Question 1

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

Accepted Answer

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

Question 2

Which of the following is a disadvantage of partnership firms?

Accepted Answer

A) They cannot be dissolved without the permission of the SEC. 
B) They are taxed at multiple levels: corporate level and individual level. 
C) They have more difficulty in raising capital as compared to a sole proprietorship. 
D) They have mutual agency which creates personal obligations for each partner. 
A) They cannot be dissolved without the permission of the SEC. 
B) They are taxed at multiple levels: corporate level and individual level. 
C) They have more difficulty in raising capital as compared to a sole proprietorship. 
D) They have mutual agency which creates personal obligations for each partner.

Question 3

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 4

Which of the following is true when a new partner is admitted 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 5

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

Accepted Answer

A) True 
 B)False

Question 6

Anna and Naomi are partners.Anna has a capital balance of $49,000 and Naomi has a capital balance of $42,000.Gary invested $27,000 to acquire an ownership interest of $18,000.Which of the following is true of the partnership journal entry to record the receipt of Gary's contribution? (Assume the existing partners equally divide the bonus. )

Accepted Answer

A) Cash is debited for $27,000 and Gary,Capital is credited for $18,000. 
B) Cash is debited for $18,000 and Gary,Capital is credited for $18,000. 
C) Cash is credited for $27,000 and Gary,Capital is debited for $18,000. 
D) Cash is credited for $18,000 and Gary,Capital is debited for $18,000. 
A) Cash is debited for $27,000 and Gary,Capital is credited for $18,000. 
B) Cash is debited for $18,000 and Gary,Capital is credited for $18,000. 
C) Cash is credited for $27,000 and Gary,Capital is debited for $18,000. 
D) Cash is credited for $18,000 and Gary,Capital is debited for $18,000.

Question 7

Ronald,Ross,and Carol opened a partnership firm.Ronald has a capital of $77,000;Ross has a capital of $119,000;and Carol has a capital of $91,000.Ronald decided to withdraw from the partnership and received $86,000.Which of the following will be included in the journal entry to record this? (Assume an equal profit-loss sharing between the existing partners. )

Accepted Answer

A) Cash is credited for $9,000. 
B) Ross,Capital is credited for $4,500. 
C) Carol,Capital is debited for $4,500. 
D) Ross,Capital is debited for $9,000. 
A) Cash is credited for $9,000. 
B) Ross,Capital is credited for $4,500. 
C) Carol,Capital is debited for $4,500. 
D) Ross,Capital is debited for $9,000.

Question 8

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 exiting partner 
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 exiting partner 
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 9

Alex,Brad,and Carl are partners.The profit and rule sharing rule between them is 4:3:2 in alphabetical order.The partnership incurs a net loss of $120,000.Before preparing the closing journal entry the ________.

Accepted Answer

A) Income Summary account will have a debit balance of $120,000 
B) Alex,Capital account will have a debit balance of $53,333 
C) Alex,Capital account will have a credit balance of $53,333 
D) Carl,Capital account will have a debit balance of $26,667 
A) Income Summary account will have a debit balance of $120,000 
B) Alex,Capital account will have a debit balance of $53,333 
C) Alex,Capital account will have a credit balance of $53,333 
D) Carl,Capital account will have a debit balance of $26,667

Question 10

Aries and Eros start a partnership with capital contributions of $36,000 and $55,000,respectively.Over the course of the year,Aries withdraws $5,100 from the business in order to meet his personal expenses.Which of the following is the correct journal entry to record the above withdrawal?

Accepted Answer

A) 
  
B) 
  
C) No entry 
D) 
  
A) 
  
B) 
  
C) No entry 
D)

Question 11

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

Accepted Answer

A) Each partner's assets will be shown separately. 
B) Each partner's liabilities will be shown separately. 
C) Each partner's equity will be shown separately. 
D) Each partner's assets,liabilities,and equity will be shown separately. 
A) Each partner's assets will be shown separately. 
B) Each partner's liabilities will be shown separately. 
C) Each partner's equity will be shown separately. 
D) Each partner's assets,liabilities,and equity will be shown separately.

Question 12

Keith and Jim are partners.Keith has a capital balance of $47,000 and Jim has a capital balance of $32,000.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 $17,000. 
B) Jim,Capital will be debited for $17,000. 
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 $17,000. 
B) Jim,Capital will be debited for $17,000. 
C) Jim,Capital will be credited for $15,000. 
D) Bill,Capital will be credited for $15,000.

Question 13

David,Chris and John formed a partnership on July 31,2017.They decided to share profits equally,but inserted a clause in the partnership agreement where any losses would be allocated in the ratio of 4:3:2,respectively.For the year ended December 31,2017,the firm earned a net income of $47,000.However,for the year ended December 31,2018,the firm incurred a loss of $65,000.Assuming that John had an initial capital contribution of $36,000 and made no withdrawals,what is the balance of John's Capital account as of December 31,2018? (Assume that none of the partners made any further contributions to their capital accounts. )

Accepted Answer

A) $37,222 
B) $36,000 
C) $51,667 
D) $34,778 
A) $37,222 
B) $36,000 
C) $51,667 
D) $34,778

Question 14

Dominic and Morgan are partners.Dominic has a capital balance of $360,000 and Morgan has a capital balance of $225,000.Morgan sells $125,000 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 $125,000. 
B) The total equity remains unchanged. 
C) Assets will decrease by $125,000. 
D) Assets will increase by $125,000. 
A) The total equity decreases by $125,000. 
B) The total equity remains unchanged. 
C) Assets will decrease by $125,000. 
D) Assets will increase by $125,000.

Question 15

Adam,Bill,and Charlie are partners.The profit and loss sharing rule between them is 3:6:2,with Bill receiving the largest share and Adam receiving the smallest.The partnership incurs a net loss of $70,000.While closing the Income Summary ________.

Accepted Answer

A) Income Summary will be debited for $70,000 
B) Adam,Capital will be debited for $19,091 
C) Adam,Capital will be credited for $38,182 
D) Charlie,Capital will be credited for $38,182 
A) Income Summary will be debited for $70,000 
B) Adam,Capital will be debited for $19,091 
C) Adam,Capital will be credited for $38,182 
D) Charlie,Capital will be credited for $38,182

Question 16

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 17

The balance sheet of Ryan,James and Peter firm as on December 31,2017,is given below.
 
Ryan,Peter,and James share profits in the ratio 3:2:1.They have decided to liquidate the partnership with immediate effect.The furniture and the equipment were sold at a cumulative loss of $7,000.The accounts receivable were received in cash and the other assets were written off as worthless.The accounts payable and other liabilities were paid off at book value.James argued that he should receive a portion of the remaining cash,but Peter and Ryan argued otherwise.How much cash should James receive or pay?

Accepted Answer

A) He should receive $500. 
B) He should not receive or pay any money. 
C) He should pay $54,833. 
D) He should pay $833. 
A) He should receive $500. 
B) He should not receive or pay any money. 
C) He should pay $54,833. 
D) He should pay $833.

Question 18

Which of the following is true of a general partnership?

Accepted Answer

A) Each partner has all the privileges and risks of ownership. 
B) The income of a general partnership is subject to double taxation. 
C) Each partner's liability is limited to their contributed capital. 
D) When a general partner contributes a particular asset to the firm,he or she is considered the sole owner of the asset. 
A) Each partner has all the privileges and risks of ownership. 
B) The income of a general partnership is subject to double taxation. 
C) Each partner's liability is limited to their contributed capital. 
D) When a general partner contributes a particular asset to the firm,he or she is considered the sole owner of the asset.

Question 19

Dana and Emile allocate 2/3 of their partnership's profits and losses to Dana and 1/3 to Emile.The net income of the firm is $40,000.The journal entry to close the Income Summary will include a ________.

Accepted Answer

A) credit to Income Summary for $26,667 
B) debit to Dana,Capital for $13,333 
C) credit to Emile,Capital for $26,667 
D) debit to Income Summary for $40,000 
A) credit to Income Summary for $26,667 
B) debit to Dana,Capital for $13,333 
C) credit to Emile,Capital for $26,667 
D) debit to Income Summary for $40,000

Question 20

Mathew,Patrick,and Robin and have capital balances of $75,000,$125,000 and $93,000,respectively.As per the partnership agreement,Mathew gets a profit share of 2/9;Patrick gets 4/9;and Robin gets 3/9.Partnership agrees to pay $65,000 as final settlement to Mathew.How much bonus will Robin receive as a result of this transaction?

Accepted Answer

A) $5,714 
B) $4,286 
C) $5,556 
D) $4,444 
A) $5,714 
B) $4,286 
C) $5,556 
D) $4,444

Exam 12: Partnerships

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

Which of the following is a disadvantage of partnership firms?

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?

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

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

In a partnership,mutual agency means that ________.

Alex,Brad,and Carl are partners.The profit and rule sharing rule between them is 4:3:2 in alphabetical order.The partnership incurs a net loss of $120,000.Before preparing the closing journal entry the ________.

Aries and Eros start a partnership with capital contributions of $36,000 and $55,000,respectively.Over the course of the year,Aries withdraws $5,100 from the business in order to meet his personal expenses.Which of the following is the correct journal entry to record the above withdrawal?

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

Keith and Jim are partners.Keith has a capital balance of $47,000 and Jim has a capital balance of $32,000.Jim sells $15,000 of his ownership to Bill.Which of the following is true of the journal entry to admit Bill?

Dominic and Morgan are partners.Dominic has a capital balance of $360,000 and Morgan has a capital balance of $225,000.Morgan sells $125,000 of his ownership to Lance.Which of the following is true of the items in balance sheet?

Adam,Bill,and Charlie are partners.The profit and loss sharing rule between them is 3:6:2,with Bill receiving the largest share and Adam receiving the smallest.The partnership incurs a net loss of $70,000.While closing the Income Summary ________.

In a partnership,the entry to close net income ________.

Which of the following is true of a general partnership?

Dana and Emile allocate 2/3 of their partnership's profits and losses to Dana and 1/3 to Emile.The net income of the firm is $40,000.The journal entry to close the Income Summary will include a ________.

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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