ACC 206 Week 4 Quiz – Strayer



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Quiz 3 Chapter 12

CHAPTER12


ACCOUNTINGFORPARTNERSHIPS



CHAPTERSTUDYOBJECTIVES


1.Identifythecharacteristicsofthepartnershipformofbusinessorganization.

2.Explaintheaccountingentriesfortheformationofapartnership.

3.Identifythebasesfordividingnetincomeornetloss.

4.Describetheformandcontentofpartnershipfinancialstatements.

5.Explaintheeffectsoftheentriestorecordtheliquidationofapartnership.

6.Explaintheeffectsoftheentrieswhenanewpartnerisadmitted.

7.Describetheeffectsoftheentrieswhenapartnerwithdrawsfromthefirm.




TRUE-FALSESTATEMENTS

1.     Thepersonalassets,liabilities,andpersonaltransactionsofpartnersareexcludedfrom theaccountingrecordsofthepartnership.

2.     Theactofanypartnerisbindingonallotherpartnersiftheactappearstobeappropriate forthepartnership.

3.     Amajoradvantageofthepartnershipformoforganizationisthatthepartnershave unlimitedliability.

4.     Partnershipcreditorsmayhaveaclaimonthepersonalassetsofanyofthepartnersifthe partnershipassetsarenotsufficienttosettleclaims.

5.     Thepartnershipagreementbetweenpartnersmustbeinwriting.


6.     Ifapartnerinvestsnoncashassetsinapartnership,theyshouldberecordedbythe partnershipattheirfairmarketvalue.

7.     L.Hillinveststhefollowingassetsinanewpartnership:$15,000incash,andequipment thatcost$30,000buthasabookvalueof$17,000andfairmarketvalueof$20,000.Hill, Capitalwillbecreditedfor$32,000.

8.     Twoproprietorshipscannotcombineandformapartnership.


9.     Ifapartner'sinvestmentinapartnershipconsistsofequipmentthathasaccumulated depreciationof$8,000,itwouldnotbeappropriateforthepartnershiptorecordthe accumulateddepreciation.

10.     Ifapartner'sinvestmentinapartnershipconsistsofAccountsReceivableof$25,000and anAllowanceforDoubtfulAccountsof$7,000,itwouldnotbeappropriateforthe partnershiptorecordthe AllowanceforDoubtfulAccounts.

11.     Unlessstatedotherwiseinthepartnershipcontract,profitsandlossesaresharedamong thepartnersintheratiooftheircapitalequitybalances.

12.     Ifsalaryallowancesandinterestoncapitalarestipulatedinthepartnershipprofitandloss sharingagreement,theyareimplementedonlyifincomeissufficienttocovertheamounts requiredbythesefeatures.

13.     Unlessthepartnershipagreementspecificallyindicatesanincomeratio,partnershipnet incomeorlossisnotallocatedtothepartners.
AccountingforPartnerships         12-5


14.     Partnershipincomeorlossneednotbeclosedtopartners'capitalaccountseachperiod becauseoftheunlimitedlifecharacteristicofpartnerships.

15.     Ifapartnershiphasalossfortheperiod,theclosingentrytotransferthelosstothe partnerswillrequireacredittotheIncomeSummaryaccount.

16.     Thepartners'drawingaccountsareclosedeachperiodintotheIncomeSummary account.

17.     Salaryallowancestopartnersareamajorexpenseonmostpartnershipincome statements.

18.     Aninterestallowanceinsharingpartnershipnetincome(ornetloss)isrelatedtothe amountofpartners'investedcapital duringtheperiod.

19.     Thefinancialstatementsofapartnershiparesimilartothoseofaproprietorship.


20.     Theincomeearnedbyapartnershipwillalwaysbegreaterthantheincomeearnedbya proprietorshipbecauseinapartnershipthereismorethanoneownercontributingtothe successofthebusiness.

21.     ThefunctionofthePartners'CapitalStatementistoexplainthechangesinpartners' capitalaccountbalancesduringaperiod.

22.     Adetailedlistingofalltheassetsinvestedbyapartnerinapartnershipappearsonthe Partners'CapitalStatement.

23.     Totalpartners'equityofapartnershipisequaltothesumofallpartners'capitalaccount balances.

24.     Thedistributionofcashtopartnersinapartnershipliquidationisalwaysmadebasedon thepartners'incomesharingratio.

25.     Theliquidationofapartnershipmeansthatanewpartnerhasbeenadmittedtothe partnership.

a26.     Theadmissionofanewpartnerresultsinthelegaldissolutionoftheexistingpartnership andthebeginningofanewpartnership.

a27.     Ifanewpartnerisadmittedintoapartnershipbyinvestment,thetotalassetsandtotal capitalwillchange.

a28.     Abonustooldpartnersresultswhenthenewpartner'scapitalcreditonthedateof admittanceisgreaterthanhisorherinvestmentinthefirm.

a29.     Ifanewpartnerinvestsinapartnershipatbookvalueandacquiresa1/4interestintotal partnershipcapital,itindicatesthatabonuswaspaidtotheoriginalpartners.

a30.     Abonustotheremainingpartnersresultswhenaretiringpartnerreceivespartnership assetswhicharelessthanhisorhercapitalbalanceonthedateofwithdrawal.


AdditionalTrue-FalseQuestions


31.     Apartnershipisanassociationofnomorethantwopersonstocarryonasco-ownersofa businessforprofit.

32.     Onceassetshavebeeninvestedinthepartnership,theyareownedjointlybyallpartners.


33.     Eachpartner'sinitialinvestmentinapartnershipshouldberecordedatbookvalue.


34.     Partnershipincomeissharedinproportiontoeachpartner'scapitalequityinterestunless thepartnershipcontractspecificallyindicatesthemannerinwhichnetincomeornetloss istobedivided.

35.     Inaliquidation,thefinaldistributionofcashtopartnersshouldbeonthebasisoftheir incomeratios.

a36.     Inanadmissionofapartnerbyinvestmentofassets,thetotalnetassetsandtotalcapital ofthepartnershipdonotchange.

a37.     Thewithdrawalofapartnerlegallydissolvesthepartnership.






MULTIPLECHOICEQUESTIONS


38.     Ahybridformofbusinessorganizationwithcertainfeatureslikeacorporationisa(n) a.limitedliabilitypartnership.
b.limitedliabilitycompany. c."S"corporation.
d.sub-chapter"S"corporation.


39.     Apartnership

a.hasonlyoneowner.

b.paystaxesonpartnershipincome. c.mustfileaninformationtaxreturn.
d.isnotanaccountingentityforfinancialreporting purposes.


40.     Ageneralpartnerinapartnership

a.hasunlimitedliabilityforallpartnershipdebts. b.isalwaysthegeneralmanagerofthefirm.
c.isthepartnerwholacksaspecialization.

d.isliableforpartnershipliabilitiesonlytotheextentofthatpartner'scapitalequity.
AccountingforPartnerships         12-7


41.     Theindividualassetsinvestedbyapartnerinapartnership a.revertbacktothatpartnerifthepartnershipliquidates.
b.determinethatpartner'sshareofnetincomeorlossfortheyear. c.arejointlyownedbyallpartners.
d.determinethescopeofauthorityofthatpartner.


42.     Whichoneofthefollowingwouldnotbeconsideredadisadvantageofthepartnership formoforganization?
a.Limitedlife

b.Unlimitedliability c.Mutualagency
d.Easeofformation


43.     Thepartnershipformofbusinessis

a.restrictedtolawandmedicalpractices.

b.restrictedtofirmshavingfewerthan10partners. c.notrestrictedtoanyparticulartypeofbusiness. d.mostoftenusedinrelativelylargecompanies.

44.     Whichofthefollowingisnotaprincipalcharacteristicofthepartnershipformofbusiness organization?
a.Mutualagency

b.Associationofindividuals c.Limitedliability
d.Limitedlife


45.     Thepartnershipagreementshouldincludeeachofthefollowingexceptthe a.dateofthepartnershipinception.
b.principallocationofthefirm.

c.survivingfamilymembersintheeventofapartner'sdeath. d.Eachoftheseshouldbeincluded.

46.     Whichofthefollowingstatementsistrueregardingtheformofalegallybinding partnershipcontract?
a.Thepartnershipcontractmustbeinwriting.

b.Thepartnershipcontractmaybebasedonahandshake. c.Thepartnershipcontractmaybeimplied.
d.Thepartnershipcontractcannotbe oral.


47.     Whichofthefollowingstatementsaboutapartnershipiscorrect?

a.Thepersonalassetsofapartnerareincludedinthepartnershipaccountingrecords. b.Apartnershipisnotrequiredtofileaninformationtaxreturn.
c.Eachpartner'sshareofincomeistaxabletothepartnership.

d.Apartnershiprepresentsanaccountingentityforfinancialreportingpurposes.


48.     Inapartnership,mutualagencymeans

a.eachpartneractsonhisownbehalfwhenengaginginpartnershipbusiness.

b.theactofanypartnerisbindingonallotherpartners,onlyifpartnersactwithintheir copeofauthority.
c.anactbyapartnerisjudgedasbindingonotherpartnersdependingonwhetherthe actappearstobeappropriateforthepartnership.
d.thatpartnersmustpaytaxesonamutualorcombinedbasis.
12-8        TestBankforAccountingPrinciples,EighthEdition


49.     Apartnership

a.isdissolvedonlybythewithdrawalofapartner.

b.isdissolvedupontheacceptanceofanewpartner. c.dissolutionmeansthebusinessmustliquidate.
d.hasunlimitedlife.


50.     Thepartnerinalimitedpartnershipthathasunlimitedliabilityisreferredtoasthe a.leadpartner.
b.headpartner.

c.generalpartner.d.unlimitedpartner.

51.     Limitedpartnerships

a.musthaveatleastonegeneralpartner.

b.guaranteethatapartnerwillreceiveareturn.

c.guaranteethatapartnerwillgetbackhisoriginalinvestment. d.arelimitedtoonlythreepartners.

52.     TheMaris-Cranepartnershipisterminatedwhencreditorclaimsexceedpartnership assetsby$40,000.CraneisamillionaireandMarishasnopersonalassets.Maris' partnershipinterestis75%andCrane'sis25%.Creditors
a.mustcollecttheirclaimsequallyfromMarisandCrane. b.maycollecttheentire$40,000fromCrane.
c.mustcollecttheirclaims75%fromMarisand25%fromCrane.

d.maynotrequireCranetousehispersonalassetstosatisfythe$40,000inclaims.


53.     Whichofthefollowingstatementsaboutpartnershipsisincorrect? a.Partnershipassetsareco-ownedbypartners.
b.Ifa partnership isterminated,the assets do not legallyrevert totheoriginal contributor.c.Ifthepartnershipagreementdoesnotspecifythemannerinwhichnetincomeistobe
shared,itisdistributedaccordingtocapitalcontributions.

d.Eachpartnerhasaclaimonassetsequaltothebalanceinthepartner'scapital account.

54.     Whichofthefollowingisnotanadvantageofthepartnershipformofbusiness? a.Mutualagency
b.Easeofformation

c.Easeofdecisionmaking

d.Freedomfromgovernmentalregulationsandrestrictions


55.     ThelargestcompaniesintheUnitedStatesareprimarilyorganizedas a.limitedpartnerships.
b.partnerships. c.corporations.
d.proprietorships.


56.     Thebasisfordividingpartnershipnetincomeornetlossisreferredtoasanyofthe followingexceptthe
a.incomeratio.

b.incomeandlossratio. c.profitandlossratio.d.incomesharingratio.
AccountingforPartnerships         12-9


57.     Whichofthefollowingstatementsisincorrectregardingpartnershipagreements? a.Itmaybereferredtoasthe“articlesofco-partnership.”
b.Oralagreementsarepreferabletowrittenarticles.

c.Itshouldspecifythedifferentrelationshipsthataretoexistamongthepartners. d.Itshouldstateproceduresforsubmittingdisputestoarbitration.


58.     Nortoninvestspersonallyownedequipment,whichoriginallycost$110,000andhas accumulateddepreciationof$30,000intheNortonandKennettpartnership.Bothpartners agreethatthefairmarketvalueoftheequipmentwas$60,000.Theentrymadebythe partnershiptorecordNorton'sinvestmentshouldbe

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