Question 1

Mutual agency means

Accepted Answer

A) Partners are taxed on partnership withdrawals. 
B) All partners must agree before the partnership can act. 
C) A partner can commit or bind the partnership in any contract within the scope of the partnership business. 
D) The partnership has a limited life. 
E) Creditors can apply their claims to partners' personal assets. 
A) Partners are taxed on partnership withdrawals. 
B) All partners must agree before the partnership can act. 
C) A partner can commit or bind the partnership in any contract within the scope of the partnership business. 
D) The partnership has a limited life. 
E) Creditors can apply their claims to partners' personal assets.

Question 2

Advantages of a partnership include:

Accepted Answer

A) Tax-free designation of all income earned 
B) Limited life. 
C) Unlimited liability. 
D) Voluntary association. 
E) Mutual agency. 
A) Tax-free designation of all income earned 
B) Limited life. 
C) Unlimited liability. 
D) Voluntary association. 
E) Mutual agency.

Question 3

Assume that the M & L partnership agreement gave March 60% and Ludwig 40% of partnership income and losses. The partnership lost $27,000 in the current period. This implies that March's share of the loss equals $16,200, and Ludwig's share equals $10,800.

Accepted Answer

A) True 
 B)False

Question 4

Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Masters, $15,000; Hardy, $15,000; Rowen, $(2,000). After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $28,000 in cash to be distributed. Rowen pays $2,000 to cover the deficiency in his account. The general journal entry to record the final distribution would be:

Accepted Answer

A) Debit Masters, Capital $14,000; debit Hardy, Capital $14,000; credit Cash $28,000. 
B) Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Rowen, Capital $2,000; credit Cash $28,000. 
C) Debit Masters, Capital $9,334; debit Hardy, Capital $9,333; debit Rowen, Capital $9,333; credit Cash $28,000. 
D) Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Cash $30,000. 
E) Debit Cash $28,000; debit Rowen, Capital $2,000; credit Masters, Capital $15,000; credit Hardy, Capital $15,000. 
A) Debit Masters, Capital $14,000; debit Hardy, Capital $14,000; credit Cash $28,000. 
B) Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Rowen, Capital $2,000; credit Cash $28,000. 
C) Debit Masters, Capital $9,334; debit Hardy, Capital $9,333; debit Rowen, Capital $9,333; credit Cash $28,000. 
D) Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; credit Cash $30,000. 
E) Debit Cash $28,000; debit Rowen, Capital $2,000; credit Masters, Capital $15,000; credit Hardy, Capital $15,000.

Question 5

What factors should be considered before establishing a partnership?

Accepted Answer

Anyone considering forming a partnership

Question 6

The partnership agreement for Wilson, Pickett & Nelson, a general partnership, provided that profits be shared between the partners in the ratio of their financial contributions to the partnership. Wilson contributed $100,000, Pickett contributed $50,000 and Nelson contributed $50,000. In the partnership's first year of operation, it incurred a loss of $110,000. What amount of the partnership's loss, rounded to the nearest dollar, should be absorbed by Nelson?

Accepted Answer

A) $36,667 
B) $40,000 
C) $27,500 
D) $0 
E) $50,000 
A) $36,667 
B) $40,000 
C) $27,500 
D) $0 
E) $50,000

Question 7

Peters and Chong are partners and share equally in income or loss. Peters' current capital balance is $140,000 and Chong's is $130,000. Peters and Chong agree to accept Aaron with a 30% interest in the partnership. Aaron invests $98,000 in the partnership. The amount credited to Aaron's capital account is:

Accepted Answer

A) $114,533. 
B) $81,000. 
C) $110,400. 
D) $98,000. 
E) $102,600. 
A) $114,533. 
B) $81,000. 
C) $110,400. 
D) $98,000. 
E) $102,600.

Question 8

In the absence of a partnership agreement, the law says that income of a partnership will be shared equally by the partners.

Accepted Answer

A) True 
 B)False

Question 9

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 $60,000. The balance in Caitlin's capital account immediately after Paul's admission is:

Accepted Answer

A) $60,000 
B) $123,600 
C) $72,000 
D) $120,000 
E) $116,400 
A) $60,000 
B) $123,600 
C) $72,000 
D) $120,000 
E) $116,400

Question 10

When a partner is unable to pay a capital deficiency:

Accepted Answer

A) The partner must take out a loan to cover the deficient balance. 
B) The deficient partner is relieved of the liability. 
C) The remaining partners must wait for the deficiency to be paid before cash is distributed. 
D) The partnership ends before distribution of cash. 
E) The deficiency is absorbed by the remaining partners before distribution of cash. 
A) The partner must take out a loan to cover the deficient balance. 
B) The deficient partner is relieved of the liability. 
C) The remaining partners must wait for the deficiency to be paid before cash is distributed. 
D) The partnership ends before distribution of cash. 
E) The deficiency is absorbed by the remaining partners before distribution of cash.

Question 11

Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $285,000, and Atkins' beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. Barber withdrew $90,000 during the year and Atkins withdrew $100,000. What is Atkins's return on equity?

Accepted Answer

A) 41.3% 
B) 43.9% 
C) 36.5% 
D) 32.7% 
E) 33.8% 
A) 41.3% 
B) 43.9% 
C) 36.5% 
D) 32.7% 
E) 33.8%

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.

Accepted Answer

A partner may sell his or her interest i

Mutual agency means

Advantages of a partnership include:

Assume that the M & L partnership agreement gave March 60% and Ludwig 40% of partnership income and losses. The partnership lost $27,000 in the current period. This implies that March's share of the loss equals $16,200, and Ludwig's share equals $10,800.

What factors should be considered before establishing a partnership?

In the absence of a partnership agreement, the law says that income of a partnership will be shared equally by the partners.

When a partner is unable to pay a capital deficiency:

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

What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

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Exam 12: Accounting for Partnerships

Mutual agency means

Advantages of a partnership include:

Assume that the M & L partnership agreement gave March 60% and Ludwig 40% of partnership income and losses. The partnership lost $27,000 in the current period. This implies that March's share of the loss equals $16,200, and Ludwig's share equals $10,800.

What factors should be considered before establishing a partnership?

In the absence of a partnership agreement, the law says that income of a partnership will be shared equally by the partners.

When a partner is unable to pay a capital deficiency:

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

What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.

Accounting in Business

Analyzing and Recording Transactions

Adjusting Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories and Cost of Sales

Accounting Information Systems

Cash and Internal Controls

Accounting for Receivables

Plant Assets, Natural Resoures, and Intangibles

Current Liabilities and Payroll Accounting

Accounting for Corporations

Long-Term Liabilities

Investments and International Operations

Reporting the Statement of Cash Flows

Analysis of Financial Statements

Filters