Question 1

The Limited Liability Company may elect to be manager managed rather than member managed which means that only authorized members may legally bind the corporation.

Accepted Answer

A) True 
 B)False

Question 2

The distribution of cash, as the final process in winding up the affairs of a partnership, is based on the income-sharing ratio.

Accepted Answer

A) True 
 B)False

Question 3

Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann's was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will McMann's share of the income be if the income for the year was $15,000?

Accepted Answer

A)  $6,000 
B)  $9,400 
C)  $12,600 
D)  $14,000

Question 4

When a partner invests noncash assets in a partnership, the assets are recorded at the partner's book value.

Accepted Answer

A) True 
 B)False

Question 5

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 6

When a new partner is admitted to a partnership, bonuses attributable to either the old partnership or to the incoming partner may be recognized in accordance with the agreement among the partners.

Accepted Answer

A) True 
 B)False

Question 7

A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm. As a results of this transaction, the capital account balance of the other partners in the partnership

Accepted Answer

A)  will increase 
B)  will decrease 
C)  will remain the same 
D)  may increase, decrease, or remain the same

Question 8

When compared to a corporation, one of the major disadvantages of the partnership is its limited life.

Accepted Answer

A) True 
 B)False

Question 9

The partnership of Abraham Associates began operations on January 1, 2010, with contributions from two partners as follows:
  The following additional partner transactions took place during the year:
  Required:
Prepare a statement of partnership equity for the year ended December 31, 2010.

Accepted Answer

The answer of The partnership of Abraham Associates began operations...

Question 10

Henry Jones contributed equipment, inventory, and $44,000 cash to the partnership. The equipment had a book value of $35,000 and market value of $28,000. The inventory has a book value of $25,000, but only had a market value of $12,000. due to obsolescence. The partnership also assumed a $15,000 note payable owed by Henry that was originally used to purchase the equipment. What amount should Henry's capital account be recorded?

Accepted Answer

A)  $104,000 
B)  $89,000 
C)  $69,000 
D)  $84,000

Question 11

Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in the year's net income of $200,000 under each of the following independent assumptions:

Accepted Answer

The answer of Holly and Luke formed a partnership, investing...

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Details of the division of net income for a partnership should be disclosed

Accepted Answer

A)  in the asset section of the balance sheet 
B)  in the partners' subsidiary ledger 
C)  in the statement of cash flows 
D)  in the partnership income statement

Question 14

As part of the initial investment, a partner contributes equipment that had originally cost $125,000 and on which accumulated depreciation of $100,000 has been recorded. If similar equipment would cost $150,000 to replace and the partners agree on a valuation of $38,000 for the contributed equipment, what amount should be debited to the equipment account?

Accepted Answer

A)  $38,000 
B)  $150,000 
C)  $125,000 
D)  $100,000

Question 15

The salary allocation to partners used in dividing net income would also appear as salary expense on the partnership income statement.

Accepted Answer

A) True 
 B)False

Question 16

The Craig-Doran Partnership owns inventory that was purchased for $85,000, has a current replacement cost of $54,500, and is priced to sell for $98,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted?

Accepted Answer

A)  $98,000 
B)  $54,500 
C)  $85,000 
D)  $79,167

Question 17

Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income when there is no reference to division in partership agreement.

Accepted Answer

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

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

Derek and Hailey, partners sharing net income in the ratio of 2:1, admit Ben to the partnership in accordance with the following agreement:
  Required:

Accepted Answer

The answer of Derek and Hailey, partners sharing net income...

Question 20

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 20%, salary allowances of $34,000 and $26,000 respectively, and the remainder equally. How much of the net income of $100,000 is allocated to Yolanda?

Accepted Answer

A)  $49,000 
B)  $51,000 
C)  $50,000 
D)  $56,000

Exam 12: Accounting for Partnerships and Limited Liability Companies

The Limited Liability Company may elect to be manager managed rather than member managed which means that only authorized members may legally bind the corporation.

The distribution of cash, as the final process in winding up the affairs of a partnership, is based on the income-sharing ratio.

When a partner invests noncash assets in a partnership, the assets are recorded at the partner's book value.

When a new partner is admitted to a partnership, bonuses attributable to either the old partnership or to the incoming partner may be recognized in accordance with the agreement among the partners.

A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm. As a results of this transaction, the capital account balance of the other partners in the partnership

When compared to a corporation, one of the major disadvantages of the partnership is its limited life.

The partnership of Abraham Associates began operations on January 1, 2010, with contributions from two partners as follows: The following additional partner transactions took place during the year: Required: Prepare a statement of partnership equity for the year ended December 31, 2010.

Holly and Luke formed a partnership, investing $240,000 and $80,000, respectively. Determine their participation in the year's net income of $200,000 under each of the following independent assumptions:

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

Details of the division of net income for a partnership should be disclosed

The salary allocation to partners used in dividing net income would also appear as salary expense on the partnership income statement.

The Craig-Doran Partnership owns inventory that was purchased for $85,000, has a current replacement cost of $54,500, and is priced to sell for $98,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted?

Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income when there is no reference to division in partership agreement.

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.

Derek and Hailey, partners sharing net income in the ratio of 2:1, admit Ben to the partnership in accordance with the following agreement: Required: