Exam 17: Partnerships

Under the partnership form of business, large amounts of capital can be raised easily.

If the asset accounts did not reflect their current values, the asset accounts would need to be adjusted before admitting the new partner.

If a partnership agreement does not specify how income and losses are to be distributed, they should be allocated based on relative Capital account balances.

Bill, Carl, and Dwayne are in a partnership. Dwayne decides to withdraw from the partnership by selling his interest to Ethel. Bill and Carl agree to this. Bill's Capital account and Carl's Capital account

The most appropriate place to look for relationships among partners is in the

There is no impact on the income statement of a partnership when a partner withdraws from the business.

In a limited partnership, the general partner's liability is limited to his or her investment.

Liquidation of a partnership is the process of ending the business.

Which of the following partnership characteristics is an advantage?

Beth and Carla form a partnership and invest the following assets and liabilities. Assuming that the partners will share income and losses equally, in the journal provided prepare the entry to record the formation of the partnership. (Omit explanation.)

Doris invests $10,000 for a one-third interest in a partnership in which the other partners have capital totaling $26,000 before admitting Doris. After distribution of the bonus, what is Doris's capital?

Bankruptcy of a partner will dissolve the partnership.

The use of salaries in the allocation of income or loss allows for the differences in the services that partners provide the business.

A partner's inability to meet his or her obligations at the time of liquidation relieves that individual of his or her liabilities to the other partners.

A partnership agreement most likely will stipulate that assets be reappraised when

Avery and Bert are partners who share profits and losses in a ratio of 2:1 and have capital balances of $75,000 and $150,000, respectively. The partners agree to admit Carmen to the partnership. Carmen invests $75,000 for a 35 percent interest in the partnership. The new total capital balance after admitting Carmen is $300,000. The entry to record the admission of Carmen to the partnership is:

Each partner is personally liable for all debts of the partnership.

Tim and Vito are about to liquidate their partnership. They each have $20,000 capital balances, and they share income and losses in a 3:1 ratio, respectively. In addition, the partnership has $25,000 in cash, $45,000 in noncash assets, and $30,000 in accounts payable. Assuming that the noncash assets are sold for $17,000 and that both partners are personally solvent, prepare all the liquidation entries in the journal provided.

Aaron, Ben, and Carl are liquidating their business. They share income and losses in a 1:2:3 ratio, respectively, and currently have capital balances of $15,000, $13,000, and $12,000, respectively. In addition, the partnership has $5,000 in cash, $15,000 in accounts payable, and $50,000 in noncash assets. Aaron and Ben are personally solvent, but Carl is not. Assuming that the noncash assets are sold for $20,000, prepare all liquidation entries in the journal provided without explanation.

It is possible for a partner's Capital account to increase as a result of the allocation of a net loss.