Question 1

A partnership need not obtain permission from the state before it legally conducts business.

Accepted Answer

A) True 
 B)False

Question 2

When a new partner is admitted,the old partnership agreement is still in effect.

Accepted Answer

A) True 
 B)False

Question 3

Liquidation of a partnership is the process of ending the business.

Accepted Answer

A) True 
 B)False

Question 4

An advantage of the partnership form of business is that the life of the partnership is limited.

Accepted Answer

A) True 
 B)False

Question 5

Discuss how each of the following would be recorded in the partner's capital account and why:
a.Trevor invests into the partnership land that he paid $40,000 for 3 years ago.Today,the fair market value of the land is $65,000.
b.Marcela invests into the partnership a building that she paid $24,000 for 2 years ago.The building has a $10,000 mortgage and its fair market value is $18,000.The partnership assumes the mortgage.
c.Courtney invests into the partnership equipment she paid $12,000 for earlier in the year by signing a note payable that the partnership is not assuming.The equipment has a fair market value of $15,000.

Accepted Answer

a.Trevor's capital account would be cred

Question 6

Chad invests $20,000 for a one-third interest in a partnership in which the other partners have capital totaling $52,000 before admitting Chad.After distribution of the bonus,what is Chad's capital?

Accepted Answer

A) $10,666 
B) $17,334 
C) $20,000 
D) $24,000 
A) $10,666 
B) $17,334 
C) $20,000 
D) $24,000

Question 7

Avery and Bert are partners who share profits in a ratio of 2:1 and have capital balances of $75,000 and $150,000,respectively.The partners agree to admit Carmen to the partnership.Carmen invests $75,000 for a 35 percent interest in the partnership.The new total capital balance after admitting Carmen is $300,000.The entry to record the admission of Carmen to the partnership is:

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 8

In a liquidation,partners are given back the assets that they originally invested.

Accepted Answer

A) True 
 B)False

Question 9

When a new partner invests less than the proportionate share he or she receives in the partnership,a bonus is recorded to his or her account.

Accepted Answer

A) True 
 B)False

Question 10

When the existing partners pay a bonus to a newly admitted partner,the existing partners' accounts are debited.

Accepted Answer

A) True 
 B)False

Question 11

Partner X purchases Partner Y's $25,000 interest from Partner Y for $30,000.The entry to record the transaction is for $30,000.

Accepted Answer

A) True 
 B)False

Question 12

Sara invests $120,000 for a 30 percent interest in a partnership in which the other partners have capital totaling $200,000 before admitting Sara.After distribution of the bonus,what is Sara's capital balance?

Accepted Answer

A) $60,000 
B) $96,000 
C) $120,000 
D) $144,000 
A) $60,000 
B) $96,000 
C) $120,000 
D) $144,000

Question 13

It is possible to invest no tangible assets into a partnership,yet be given a positive opening capital balance.

Accepted Answer

A) True 
 B)False

Question 14

A partnership agreement should include

Accepted Answer

A) the method of allocating profits. 
B) investments of each partner. 
C) procedures for admitting partners. 
D) All of these choices. 
A) the method of allocating profits. 
B) investments of each partner. 
C) procedures for admitting partners. 
D) All of these choices.

Question 15

When a newly admitted partner pays a bonus to the existing partners,the new partner's capital account is credited.

Accepted Answer

A) True 
 B)False

Question 16

Alex,Clinton,and Evan are in a partnership.Evan decides to withdraw from the partnership by selling his interest to Linsey.Alex and Clinton agree to this.Alex's Capital account and Clinton's Capital account

Accepted Answer

A) will not be affected when Linsey is admitted. 
B) will decrease when Linsey is admitted. 
C) will increase when Linsey is admitted. 
D) cannot be determined from the information given. 
A) will not be affected when Linsey is admitted. 
B) will decrease when Linsey is admitted. 
C) will increase when Linsey is admitted. 
D) cannot be determined from the information given.

Question 17

When a partner invests assets in a partnership,the assets are recorded at their fair market value on the date they are transferred to the partnership.

Accepted Answer

A) True 
 B)False

Question 18

Joan pays Eva $60,000 for her $40,000 interest in a partnership.The entry to record the sale on the partnership books is:

Accepted Answer

A)   
B)   
C)   
D)   
A)   
B)   
C)   
D)

Question 19

The ability of a partner to enter into a contract on behalf of all partners is called

Accepted Answer

A) the partnership agreement. 
B) voluntary association. 
C) mutual agency. 
D) unlimited liability. 
A) the partnership agreement. 
B) voluntary association. 
C) mutual agency. 
D) unlimited liability.

Question 20

The division of partnership profits on the basis of salaries,interest,and a stated ratio is usually necessary because

Accepted Answer

A) partners seldom contribute time,effort,and resources equally. 
B) this prevents arguments among the partners. 
C) this reflects the amount of time devoted to the partnership by the partners. 
D) most states require this method of distribution. 
A) partners seldom contribute time,effort,and resources equally. 
B) this prevents arguments among the partners. 
C) this reflects the amount of time devoted to the partnership by the partners. 
D) most states require this method of distribution.

Exam 27: Accounting for Unincorporated Businesses

A partnership need not obtain permission from the state before it legally conducts business.

When a new partner is admitted,the old partnership agreement is still in effect.

Liquidation of a partnership is the process of ending the business.

An advantage of the partnership form of business is that the life of the partnership is limited.

Chad invests $20,000 for a one-third interest in a partnership in which the other partners have capital totaling $52,000 before admitting Chad.After distribution of the bonus,what is Chad's capital?

In a liquidation,partners are given back the assets that they originally invested.

When a new partner invests less than the proportionate share he or she receives in the partnership,a bonus is recorded to his or her account.

When the existing partners pay a bonus to a newly admitted partner,the existing partners' accounts are debited.

Partner X purchases Partner Y's $25,000 interest from Partner Y for $30,000.The entry to record the transaction is for $30,000.

Sara invests $120,000 for a 30 percent interest in a partnership in which the other partners have capital totaling $200,000 before admitting Sara.After distribution of the bonus,what is Sara's capital balance?

It is possible to invest no tangible assets into a partnership,yet be given a positive opening capital balance.

A partnership agreement should include

When a newly admitted partner pays a bonus to the existing partners,the new partner's capital account is credited.

Alex,Clinton,and Evan are in a partnership.Evan decides to withdraw from the partnership by selling his interest to Linsey.Alex and Clinton agree to this.Alex's Capital account and Clinton's Capital account

When a partner invests assets in a partnership,the assets are recorded at their fair market value on the date they are transferred to the partnership.

Joan pays Eva $60,000 for her $40,000 interest in a partnership.The entry to record the sale on the partnership books is:

The ability of a partner to enter into a contract on behalf of all partners is called

The division of partnership profits on the basis of salaries,interest,and a stated ratio is usually necessary because

Uses of Accounting Information and the Financial Statements

Measurement Concepts: Recording Business Transactions

Measuring Business Income: Adjusting the Accounts

Foundations of Financial Reporting and the Classified Balance Sheet

Accounting for Merchandising Operations

Inventories

Cash and Internal Control

Receivables

Long-Term Assets

Current Liabilities and Fair Value Accounting

Long-Term Liabilities

Stockholders Equity

The Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting and Cost Concepts

Costing Systems: Job Order Costing

Costing Systems: Process Costing

Value-Based Systems: Activity-Based Costing and Lean Accounting

Cost-Volume-Profit Analysis

The Budgeting Process

Flexible Budgets and Performance Analysis

Standard Costing and Variance Analysis

Short-Run Decision Analysis

Capital Investment Analysis

Pricing Decisions, including Target Costing and Transfer Pricing

Quality Management and Measurement

Accounting for Investments

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