Question 1

Zheng invested $100,000 and Murray invested $200,000 in a partnership. They agreed to share incomes and losses by allowing a $60,000 per year salary allowance to Zheng and a $40,000 per year salary allowance to Murray, plus an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns $105,000 in income are:

Accepted Answer

A)  $70,000 to Zheng; $60,000 to Murray.
B)  $35,000 to Zheng; $70,000 to Murray.
C)  $52,500 to Zheng; $52,500 to Murray.
D)  $57,500 to Zheng; $47,500 to Murray.
E)  $42,500 to Zheng; $62,500 to Murray.F) A) and B)
G) A) and C)

Question 2

When a partnership is liquidated:

Accepted Answer

A)  Any gain or loss on liquidation is allocated to the partner with the highest capital account balance.
B)  The business may continue to operate.
C)  Liabilities are paid or settled.
D)  Any remaining cash is distributed to the partners equally.
E)  Noncash assets are distributed to partners.F) None of the above
G) B) and C)

Question 3

Caitlin, Chris, and Molly are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Caitlin, $120,000; Chris, $80,000; and Molly, $100,000. Paul is admitted to the partnership on July 1 with a 20% equity and invests $160,000. The balance in Paul's capital account immediately after his admission is:

Accepted Answer

A)  $160,000
B)  $300,000
C)  $460,000
D)  $68,000
E)  $92,000F) C) and D)
G) A) and B)

Question 4

Wallace, Simpson, and Prince are partners and share income and losses in a 3:4:3 ratio. The partnership's capital balances are Wallace, $68,000; Simpson, $90,000; and Prince, $42,000. Royal is admitted to the partnership on July 1 with a 20% equity and invests $50,000. The partnership would record the admission of Royal into the partnership as:

Accepted Answer

A)  Debit Cash $20,000; credit Prince, Capital $20,000.
B)  Debit Cash $50,000; credit Royal, Capital $50,000.
C)  Debit Cash $40,000; debit Wallace, Capital $3,000; debit Simpson, Capital, $4,000; debit Prince, Capital $3,000; credit Royal, Capital $50,000.
D)  Debit Cash $50,000; credit Simpson, Capital $10,000, credit Royal, Capital $40,000.
E)  Debit Wallace, Capital $15,000; debit Simpson, Capital, $20,000; debit Prince, Capital $15,000; credit Royal, Capital $50,000.F) C) and E)
G) B) and E)

Question 5

To buy into an existing partnership, the new partner must contribute cash to the partnership.

Accepted Answer

A) True 
 B)False

Question 6

A partnership has a limited life.

Accepted Answer

A) True 
 B)False

Question 7

In closing the accounts at the end of a period, the partners' capital accounts are credited for their share of the partnership net income or debited for their share of the partnership loss.

Accepted Answer

A) True 
 B)False

Question 8

Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $180,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Smart is investing $120,000 cash. The balance of Maxwell's Capital account will be:

Accepted Answer

A)  $56,000.
B)  $180,000.
C)  $60,000.
D)  $64,000.
E)  $124,000.F) B) and E)
G) A) and E)

Question 9

Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage, $(5,000) . After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency. What amount of cash will Gage receive upon liquidation?

Accepted Answer

A)  $0.
B)  Gage will be invoiced for $5,000.
C)  $25,667.
D)  $30,667.
E)  $20,667.F) A) and D)
G) A) and B)

Question 10

Mutual agency means each partner can commit or bind the partnership to any contract within the scope of the partnership business.

Accepted Answer

A) True 
 B)False

Question 11

The end of a partnership is referred to as its dissolution.

Accepted Answer

A) True 
 B)False

Question 12

A Limited Liability Partnership (LLP)is designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.

Accepted Answer

A) True 
 B)False

Question 13

Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage, $(5,000) . After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency. The journal entry to record the distribution should be:

Accepted Answer

A)  Debit Cash $77,000, debit Gage, Capital $5,000, credit Henry, Capital $45,000, credit Luther, Capital $37,000.
B)  Debit Cash $77,000; credit Henry, Capital $25,667; credit Luther, Capital $25,667; credit Gage, Capital $25,666.
C)  Debit Henry, Capital $42,500; debit Luther, Capital $34,500; credit Cash $77,000.
D)  Debit Henry, Capital $25,667; debit Luther, Capital $25,667; debit Gage, Capital $25,666; credit Cash $77,000.
E)  Debit Henry, Capital $45,000; debit Luther, Capital $37,000; credit Gage, Capital $5,000; credit Cash $77,000.F) A) and D)
G) D) and E)

Question 14

Bloom and Plant organize a partnership on January 1. Bloom's initial investment consists of $800 cash, $1,700 equipment and a $500 note payable reflecting a bank loan for the new business. Plant's initial investment is cash of $2,000. These amounts are the values agreed on by both partners. The journal entry to record Plant's investment is:

Accepted Answer

A)  Debit Cash $2,500; credit Note Payable $500; credit Plant, Capital $2,500.
B)  Debit Cash $1,500; debit Note Payable $500; credit Plant, Capital $2,000.
C)  Debit Cash $2,000; credit Note Payable $500, credit Plant, Capital $1,500.
D)  Debit Cash $2,000; credit Plant, Capital $2,000.
E)  Debit Bloom, Capital $2,000; credit Cash $2,000.F) B) and D)
G) A) and B)

Question 15

Define the partner return on equity ratio and explain how a specific partner would use this ratio.

Accepted Answer

The partner return on equity ratio is ca...

Question 16

Partners' withdrawals are debited to their separate withdrawals accounts.

Accepted Answer

A) True 
 B)False

Question 17

Pat and Nicole formed Here & There as a limited liability company. Unless the member owners elect to be treated otherwise, the Internal Revenue Service will tax the LLC as:

Accepted Answer

A)  A joint venture.
B)  An S corporation.
C)  A partnership.
D)  A C corporation.
E)  A non-taxable entity.F) B) and E)
G) All of the above

Question 18

Salary allowances are reported as salaries expense on a partnership income statement.

Accepted Answer

A) True 
 B)False

Question 19

Partnership accounting is the same as accounting for:

Accepted Answer

A)  A sole proprietorship, except that separate capital and withdrawal accounts are kept for each partner.
B)  A sole proprietorship.
C)  A corporation.
D)  A corporation, except that retained earnings is used to keep track of partners' withdrawals.
E)  An S corporation.F) C) and D)
G) B) and E)

Question 20

The equity section of the balance sheet of a partnership can report the separate capital account balances of each partner.

Accepted Answer

A) True 
 B)False

Exam 12: Accounting for Partnerships

Salary allowances are reported as salaries expense on a partnership income statement.

Correct Answer
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Partners' withdrawals are debited to their separate withdrawals accounts.

Correct Answer
verified

Correct Answer
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Correct Answer
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A partnership has a limited life.

Correct Answer
verified

Pat and Nicole formed Here & There as a limited liability company. Unless the member owners elect to be treated otherwise, the Internal Revenue Service will tax the LLC as:

Correct Answer
verified

Define the partner return on equity ratio and explain how a specific partner would use this ratio.

Correct Answer
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The partner return on equity ratio is ca...
View Answer

Partnership accounting is the same as accounting for:

Correct Answer
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The end of a partnership is referred to as its dissolution.

Correct Answer
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Correct Answer
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The equity section of the balance sheet of a partnership can report the separate capital account balances of each partner.

Correct Answer
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Correct Answer
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A Limited Liability Partnership (LLP)is designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.

Correct Answer
verified

Correct Answer
verified

To buy into an existing partnership, the new partner must contribute cash to the partnership.

Correct Answer
verified

Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $180,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Smart is investing $120,000 cash. The balance of Maxwell's Capital account will be:

Correct Answer
verified

In closing the accounts at the end of a period, the partners' capital accounts are credited for their share of the partnership net income or debited for their share of the partnership loss.

Correct Answer
verified

Mutual agency means each partner can commit or bind the partnership to any contract within the scope of the partnership business.

Correct Answer
verified

Correct Answer
verified

When a partnership is liquidated:

Correct Answer
verified

Exam 12: Accounting for Partnerships

Salary allowances are reported as salaries expense on a partnership income statement.

Correct AnswerverifiedShow Answer

Partners' withdrawals are debited to their separate withdrawals accounts.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A partnership has a limited life.

Correct AnswerverifiedShow Answer

Pat and Nicole formed Here & There as a limited liability company. Unless the member owners elect to be treated otherwise, the Internal Revenue Service will tax the LLC as:

Correct AnswerverifiedShow Answer

Define the partner return on equity ratio and explain how a specific partner would use this ratio.

Correct AnswerverifiedThe partner return on equity ratio is ca...View AnswerShow Answer

Partnership accounting is the same as accounting for:

Correct AnswerverifiedShow Answer

The end of a partnership is referred to as its dissolution.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The equity section of the balance sheet of a partnership can report the separate capital account balances of each partner.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A Limited Liability Partnership (LLP)is designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To buy into an existing partnership, the new partner must contribute cash to the partnership.

Correct AnswerverifiedShow Answer

Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $180,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Smart is investing $120,000 cash. The balance of Maxwell's Capital account will be:

Correct AnswerverifiedShow Answer

In closing the accounts at the end of a period, the partners' capital accounts are credited for their share of the partnership net income or debited for their share of the partnership loss.

Correct AnswerverifiedShow Answer

Mutual agency means each partner can commit or bind the partnership to any contract within the scope of the partnership business.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a partnership is liquidated:

Correct AnswerverifiedShow Answer

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The partner return on equity ratio is ca...
View Answer

Correct Answer
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Correct Answer
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