Exam 8: Partnerships: Formation, Operation and Reporting

Tom and Jerry are two sole traders that have joined together to form a partnership by combining their net assets. Jerry contributes: 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 Tom and Jerry?

A limited partner is one who has limited his/her:

Hodges and Burton formed a partnership with capital of $30 000 and $45 000 respectively. The partnership agreement provides for the crediting of annual salaries of $45 000 to Hodges and $75 000 to Burton. Each partner is entitled to 20% interest on capital. The remaining profit or loss is divided equally. Assuming capital balances are adjusted to reflect profits and losses, how much, in total, will be credited to Burton's capital account if profit for the year is $198 000?

Steve, Chevy and Martin agree to share profits in the ratio 3: 5: 2. This means:

When a partner makes an advance or loan to the partnership, which of the following statements is correct? I.The partner is entitled to interest at the rate of 7% p.a. unless there is an agreement to the contrary. II.The amount loaned is added to the partner's equity account balance. III.Interest on the loan is regarded as an expense of the partnership and appears in the income statement.

__________________is the characteristic of a partnership whereby each partner is liable for partnership debts to the full extent of his or her private assets.

When preparing the closing entries for a partnership at the end of the accounting period which of the following statements is correct? Assume that capital account balances are not fixed.

As compared to a company with a similar number of shareholder's as there are partners in the partnership, an advantage of a partnership is:

In a partnership, the profit and loss sharing ratio will be based:

Goodwill represents the future benefits of unidentifiable assets. Which of the factors listed below contribute to the value of goodwill? I.Favourable location II. Efficient manufacturing III. Good customer relations IV. Staff skills and experience

Accounting for a partnership is similar to accounting for a sole trader, except that:

With the fixed capital balances method (method 2) of accounting for partnership equity, the general journal entry to record interest on capital is:

Which of the following are correct ways of recording partnership equity?

The fair value of an asset, as defined in the accounting standards, is:

If the fixed capital balances method (method 2) is used to account for partnership equity, both the profit or loss and the partner's drawings are closed to the:

How is the allocation of partnership profits affected by drawings?

When the final financial statements are prepared the profit or loss allocation for a partnership is normally shown in the:

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

Unless otherwise agreed amongst the partners, partners' salaries, interest on capital and interest on drawings are assumed in partnership accounting to be settled by means of:

Which of the following statements relating to financial reports for a partnership is incorrect?