Exam 38: Operation of Partnerships and Related Forms

Mark and Bonnie are partners. Mark contributed $30,000 of capital to the partnership and Bonnie contributed $15,000. Mark does 70 percent of the partnership's work, while Bonnie does 30 percent. They agree that Mark will assume 60 percent of partnership losses and Bonnie 40 percent. They have not decided how to share profits. The partnership earns a profit of $90,000. What is Bonnie's share of the profits?

Which of the following is NOT true about the management powers of partners?

A partnership and its partners are usually liable for a partner's intentional torts.

Vernon and Josh are partners in an accounting firm. They agree that only Josh has authority to make contracts to perform audits of clients, an agreement known by Mantron Company. Nonetheless, Vernon and Mantron contract for the partnership to audit Mantron's financial statements. Vernon takes the contract to Josh, who reads it and says, "OK, we can perform the audit." In this situation, Josh has _____ the contract.

Frazier and Roz are partners. Frazier contributes $30,000 to the partnership, and Roz contributes $10,000. They agree that Frazier will assume 70 percent of partnership losses and that Roz will assume 30 percent. They make no agreement about how to share profits. The partnership has a profit of $60,000 in its first year. How much of the profits is Frazier entitled to receive?

Which of the following is applied in determining the liability of a partnership and of the other partners for the torts of a partner and other partnership employees?

Silent partners have the duty to serve and bear the same liability for partnership debts as any other partner.

A trading partnership:

Stella, Bob and Chris are partners in Sole Services, a general partnership that operates a shoe store. One day Stella's ex-husband Dan comes into the store to buy shoes. Stella is still angry over the divorce. While Dan's back is turned to Stella, she stabs him with a knife, inflicting serious injuries. Dan wants to sue Stella, the partnership, and each partner. Who could be required to pay for Dan's injuries?

_____ authority exists because it seems reasonable to a third party that a partner has authority to do an act.

Express authority:

Any notice given to a partner is deemed to be a notice given to the partnership firm.

Lloyd is a partner in an ordinary partnership firm in the business of providing tax services. While serving a client on behalf of the partnership, Lloyd's partner Janet intentionally understates the client's taxable income on a federal tax return. When the true income is reported a few years later, the client is required to pay a penalty. The client sues the partnership and its partners. Which of the following is correct?

The _____ requires partners to undertake their share of responsibility for running the day-to-day operations of the partnership business.

Shawnequa is a partner of Cost Hydrohut LLP, an accounting limited liability partnership. One of Shawnequa's partners negligently audits a client, with the result that a bank that relied on the client's audited financial statements suffers damages when the client fails to repay the loan. The bank sues Cost Hydrohut, but its assets are insufficient to pay the entire damages. Will the bank be able to collect the remaining damages from Shawnequa's personal assets?

In a partnership agreement, partners are not criminally liable when a partner commits a crime in the course and scope of transacting partnership business, even if they knew of the partner's criminal tendencies and placed him or her in a position in which he or she could commit a crime.

When partners disagree concerning an action to be taken in the ordinary course of business, the disagreement will be resolved only if all the partners agree.

In all partnerships, profits are shared according to the amount of capital contributed by each of the partners.

Which of the following is true about a nontrading partnership?

A partner in a partnership firm should make all attempts to take decisions that are in the best interest of the firm. This is related to the concept of _____.