Question 1

If the variable capital balances method method 1 is used,the profit or loss and partner's drawings are closed to the:

Accepted Answer

A) Retained earnings accounts 
B) Capital accounts 
C) Profit and loss summary account 
D) Profit distribution account 
A) Retained earnings accounts 
B) Capital accounts 
C) Profit and loss summary account 
D) Profit distribution account B

Question 2

Smiles and Scowls,two sole traders,form a partnership by combining their net assets.
Smiles contributes: $\begin{array}{lcc} 
& \text { Cost value } & \text { Fair value } \
\text { Accounts Receivable } & \$ 10000 & \$ 8500 \
\text { Cash } & \$ 20000 &\
\text { Scowls contributes: }\
\text { Plant } & \$ 30000 & \$ 25000 \
\text { Accumulated Depreciation } & \$ 8000 & \
\text { Bank Overdraft } & \$ 11000 &
\end{array}$
What will be the amount shown in the Accumulated Depreciation account on formation of the partnership of Smiles and Scowls?

Accepted Answer

A) Nil 
B) $3000 
C) $5000 
D) $8000 
A) Nil 
B) $3000 
C) $5000 
D) $8000 A

Question 3

Smiles and Scowls,two sole traders form a partnership by combining their net assets.
Smiles contributes: $\begin{array}{lcc} 
& \text { Cost value } & \text { Fair value } \
\text { Accounts Receivable } & \$ 10000 & \$ 8500 \
\text { Cash } & \$ 20000 &\
\text { Scowls contributes: }\
\text { Plant } & \$ 30000 & \$ 25000 \
\text { Accumulated Depreciation } & \$ 8000 & \
\text { Bank Overdraft } & \$ 11000 &
\end{array}$
The amount credited to Smiles' Capital account is:

Accepted Answer

A) $30 000 
B) $29 000 
C) $28 500 
D) $20 000 
A) $30 000 
B) $29 000 
C) $28 500 
D) $20 000 C

Question 4

Which of these is not a disadvantage of a partnership?

Accepted Answer

A) The principle of mutual agency 
B) Unlimited liability 
C) The difficulty of transferring partnership interests 
D) The liability of the partnership for taxation 
A) The principle of mutual agency 
B) Unlimited liability 
C) The difficulty of transferring partnership interests 
D) The liability of the partnership for taxation

Question 5

Smiles and Scowls,two sole traders form a partnership by combining their net assets. $\begin{array}{lcc} \text { Smiles contributes: }\
& \text { Cost value } & \text { Fair value } \
\text { Accounts Receivable } & \$ 10000 & \$ 8500 \
\text { Cash } & \$ 20000 &\
\text { Scowls contributes: }\
\text { Plant } & \$ 30000 & \$ 25000 \
\text { Accumulated Depreciation } & \$ 8000 & \
\text { Bank Overdraft } & \$ 11000 &
\end{array}$ What will be the amount shown in the Allowance for Doubtful Debts account in the Balance sheet prepared after the formation of the partnership of Smiles and Scowls?

Accepted Answer

A) Nil 
B) $1500 
C) $1000 
D) $500 
A) Nil 
B) $1500 
C) $1000 
D) $500

Question 6

Internally generated goodwill is not recorded by accountants because:

Accepted Answer

A) It does not exist 
B) It is not important 
C) It cannot be measured reliably 
D) It is immaterial 
A) It does not exist 
B) It is not important 
C) It cannot be measured reliably 
D) It is immaterial

Question 7

Fair value is defined in the accounting standards as:

Accepted Answer

A) Vendor value 
B) The amount for which an asset could be exchanged between knowledgeable willing parties in an arm's-length transaction. 
C) Trade value 
D) Retail value 
A) Vendor value 
B) The amount for which an asset could be exchanged between knowledgeable willing parties in an arm's-length transaction. 
C) Trade value 
D) Retail value

Question 8

The principle whereby a partner can represent the other partners and bind them to a contract if acting within the normal scope of business is known as m_______________ a_____________.

Accepted Answer

The answer of The principle whereby a partner can represent...

Question 9

In the event of the death of a partner the legal arrangement that is a partnership is d_________.

Accepted Answer

The answer of In the event of the death of...

Question 10

It is best that a written p_____________ a______________ should be established when a partnership is formed so that what has been agreed on is not subject to dispute at a later date.

Accepted Answer

partnershi

Question 11

Doreen and Amy have a profit and loss sharing agreement where: 1)salaries of $20 000 each are credited,2)8% interest is allowed on capital balances 3)the remaining profit or loss is split 60-40,respectively.At the end of the year,before the distribution of profits or losses,capital account balances were $20 000 for Doreen and $10 000 for Amy.There was a profit of $30 000 before distributions to the partners.What is Amy's year-end capital account balance assuming capital balances are adjusted to reflect profits and losses?

Accepted Answer

A) $25 840 
B) $22 000 
C) $30 800 
D) $9360 
A) $25 840 
B) $22 000 
C) $30 800 
D) $9360

Question 12

The statement concerning drawings by partners in a partnership that is true is:

Accepted Answer

A) Interest is charged on drawings if the partnership agreement is silent on the matter 
B) Charging interest on drawings acts as an incentive to partners to withdraw money from the partnership 
C) Drawings are generally regarded as withdrawals of future profits 
D) Drawings are taken into account when calculating the final distribution of profit between the partners 
A) Interest is charged on drawings if the partnership agreement is silent on the matter 
B) Charging interest on drawings acts as an incentive to partners to withdraw money from the partnership 
C) Drawings are generally regarded as withdrawals of future profits 
D) Drawings are taken into account when calculating the final distribution of profit between the partners

Question 13

How is the allocation of partnership profits affected by drawings?

Accepted Answer

A) Drawings must be added back to profits before they are allocated 
B) Drawings must be deducted from profits before they are allocated 
C) Drawings only affect profit allocation if the partnership agreement provides for interest on drawings 
D) Drawings must be deducted from salaries due to the partners 
A) Drawings must be added back to profits before they are allocated 
B) Drawings must be deducted from profits before they are allocated 
C) Drawings only affect profit allocation if the partnership agreement provides for interest on drawings 
D) Drawings must be deducted from salaries due to the partners

Question 14

Which statement relating to financial reports for a partnership is not true?

Accepted Answer

A) Partners' salaries are normally treated as an allocation of profit 
B) Income tax expense is deducted from the partnership profit at the end of the income statement 
C) Each individual partner's equity in the business is reported separately 
D) Interest on capital contributions is treated as an allocation of profits 
A) Partners' salaries are normally treated as an allocation of profit 
B) Income tax expense is deducted from the partnership profit at the end of the income statement 
C) Each individual partner's equity in the business is reported separately 
D) Interest on capital contributions is treated as an allocation of profits

Question 15

Sometimes the partnership agreement may specify that interest is to be charged on partner's drawings.Which of the following is the main reason for such a charge?

Accepted Answer

A) To reduce partnership profits 
B) To act as a disincentive to partners withdrawing excessive amounts from the partnership 
C) To reward partners 
D) To encourage partner's to draw extra amounts 
A) To reduce partnership profits 
B) To act as a disincentive to partners withdrawing excessive amounts from the partnership 
C) To reward partners 
D) To encourage partner's to draw extra amounts

Question 16

Which of these is an advantage of a partnership over a sole proprietorship?

Accepted Answer

A) Pooling of resources 
B) Mutual agency 
C) Ease of transferring ownership 
D) Unlimited liability 
A) Pooling of resources 
B) Mutual agency 
C) Ease of transferring ownership 
D) Unlimited liability

Question 17

With the variable capital balances method method 1)of accounting for partnership equity,the general journal entry to record interest on capital is:

Accepted Answer

A) Debit profit distribution account; credit partner's capital accounts 
B) Debit profit distribution account; credit partner's retained earnings accounts 
C) Debit profit and loss summary account; credit partner's capital accounts 
D) Debit profit and loss summary account; credit partner's retained earnings accounts 
A) Debit profit distribution account; credit partner's capital accounts 
B) Debit profit distribution account; credit partner's retained earnings accounts 
C) Debit profit and loss summary account; credit partner's capital accounts 
D) Debit profit and loss summary account; credit partner's retained earnings accounts

Question 18

Connie and Carole have a profit and loss sharing agreement where: 1)salaries of $10 000 each are credited,2)12% interest is allowed on capital balances 3)the remaining profit or loss is split 60-40 in favour of Connie.At the end of the year,before the distribution of profits or losses,capital account balances were $20 000 and $40 000 for Connie and Carole,respectively.Profit was $36 000 before distributions to partners.What is Connie's ending capital account balance assuming capital balances are adjusted to reflect profits and losses?

Accepted Answer

A) $58 320 
B) $57 680 
C) $37 680 
D) $38 320 
A) $58 320 
B) $57 680 
C) $37 680 
D) $38 320

Question 19

Douglas and Johnson each invested $50 000 in a partnership where they agreed to share profits 60% Douglas,40% Johnson.The partnership business was not successful and now has no assets.In addition they are being sued for $80 000 by a supplier for non-payment of invoices.What is the amount for which Douglas could be held personally responsible if the lawsuit is successful ignore any possible legal costs.

Accepted Answer

A) Zero 
B) $40 000 
C) $48 000 
D) $80 000 
A) Zero 
B) $40 000 
C) $48 000 
D) $80 000

Question 20

In closing the books of a partnership the balance of the Profit and Loss Summary account is transferred to the profit d_______________ account.

Accepted Answer

The answer of In closing the books of a partnership...

If the variable capital balances method method 1 is used,the profit or loss and partner's drawings are closed to the:

Which of these is not a disadvantage of a partnership?

Internally generated goodwill is not recorded by accountants because:

Fair value is defined in the accounting standards as:

The principle whereby a partner can represent the other partners and bind them to a contract if acting within the normal scope of business is known as m___ a_.

In the event of the death of a partner the legal arrangement that is a partnership is d_________.

It is best that a written p_ a__ should be established when a partnership is formed so that what has been agreed on is not subject to dispute at a later date.

The statement concerning drawings by partners in a partnership that is true is:

How is the allocation of partnership profits affected by drawings?

Which statement relating to financial reports for a partnership is not true?

Sometimes the partnership agreement may specify that interest is to be charged on partner's drawings.Which of the following is the main reason for such a charge?

Which of these is an advantage of a partnership over a sole proprietorship?

With the variable capital balances method method 1)of accounting for partnership equity,the general journal entry to record interest on capital is:

In closing the books of a partnership the balance of the Profit and Loss Summary account is transferred to the profit d_______________ account.

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Retailing

Accounting for Systems

Accounting for Manufacturing

Cost Accounting Systems

Cash Management and Internal Control

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis,profitability Analysis and Capital Budgeting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation,disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Liabilities

Analysis and Interpretation of Financial Statements

Filters

Exam 15: Partnerships: Formation,operation and Reporting

If the variable capital balances method method 1 is used,the profit or loss and partner's drawings are closed to the:

Which of these is not a disadvantage of a partnership?

Internally generated goodwill is not recorded by accountants because:

Fair value is defined in the accounting standards as:

The principle whereby a partner can represent the other partners and bind them to a contract if acting within the normal scope of business is known as m_______________ a_____________.

In the event of the death of a partner the legal arrangement that is a partnership is d_________.

It is best that a written p_____________ a______________ should be established when a partnership is formed so that what has been agreed on is not subject to dispute at a later date.

The statement concerning drawings by partners in a partnership that is true is:

How is the allocation of partnership profits affected by drawings?

Which statement relating to financial reports for a partnership is not true?

Sometimes the partnership agreement may specify that interest is to be charged on partner's drawings.Which of the following is the main reason for such a charge?

Which of these is an advantage of a partnership over a sole proprietorship?

With the variable capital balances method method 1)of accounting for partnership equity,the general journal entry to record interest on capital is:

In closing the books of a partnership the balance of the Profit and Loss Summary account is transferred to the profit d_______________ account.

Decision Making and the Role of Accounting

Financial Statements for Decision Making

Recording Transactions

Adjusting the Accounts and Preparing Financial Statements

Completing the Accounting Cycle

Accounting for Retailing

Accounting for Systems

Accounting for Manufacturing

Cost Accounting Systems

Cash Management and Internal Control

Cost-Volume-Profit Analysis for Decision Making

Budgeting for Planning and Control

Performance Evaluation for Managers

Differential Analysis,profitability Analysis and Capital Budgeting

Companies: Formation and Operations

Regulation and the Conceptual Framework

Receivables

Inventories

Non-Current Assets: Acquisition and Depreciation

Non-Current Assets: Revaluation,disposal and Other Aspects

Liabilities

Presentation of Financial Statements

Liabilities

Analysis and Interpretation of Financial Statements

Filters

The principle whereby a partner can represent the other partners and bind them to a contract if acting within the normal scope of business is known as m___ a_.

It is best that a written p_ a__ should be established when a partnership is formed so that what has been agreed on is not subject to dispute at a later date.