Question 1

When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

Accepted Answer

A) True 
 B)False

Question 2

Partners' withdrawals of assets are:

Accepted Answer

A)   Debited to retained earnings.
B)   Credited to their withdrawals accounts.
C)   Debited to their withdrawals accounts.
D)   Debited to their capital accounts.
E)   Credited to their capital accounts.F) A) and D)
G) C) and E)

Question 3

In the absence of a partnership agreement, the law says income/loss sharing should be based on:

Accepted Answer

A)   A fractional basis.
B)   Interest allowances.
C)   Equal shares.
D)   Salary allowances.
E)   The ratio of capital investments.F) C) and D)
G) A) and B)

Question 4

A general partner in a limited partnership

Accepted Answer

A)   is responsible for management duties in the business.
B)   is liable for partnership liabilities only to the extent of the partner's capital investment.
C)   is protected from any malpractice or negligence claims resulting from the acts of another partner.
D)   has limited liability for partnership debts.E) None of the above
F) B) and D)

Question 5

Rice, Hepburn, and DiMarco formed a partnership with Rice contributing $50,000, Hepburn contributing $30,000, and DiMarco contributing $20,000. Their partnership agreement called for the earnings division to be based on the ratio of capitalinvestments. If the partnership had a profit of $75,000 for its first year of operation, how much would be credited to DiMarco's capital account?

Accepted Answer

A)   $10,000.
B)   $30,000.
C)   $75,000.
D)   $15,000.
E)   $20,000.F) C) and D)
G) D) and E)

Question 6

A capital deficiency means that:

Accepted Answer

A)   The partnership has a loss.
B)   At least one partner has a credit balance in his/her capital account.
C)   The partnership has been sold at a loss.
D)   At least one partner has a debit balance in his/her capital account.
E)   The partnership has more liabilities than assets.F) C) and E)
G) D) and E)

Question 7

When a partner is unable to pay a capital deficiency:

Accepted Answer

A)   The deficient partner has a personal liability to the other partners.
B)   The deficiency is absorbed by the remaining partners and the deficient partner has a personal liability to the other partners.
C)   The deficiency is absorbed by the remaining partners.
D)   The partnership ends.
E)   The partner must take out a loan to cover the deficiency.F) A) and C)
G) All of the above

Question 8

If the partners agree on a formula to share income and say nothing about losses, then the losses are shared equally.

Accepted Answer

A) True 
 B)False

Question 9

When a partner leaves a partnership, the partnership ends.

Accepted Answer

A) True 
 B)False

Question 10

If there is no partnership agreement, the law requires that profits or losses are divided among partners in the ratio of their capital investments.

Accepted Answer

A) True 
 B)False

Question 11

If partners devote their time and services to their partnership, their salaries are expenses on the income statement.

Accepted Answer

A) True 
 B)False

Question 12

A partnership has unlimited life.

Accepted Answer

A) True 
 B)False

Question 13

In a limited partnership the general partner has unlimited liability.

Accepted Answer

A) True 
 B)False

Question 14

The equity section of the balance sheet of a partnership usually shows the individual capital account balance of each partner.

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) True 
 B)False

Question 16

Disadvantages of a partnership include:

Accepted Answer

A)   Unlimited liability.
B)   Limited life.
C)   Mutual agency.
D)   Co-ownership of property.
E)   All of these answers are correct.F) B) and E)
G) A) and D)

Question 17

An unincorporated association of two or more persons to carry on a business for profit as co-owners is called a:

Accepted Answer

A)   Partnership contract.
B)   Mutual agency.
C)   Divided authority.
D)   Proprietorship.
E)   Partnership.F) A) and D)
G) D) and E)

Question 18

Alban and Thompson formed a partnership with capital contributions with a fair value of $25,000 and $45,000, respectively. Their partnership agreement calls for Alban toreceive a $12,000 annual salary allowance. Also, each partner is to receive a share of earnings equal to a 10% return on capital investments. The remaining income or loss is to be divided equally. If the profit for the year is $48,000, then Alban and Thompson's respective shares are:

Accepted Answer

A)   $14,000; $14,000.
B)   $12,000; $16,000.
C)   $20,000; $8,000.
D)   $29,000; $19,000.
E)   $16,500; $11,500.F) C) and D)
G) C) and E)

Question 19

Salary and interest allowances are reported as expenses on a partnership income statement.

Accepted Answer

A) True 
 B)False

Question 20

Unlimited liability of partners is:

Accepted Answer

A)   The legal relationship among the partners whereby each partner is an agent of the partnership and is able to bind the partnership to contracts within the apparent scope of the partnership's business.
B)   The legal relationship between partners in which all the partners must share liability for the partnership debts, but only up to the amount of their capital accounts.
C)   The agreement between partners that sets forth the terms under which the affairs of the partnership will be conducted.
D)   In the absence of a contrary agreement, the legal responsibility of partners in a partnership to share all losses equally.
E)   The legal relationship among general partners that makes each of them responsible for paying all the debts of the partnership if the other partners are unable to pay their shares.F) C) and E)
G) C) and D)

Exam 11: Partnerships

An unincorporated association of two or more persons to carry on a business for profit as co-owners is called a:

Correct Answer
verified

If there is no partnership agreement, the law requires that profits or losses are divided among partners in the ratio of their capital investments.

Correct Answer
verified

In a limited partnership the general partner has unlimited liability.

Correct Answer
verified

If partners devote their time and services to their partnership, their salaries are expenses on the income statement.

Correct Answer
verified

When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

Correct Answer
verified

Correct Answer
verified

A partnership has unlimited life.

Correct Answer
verified

Disadvantages of a partnership include:

Correct Answer
verified

The equity section of the balance sheet of a partnership usually shows the individual capital account balance of each partner.

Correct Answer
verified

When a partner is unable to pay a capital deficiency:

Correct Answer
verified

Unlimited liability of partners is:

Correct Answer
verified

When a partner leaves a partnership, the partnership ends.

Correct Answer
verified

If the partners agree on a formula to share income and say nothing about losses, then the losses are shared equally.

Correct Answer
verified

In the absence of a partnership agreement, the law says income/loss sharing should be based on:

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

A general partner in a limited partnership

Correct Answer
verified

A capital deficiency means that:

Correct Answer
verified

Salary and interest allowances are reported as expenses on a partnership income statement.

Correct Answer
verified

Partners' withdrawals of assets are:

Correct Answer
verified

Exam 11: Partnerships

An unincorporated association of two or more persons to carry on a business for profit as co-owners is called a:

Correct AnswerverifiedShow Answer

If there is no partnership agreement, the law requires that profits or losses are divided among partners in the ratio of their capital investments.

Correct AnswerverifiedShow Answer

In a limited partnership the general partner has unlimited liability.

Correct AnswerverifiedShow Answer

If partners devote their time and services to their partnership, their salaries are expenses on the income statement.

Correct AnswerverifiedShow Answer

When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A partnership has unlimited life.

Correct AnswerverifiedShow Answer

Disadvantages of a partnership include:

Correct AnswerverifiedShow Answer

The equity section of the balance sheet of a partnership usually shows the individual capital account balance of each partner.

Correct AnswerverifiedShow Answer

When a partner is unable to pay a capital deficiency:

Correct AnswerverifiedShow Answer

Unlimited liability of partners is:

Correct AnswerverifiedShow Answer

When a partner leaves a partnership, the partnership ends.

Correct AnswerverifiedShow Answer

If the partners agree on a formula to share income and say nothing about losses, then the losses are shared equally.

Correct AnswerverifiedShow Answer

In the absence of a partnership agreement, the law says income/loss sharing should be based on:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A general partner in a limited partnership

Correct AnswerverifiedShow Answer

A capital deficiency means that:

Correct AnswerverifiedShow Answer

Salary and interest allowances are reported as expenses on a partnership income statement.

Correct AnswerverifiedShow Answer

Partners' withdrawals of assets are:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified