.The partnership incurs a net loss of $72,000.While closing the Income Summary ________.(Do not round any intermediate calculations.)

The death of a partner dissolves the partnership.

Keith and Jim are partners.Keith has a capital balance of $51,000 and Jim has a capital balance of $39,000.Bill contributes a building with a fair market value of $27,000 to the partnership for an ownership interest of 20%.How much is the total bonus for the existing partners?

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