Question 1

Match each statement to the appropriate term (a-h).
-Without an agreement, the law will stipulate this method of sharing profits and losses

Accepted Answer

A) Partnership 
B) Partnership agreement 
C) Distribution of remaining cash to partners 
D) Mutual agency 
E) Equally
F)Death of a partner
G)Liquidation
H)Unlimited liability

Question 2

Xavier and Yolanda have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $38,000 and $28,000, respectively; and the remainder to be divided equally. How much of the net income of $77,000 is allocated to Yolanda?

Accepted Answer

A)  $77,000 
B)  $38,000 
C)  $36,000 
D)  $44,000

Question 3

Adriana and Belen are partners who share income in the ratio of 3:2 and have capital balances of $50,000 and $90,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $90,000. How much cash should be distributed to Adriana?

Accepted Answer

A)  $50,000 
B)  $20,000 
C)  $30,000 
D)  $45,000

Question 4

Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000, respectively, at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $130,000. What amount of loss on realization should be allocated to Soledad?

Accepted Answer

A)  $60,000 
B)  $27,500 
C)  $92,500 
D)  $32,500

Question 5

The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is called

Accepted Answer

A)  unlimited liability 
B)  ease of formation 
C)  mutual agency 
D)  dissolution

Question 6

Each partner has a separate capital and withdrawal account.

Accepted Answer

A) True 
 B)False

Question 7

Kala and Leah, partners in Best Designs, have capital balances of $40,000 and $60,000, respectively. Adam joins the partnership by buying one-half of Kala's interest for $30,000. In addition, because of Adam's outstanding sales skills, the partners agree to increase his interest to 40% if he invests another $10,000. The income-sharing ratio of Kala, Leah, and Adam is 4:3:1.​
(a)Journalize the entries to record the admission of Adam to the partnership.
(b)Immediately after Adam's admission to the partnership, Leah sells one-fourth of her interest to Denton for $35,000. Journalize the entry to record this transaction.

Accepted Answer

The answer of Kala and Leah, partners in Best Designs,...

Question 8

Each partner may withdraw the assets he or she contributed to the partnership at any time.

Accepted Answer

A) True 
 B)False

Question 9

Gleason invested $90,000 in the James and Kirk Partnership for ownership equity of $90,000. Prior to the investment, land was revalued to a market value of $425,000 from a book value of $200,000. James and Kirk share net income in a 1:2 ratio.​
(a) Provide the journal entry for the revaluation of land.
(b) Provide the journal entry to admit Gleason.

Accepted Answer

The answer of Gleason invested $90,000 in the James and...

Question 10

An advantage of the partnership form of business is that each partner's potential loss is limited to that partner's investment in the partnership.

Accepted Answer

A) True 
 B)False

Question 11

The chart of accounts for a partnership, with the exception of additional drawing and capital accounts, does not differ from the chart of accounts for a sole proprietorship.

Accepted Answer

A) True 
 B)False

Question 12

Rodgers and Winter had capital balances of $60,000 and $90,000, respectively, at the beginning of the current fiscal year. The articles of partnership provide for salary allowances of $25,000 and $30,000, respectively; an allowance of interest at 12% on the capital balances at the beginning of the year; and the remaining net income divided equally. Net income for the current year was $110,000.​
(a)Present the Division of net income section of the income statement for the current year.
(b)Assuming that the net income had been $65,000 instead of $110,000, present the Division of net income section of the income statement for the current year.

Accepted Answer

The answer of Rodgers and Winter had capital balances of...

Question 13

Abby and Bailey are partners who share income in the ratio of 2:1 and have capital balances of $60,000 and $30,000, respectively. With the consent of Bailey, Sandra buys one-half of Abby's interest for $35,000. For what amount will Abby's capital account be debited to record admission of Sandra to the partnership?

Accepted Answer

A)  $40,000 
B)  $15,000 
C)  $35,000 
D)  $30,000

Question 14

Many partnerships provide for the admission of new partners or withdrawals of present partners by amending existing partnership agreements, so that the firm may continue to operate without executing a new agreement.

Accepted Answer

A) True 
 B)False

Question 15

What amount will be recorded to Kelsey's capital account?

Accepted Answer

A)  $14,000 
B)  $24,000 
C)  $40,000 
D)  $44,000

Question 16

Match each statement to the appropriate term (a-h).
-The process of going out of business by selling the entity's assets and paying its liabilities

Accepted Answer

A) Partnership 
B) Partnership agreement 
C) Distribution of remaining cash to partners 
D) Mutual agency 
E) Equally
F)Death of a partner
G)Liquidation
H)Unlimited liability

Question 17

Jackson and Campbell have capital balances of $100,000 and $300,000, respectively. Jackson devotes full time and Campbell devotes one-half time to the business. Determine the division of $150,000 of net income in the ratio of capital balances.​

Accepted Answer

A)  $75,000 and $75,000 
B)  $37,500 and $112,500 
C)  $100,000 and $50,000 
D)  $50,000 and $100,000

Question 18

If the net income of a partnership is less than the total of the allowances provided by the partnership agreement, the difference must be divided among the partners in the income-sharing ratio.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not one of the four major forms of business entities that are discussed in this chapter?

Accepted Answer

A)  sole proprietorship 
B)  corporation 
C)  partnership 
D)  subchapter S corporation

Question 20

Revenue per employee may be used to measure partnership 
(LLC) efficiency.

Accepted Answer

A) True 
 B)False

Exam 12: Accounting for Partnerships and Limited Liability Companies

Match each statement to the appropriate term (a-h) . -Without an agreement, the law will stipulate this method of sharing profits and losses

The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is called

Each partner has a separate capital and withdrawal account.

Each partner may withdraw the assets he or she contributed to the partnership at any time.

An advantage of the partnership form of business is that each partner's potential loss is limited to that partner's investment in the partnership.

The chart of accounts for a partnership, with the exception of additional drawing and capital accounts, does not differ from the chart of accounts for a sole proprietorship.

Many partnerships provide for the admission of new partners or withdrawals of present partners by amending existing partnership agreements, so that the firm may continue to operate without executing a new agreement.

What amount will be recorded to Kelsey's capital account?

Match each statement to the appropriate term (a-h) . -The process of going out of business by selling the entity's assets and paying its liabilities

Jackson and Campbell have capital balances of $100,000 and $300,000, respectively. Jackson devotes full time and Campbell devotes one-half time to the business. Determine the division of $150,000 of net income in the ratio of capital balances.

If the net income of a partnership is less than the total of the allowances provided by the partnership agreement, the difference must be divided among the partners in the income-sharing ratio.

Which of the following is not one of the four major forms of business entities that are discussed in this chapter?

Revenue per employee may be used to measure partnership (LLC) efficiency.

Exam 12: Accounting for Partnerships and Limited Liability Companies

Match each statement to the appropriate term (a-h) . -Without an agreement, the law will stipulate this method of sharing profits and losses

The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is called

Each partner has a separate capital and withdrawal account.

Each partner may withdraw the assets he or she contributed to the partnership at any time.

An advantage of the partnership form of business is that each partner's potential loss is limited to that partner's investment in the partnership.

The chart of accounts for a partnership, with the exception of additional drawing and capital accounts, does not differ from the chart of accounts for a sole proprietorship.

Many partnerships provide for the admission of new partners or withdrawals of present partners by amending existing partnership agreements, so that the firm may continue to operate without executing a new agreement.

What amount will be recorded to Kelsey's capital account?

Match each statement to the appropriate term (a-h) . -The process of going out of business by selling the entity's assets and paying its liabilities

Jackson and Campbell have capital balances of $100,000 and $300,000, respectively. Jackson devotes full time and Campbell devotes one-half time to the business. Determine the division of $150,000 of net income in the ratio of capital balances.​

If the net income of a partnership is less than the total of the allowances provided by the partnership agreement, the difference must be divided among the partners in the income-sharing ratio.

Which of the following is not one of the four major forms of business entities that are discussed in this chapter?

Revenue per employee may be used to measure partnership (LLC) efficiency.

Jackson and Campbell have capital balances of $100,000 and $300,000, respectively. Jackson devotes full time and Campbell devotes one-half time to the business. Determine the division of $150,000 of net income in the ratio of capital balances.