Question 1

Liquidation in a partnership refers to ________.

Accepted Answer

A)  increasing the investment in highly liquid assets 
B)  shutting down the business by selling its assets and paying its liabilities 
C)  the admission or withdrawal of a partner that dissolves the partnership 
D)  purchase of another partnership firm which is operating in the same business 
A)  increasing the investment in highly liquid assets 
B)  shutting down the business by selling its assets and paying its liabilities 
C)  the admission or withdrawal of a partner that dissolves the partnership 
D)  purchase of another partnership firm which is operating in the same business

Question 2

Farrell and Jimmy enter into a partnership agreement on May 1,2018.Farrell contributes $60,000 and Jimmy contributes $120,000 as their capital contributions.They decide to share profits and losses in the ratio of their respective capital account balances.The net income for the year ended December 31,2018 is $70,000.Which of the following is the correct journal entry to record the allocation of profit? (Do not round any intermediate calculations.Round your final answers to the nearest dollar.)

Accepted Answer

A)  $$\begin{array} { | c | c | c | } 
\hline \text { Farrell, Capital } & 46,667 & \
\hline \text { Jimmy, Capital } & & 46,667 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | c | } 
\hline \text { Income Summary } & 70,000 & \
\hline \text { Farrell, Capital } & & 23,333 \
\hline \text { Jimmy, Capital } & & 46,667 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | } 
\hline \text { Farrell, Capital } & 23,333 & \
\hline \text { Jimmy, Capital } & 46,667 & \
\hline \text { Income Summary } & & 70,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | } 
\hline \text { Income Summary } & 23,334 & \
\hline \text { Farrell, Capital } & 23,333 & \
\hline \text { Jimmy, Capital } & & 46,667 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | c | c | c | } 
\hline \text { Farrell, Capital } & 46,667 & \
\hline \text { Jimmy, Capital } & & 46,667 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | c | c | c | } 
\hline \text { Income Summary } & 70,000 & \
\hline \text { Farrell, Capital } & & 23,333 \
\hline \text { Jimmy, Capital } & & 46,667 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | } 
\hline \text { Farrell, Capital } & 23,333 & \
\hline \text { Jimmy, Capital } & 46,667 & \
\hline \text { Income Summary } & & 70,000 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | } 
\hline \text { Income Summary } & 23,334 & \
\hline \text { Farrell, Capital } & 23,333 & \
\hline \text { Jimmy, Capital } & & 46,667 \
\hline
\end{array}$$

Question 3

Albert,Billy,and Cathy share profits and losses of their partnership in a 1:6:3,ratio respectively.If the net income is $60,000,calculate Billy's share of the profits.(Do not round any intermediate calculations.)

Accepted Answer

A)  $12,000 
B)  $18,000 
C)  $36,000 
D)  $6000 
A)  $12,000 
B)  $18,000 
C)  $36,000 
D)  $6000

Question 4

Which of the following is TRUE of a liquidation of a partnership?

Accepted Answer

A)  It allocates the gain or loss on sale of assets to the partners' capital accounts based on the profit-and-loss-sharing ratio. 
B)  The remaining cash after paying all liabilities are paid to the partners based on their profit-and-loss-sharing agreement. 
C)  Before a business is liquidated, its books should not be adjusted or closed. 
D)  It involves the selling of short-term liquid assets and does not involve the sale of fixed assets. 
A)  It allocates the gain or loss on sale of assets to the partners' capital accounts based on the profit-and-loss-sharing ratio. 
B)  The remaining cash after paying all liabilities are paid to the partners based on their profit-and-loss-sharing agreement. 
C)  Before a business is liquidated, its books should not be adjusted or closed. 
D)  It involves the selling of short-term liquid assets and does not involve the sale of fixed assets.

Question 5

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 6

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: $$\begin{array} { | l | l | } 
\hline \text { Partner } & \text { Capital Balance } \
\hline \text { Blau, Capital } & \$ 41,000 \text { Credit } \
\hline \text { Finch, Capital } & \$ 27,000 \text { Credit } \
\hline \text { Fleet, Capital } & \$ 11,000 \text { Debit } \
\hline
\end{array}$$ Assume Fleet contributes the capital deficiency.How much cash is available to distribute to the partners?

Accepted Answer

A)  $41,000 
B)  $57,000 
C)  $68,000 
D)  $79,000 
A)  $41,000 
B)  $57,000 
C)  $68,000 
D)  $79,000

Question 7

Rodriguez and Ying start a partnership on July 1,2019.Rodriguez contributes $4100 cash,furniture with a current market value of $55,000,and computer equipment.The computer equipment originally cost $48,000 in 2017 with recorded accumulated depreciation of $28,000.The current market value of the computer equipment is $17,000.At what value should the computer equipment be recorded in the accounting records of the partnership?

Accepted Answer

A)  $48,000 
B)  $17,000 
C)  $20,000 
D)  $28,000 
A)  $48,000 
B)  $17,000 
C)  $20,000 
D)  $28,000

Question 8

Keith and Jim formed a partnership,with the partners sharing profits and losses equally.The partnership incurs a net loss of $5000 for the year.The entry to close the net loss will ________.

Accepted Answer

A)  debit Income Summary by $5000 
B)  decrease Keith, Capital by $2500 
C)  increase Jim, Capital by $2500 
D)  decrease Jim, Capital by $5000 
A)  debit Income Summary by $5000 
B)  decrease Keith, Capital by $2500 
C)  increase Jim, Capital by $2500 
D)  decrease Jim, Capital by $5000

Question 9

Like a sole proprietorship's statement of owner's equity,the statement of partners' equity will show all the partners' capital accounts as one account.

Accepted Answer

A) True 
 B)False

Question 10

The balance sheet of Ryan and Peter's partnership as of December 31,2018,is given below. $$\begin{array} { | l | r | l | r | } 
\hline { \text { Assets } } & & { \text { Liabilities } } & \
\hline \text { Cash } & \$ 15,000& \text { Accounts Payable } & \$ 20,000 \
\hline \text { Accounts Receivable } & 12,000& \text { Other liabilities } & 25,000 \
\hline \text { Furniture } & 25,000& \text { Partners' Equity } &  \
\hline \text { Equipment } & 40,000 &\text { Ryan, Capital } &30,000\
\hline \text { Other assets } & \underline { 13,000 } &\text { Peter, Capital } & \underline { 30,000 }   \
\hline \text { Total assets } & \$ 105,000 & \text { Total liabilities and partners' equity } &\$ 105,000 \
\hline 
\end{array}$$ Ryan and Peter share profits in the ratio 3:2.They have decided to liquidate the partnership.The accounts payable were settled at $17,000 due to the poor financial condition of the partnership firm.As a result,Ryan's capital account will be credited by ________.

Accepted Answer

A)  $10,200 
B)  $9000 
C)  $1800 
D)  $3000 
A)  $10,200 
B)  $9000 
C)  $1800 
D)  $3000

Question 11

Which of the following is TRUE of a limited liability company?

Accepted Answer

A)  A limited liability company is not obligated to file the articles of organization with the state. 
B)  The owners of a limited liability company are personally liable for the business's debts. 
C)  A limited liability company can elect not to pay business income tax. 
D)  The owners of a limited liability company cannot participate actively in management of the business. 
A)  A limited liability company is not obligated to file the articles of organization with the state. 
B)  The owners of a limited liability company are personally liable for the business's debts. 
C)  A limited liability company can elect not to pay business income tax. 
D)  The owners of a limited liability company cannot participate actively in management of the business.

Question 12

Trevor and Brian enter into a partnership and decide to share profits and losses as follows:
1.The first allocation is a salary allowance with Trevor receiving $10,000 and Brian receiving $20,000.
2.The second allocation is 20% of the partners' capital balances at year end.On December 31,2019,the
capital balances for Trevor and Brian are $50,000 and $40,000,respectively.
3.Any remaining profit or loss is allocated equally.
For the year ending December 31,2019,the partnership reported net income of $50,000.
Required:
1.Calculate the share of profit allocated to each partner.
2.Prepare the journal entry to record the allocation of profit on December 31,2019.

Accepted Answer

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

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

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

Question 15

In a partnership,mutual agency means that ________.

Accepted Answer

A)  the addition of a new partner does not dissolve the old partnership; there is a mutual exchange of ownership with the existing partners 
B)  every partner must contribute the same amount of capital 
C)  the agency problem between the principal and agents are mutual and are neutralized 
D)  any partner can bind the business to a contract within the scope of its regular business operations 
A)  the addition of a new partner does not dissolve the old partnership; there is a mutual exchange of ownership with the existing partners 
B)  every partner must contribute the same amount of capital 
C)  the agency problem between the principal and agents are mutual and are neutralized 
D)  any partner can bind the business to a contract within the scope of its regular business operations

Question 16

A withdrawing partner acquires a bonus if the assets they receive in the dissolution are worth more than the book value of their equity.

Accepted Answer

A) True 
 B)False

Question 17

Frank and Harry are partners.Frank has a capital balance of $51,000 and Harry has a capital balance of $40,000.Bill contributes a building with a fair market value of $27,000 to the partnership for an ownership interest of 20%.Calculate Bill's capital in the new partnership.

Accepted Answer

A)  $13,000 
B)  $27,000 
C)  $24,000 
D)  $23,600 
A)  $13,000 
B)  $27,000 
C)  $24,000 
D)  $23,600

Question 18

A partnership is a ________.

Accepted Answer

A)  firm listed on a stock exchange, in which no owner owns a controlling majority of equity 
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 organization's liabilities 
D)  private firm in which all owners have equal ownership and limited liability in the event of a bankruptcy 
A)  firm listed on a stock exchange, in which no owner owns a controlling majority of equity 
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 organization's liabilities 
D)  private firm in which all owners have equal ownership and limited liability in the event of a bankruptcy

Question 19

Which of the following is TRUE when a new partner is admitted to a partnership by purchasing an existing partner's interest?

Accepted Answer

A)  Only the transfer of cash from the new partner to the existing partner is recorded. 
B)  Admission of the new partner affects the total asset amount. 
C)  Admission of the new partner affects the total equity amount. 
D)  The only journal entry the partnership records is the transfer of partner's capital. 
A)  Only the transfer of cash from the new partner to the existing partner is recorded. 
B)  Admission of the new partner affects the total asset amount. 
C)  Admission of the new partner affects the total equity amount. 
D)  The only journal entry the partnership records is the transfer of partner's capital.

Question 20

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

Exam 12: Partnerships

Liquidation in a partnership refers to ________.

Albert,Billy,and Cathy share profits and losses of their partnership in a 1:6:3,ratio respectively.If the net income is $60,000,calculate Billy's share of the profits.(Do not round any intermediate calculations.)

Which of the following is TRUE of a liquidation of a partnership?

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

Keith and Jim formed a partnership,with the partners sharing profits and losses equally.The partnership incurs a net loss of $5000 for the year.The entry to close the net loss will ________.

Like a sole proprietorship's statement of owner's equity,the statement of partners' equity will show all the partners' capital accounts as one account.

Which of the following is TRUE of a limited liability company?

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

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

In a partnership,mutual agency means that ________.

A withdrawing partner acquires a bonus if the assets they receive in the dissolution are worth more than the book value of their equity.

Frank and Harry are partners.Frank has a capital balance of $51,000 and Harry has a capital balance of $40,000.Bill contributes a building with a fair market value of $27,000 to the partnership for an ownership interest of 20%.Calculate Bill's capital in the new partnership.

A partnership is a ________.

Which of the following is TRUE when a new partner is admitted to a partnership by purchasing an existing partner's interest?

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

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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