Question 1

The advantages of the partnership form of business organization, compared to corporations, include

Accepted Answer

A)  single taxation. 
B)  ease of raising capital. 
C)  mutual agency. 
D)  limited liability. 
E)  difficulty of formation. 
A)  single taxation. 
B)  ease of raising capital. 
C)  mutual agency. 
D)  limited liability. 
E)  difficulty of formation.

Question 2

Cleary, Wasser, and Nolan formed a partnership on January 1, 2010, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2010 and $180,000 in 2011. Each partner withdrew $1,000 for personal use every month during 2010 and 2011. What was Wasser's total share of net income for 2011?

Accepted Answer

A)  $34,420. 
B)  $75,540. 
C)  $65,540. 
D)  $70,040. 
E)  $61,420. 
A)  $34,420. 
B)  $75,540. 
C)  $65,540. 
D)  $70,040. 
E)  $61,420.

Question 3

What theoretical argument could be made against the recognition of goodwill when there is a change in the ownership of a partnership?

Accepted Answer

Goodwill should be recognized only when

Question 4

A partnership began its first year of operations with the following capital balances:   The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.
What was Thurman's total share of net loss for the first year?

Accepted Answer

A)  $3,900 loss. 
B)  $11,700 loss. 
C)  $10,400 loss. 
D)  $24,700 loss. 
E)  $9,100 loss. 
A)  $3,900 loss. 
B)  $11,700 loss. 
C)  $10,400 loss. 
D)  $24,700 loss. 
E)  $9,100 loss.

Question 5

Cleary, Wasser, and Nolan formed a partnership on January 1, 2010, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2010 and $180,000 in 2011. Each partner withdrew $1,000 for personal use every month during 2010 and 2011. What was Wasser's capital balance at the end of 2010?

Accepted Answer

A)  $150,000. 
B)  $160,000. 
C)  $165,000. 
D)  $213,000. 
E)  $201,000. 
A)  $150,000. 
B)  $160,000. 
C)  $165,000. 
D)  $213,000. 
E)  $201,000.

Question 6

P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest. If C contributes $40,000 to the partnership and the goodwill method is used, what amount will be debited for goodwill?

Accepted Answer

A)  $15,000 
B)  $20,000 
C)  $25,000 
D)  $28,000 
E)  $60,000 
A)  $15,000 
B)  $20,000 
C)  $25,000 
D)  $28,000 
E)  $60,000

Question 7

Cleary, Wasser, and Nolan formed a partnership on January 1, 2010, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2010 and $180,000 in 2011. Each partner withdrew $1,000 for personal use every month during 2010 and 2011. What was Nolan's capital balance at the end of 2010?

Accepted Answer

A)  $200,000. 
B)  $224,000. 
C)  $238,000. 
D)  $246,000. 
E)  $254,000. 
A)  $200,000. 
B)  $224,000. 
C)  $238,000. 
D)  $246,000. 
E)  $254,000.

Question 8

On January 1, 2011, Lamb and Mona LLP admitted Noris to a 20% interest in net assets for an investment of $50,000 cash. Prior to the admission of Noris, Lamb and Mona had net assets of $100,000 and an income-sharing ratio of 25% to Lamb and 75% to Mona. After the admission of Noris, the partnership contract included the following provisions:
• Salary of $40,000 a year to Noris.
• Remaining net income in ratio Lamb 20%, Mona 60%, Noris 20%
• During the fiscal year ended December 31, 2011, the partnership had income of $90,000 prior to recognition of salary to Noris.
Record the journal entry to record the remainder of net income to the capital accounts.

Accepted Answer

The answer of On January 1, 2011, Lamb and Mona...

Question 9

A partnership began its first year of operations with the following capital balances:   The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.
What was Young's total share of net loss for the first year?

Accepted Answer

A)  $3,900 loss. 
B)  $11,700 loss. 
C)  $10,400 loss. 
D)  $24,700 loss. 
E)  $9,100 loss. 
A)  $3,900 loss. 
B)  $11,700 loss. 
C)  $10,400 loss. 
D)  $24,700 loss. 
E)  $9,100 loss.

Question 10

A partnership began its first year of operations with the following capital balances:   The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.
What was the balance in Thurman's Capital account at the end of the second year?

Accepted Answer

A)  $133,380. 
B)  $84,760. 
C)  $105,690. 
D)  $132,860. 
E)  $71,760. 
A)  $133,380. 
B)  $84,760. 
C)  $105,690. 
D)  $132,860. 
E)  $71,760.

Question 11

Max, Jones and Waters shared profits and losses 20%, 40%, and 40% respectively and their partnership capital balance is $10,000, $30,000 and $50,000 respectively. Max has decided to withdraw from the partnership. An appraisal of the business and its property estimates the fair value to be $200,000. Land with a book value of $30,000 has a fair value of $45,000. Max has agreed to receive $20,000 in exchange for her partnership interest after revaluation. At what amount should land be recorded on the partnership books?

Accepted Answer

A)  $20,000. 
B)  $30,000. 
C)  $45,000. 
D)  $50,000. 
E)  $200,000.
Land will be recorded at the fair value of $45,000. 
A)  $20,000. 
B)  $30,000. 
C)  $45,000. 
D)  $50,000. 
E)  $200,000.
Land will be recorded at the fair value of $45,000.

Question 12

The disadvantages of the partnership form of business organization, compared to corporations, include

Accepted Answer

A)  the legal requirements for formation. 
B)  unlimited liability for the partners. 
C)  the requirement for the partnership to pay income taxes. 
D)  the extent of governmental regulation. 
E)  the complexity of operations. 
A)  the legal requirements for formation. 
B)  unlimited liability for the partners. 
C)  the requirement for the partnership to pay income taxes. 
D)  the extent of governmental regulation. 
E)  the complexity of operations.

Question 13

Which of the following statements is correct regarding the admission of a new partner?

Accepted Answer

A)  A new partner must purchase a partnership interest directly from the business. 
B)  The right of co-ownership in the business property can be transferred to a new partner without the consent of other existing partners. 
C)  The right to participate in management of the business can be conveyed without the consent of other existing partners. 
D)  The right to share in profits and losses can be sold to a new partner without the consent of other existing partners. 
E)  A new partner always pays book value. 
A)  A new partner must purchase a partnership interest directly from the business. 
B)  The right of co-ownership in the business property can be transferred to a new partner without the consent of other existing partners. 
C)  The right to participate in management of the business can be conveyed without the consent of other existing partners. 
D)  The right to share in profits and losses can be sold to a new partner without the consent of other existing partners. 
E)  A new partner always pays book value.

Question 14

When Danny withdrew from John, Daniel, Harry, and Danny, LLP, he was paid $80,000, although his capital account balance was only $60,000. The four partners shared net income and losses equally. The journal entry to record the effect on John's capital due to Danny's withdrawal would include:

Accepted Answer

A)  $6,667 debit to John, Capital. 
B)  $6,667 credit to John, Capital. 
C)  $20,000 debit to John, Capital. 
D)  $5,000 debit to John, Capital. 
E)  $5,000 credit to John, Capital.
($80,000 - $60,000) ÷ 3 = $6,667 
A)  $6,667 debit to John, Capital. 
B)  $6,667 credit to John, Capital. 
C)  $20,000 debit to John, Capital. 
D)  $5,000 debit to John, Capital. 
E)  $5,000 credit to John, Capital.
($80,000 - $60,000) ÷ 3 = $6,667

Question 15

A partnership began its first year of operations with the following capital balances:   The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.
What was the balance in Young's Capital account at the end of the second year?

Accepted Answer

A)  $133,380. 
B)  $84,760. 
C)  $105,690. 
D)  $132,860. 
E)  $71,760. 
A)  $133,380. 
B)  $84,760. 
C)  $105,690. 
D)  $132,860. 
E)  $71,760.

Question 16

A partnership began its first year of operations with the following capital balances:   The Articles of Partnership stipulated that profits and losses be assigned in the following manner: Young was to be awarded an annual salary of $26,000 with $13,000 salary assigned to Thurman.
Each partner was to be attributed with interest equal to 10% of the capital balance as of the first day of the year.
The remainder was to be assigned on a 5:2:3 basis to Young, Eaton, and Thurman, respectively.
Each partner withdrew $13,000 per year.
Assume that the net loss for the first year of operations was $26,000 with net income of $52,000 in the second year.
What was the balance in Eaton's Capital account at the end of the first year?

Accepted Answer

A)  $120,900. 
B)  $118,300. 
C)  $126,100. 
D)  $80,600. 
E)  $111,500. 
A)  $120,900. 
B)  $118,300. 
C)  $126,100. 
D)  $80,600. 
E)  $111,500.

Question 17

Brown and Green are forming a business as partners. If they do not create a formal written partnership agreement, what risks are they exposing themselves to?

Accepted Answer

The Articles of Partnership should help

Question 18

For what events or conditions should the Articles of Partnership make provision?

Accepted Answer

The Articles of Partnership should be a

Question 19

Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively. The partners share profits and losses 20%, 40%, and 40% respectively.
What is the total partnership capital after Anne retires receiving $80,000 and using the bonus method?

Accepted Answer

A) $70,000. 
B) $40,000. 
C) $60,000. 
D) $80,000. 
E) $42,000. 
A) $70,000. 
B) $40,000. 
C) $60,000. 
D) $80,000. 
E) $42,000.

Question 20

Cleary, Wasser, and Nolan formed a partnership on January 1, 2010, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2010 and $180,000 in 2011. Each partner withdrew $1,000 for personal use every month during 2010 and 2011. What was Wasser's total share of net income for 2010?

Accepted Answer

A)  $63,000. 
B)  $53,000. 
C)  $58,000. 
D)  $29,000. 
E)  $51,000. 
A)  $63,000. 
B)  $53,000. 
C)  $58,000. 
D)  $29,000. 
E)  $51,000.

The advantages of the partnership form of business organization, compared to corporations, include

What theoretical argument could be made against the recognition of goodwill when there is a change in the ownership of a partnership?

The disadvantages of the partnership form of business organization, compared to corporations, include

Which of the following statements is correct regarding the admission of a new partner?

When Danny withdrew from John, Daniel, Harry, and Danny, LLP, he was paid $80,000, although his capital account balance was only $60,000. The four partners shared net income and losses equally. The journal entry to record the effect on John's capital due to Danny's withdrawal would include:

Brown and Green are forming a business as partners. If they do not create a formal written partnership agreement, what risks are they exposing themselves to?

For what events or conditions should the Articles of Partnership make provision?

Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively. The partners share profits and losses 20%, 40%, and 40% respectively. What is the total partnership capital after Anne retires receiving $80,000 and using the bonus method?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements - Intercompany Asset Transactions

Intercompany Debt, Consolidated Statement of Cash Flows, and Other Issues

Consolidated Financial Statements - Ownership Patterns and Income Taxes

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Termination and Liquidation

Accounting for State and Local Governments

Accounting for State and Local Governments

Accounting for Not-For-Profit Organizations

Accounting for Estates and Trusts

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Exam 14: Partnerships: Formation and Operation

The advantages of the partnership form of business organization, compared to corporations, include

What theoretical argument could be made against the recognition of goodwill when there is a change in the ownership of a partnership?

The disadvantages of the partnership form of business organization, compared to corporations, include

Which of the following statements is correct regarding the admission of a new partner?

When Danny withdrew from John, Daniel, Harry, and Danny, LLP, he was paid $80,000, although his capital account balance was only $60,000. The four partners shared net income and losses equally. The journal entry to record the effect on John's capital due to Danny's withdrawal would include:

Brown and Green are forming a business as partners. If they do not create a formal written partnership agreement, what risks are they exposing themselves to?

For what events or conditions should the Articles of Partnership make provision?

Donald, Anne, and Todd have the following capital balances; $40,000, $50,000 and $30,000 respectively. The partners share profits and losses 20%, 40%, and 40% respectively. What is the total partnership capital after Anne retires receiving $80,000 and using the bonus method?

The Equity Method of Accounting for Investments

Consolidation of Financial Information

Consolidations - Subsequent to the Date of Acquisition

Consolidated Financial Statements and Outside Ownership

Consolidated Financial Statements - Intercompany Asset Transactions

Intercompany Debt, Consolidated Statement of Cash Flows, and Other Issues

Consolidated Financial Statements - Ownership Patterns and Income Taxes

Segment and Interim Reporting

Foreign Currency Transactions and Hedging Foreign Exchange Risk

Translation of Foreign Currency Financial Statements

Worldwide Accounting Diversity and International Accounting Standards

Financial Reporting and the Securities and Exchange Commission

Accounting for Legal Reorganizations and Liquidations

Partnerships: Termination and Liquidation

Accounting for State and Local Governments

Accounting for State and Local Governments

Accounting for Not-For-Profit Organizations

Accounting for Estates and Trusts

Filters