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Exam 12: Partnerships

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Question 21

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Which of the following is true of a written partnership agreement?

A) It is an agreement in which the partners hold a direct agreement with the registration body, and the registration body acts as an interlocutor between the partners.
B) It is an informal agreement between the partners and is not legally binding.
C) It is a legally-binding agreement between the owners which explains the procedures for liquidating the partnership.
D) It is a legally-binding agreement between the proprietors and the stock exchange where it is listed regarding the profit sharing between the owners.

E) None of the above
F) A) and D)

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Question 22

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In a partnership, the entry to close net income:

A) increases assets.
B) increases liabilities.
C) decreases partners' capital accounts.
D) decreases the Income Summary account.

E) C) and D)
F) A) and D)

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Question 23

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In a partnership business, George has an ownership of 60% and Ben has an ownership of 40%. For developing the business, they purchased equipment for $10,000. George contributes a sum of $7,000 and Ben makes a contribution of $3,000 on July 1. Based on the information provided, which of the following is true of the partnership balance sheet?

A partnership business is a:

When a partner sells his interest to another party, the journal entry simply credits the withdrawing partner's capital account and debits the new partner's capital.

Albert, Billy, and Cathy share profits and losses of their partnership as 2:5:3. If the net income is $50,000, calculate the profit share of Albert.

In which of the following types of business organizations does the owners have unlimited personal liabilities for the business's debts?

Adam, Bill, and Charlie are partners. The profit and rule sharing rule between them is 2:5:3, with Bill getting the most and Adam getting the least. The partnership incurs a net loss of $18,000. While closing the Income Summary:

Dominic and Morgan are partners. Dominic has a capital balance of $350,000 and Morgan has a capital balance of $245,000. Morgan sells $105,000 of his ownership to Lance. Which of the following is true of the items in balance sheet?

A written partnership agreement is also known as the articles of partnership.

The balance sheet of Ryan and Peter firm as on December 31, 2014, is given below. Ryan and Peter share profits in the ratio 3:2. They have decided to liquidate the partnership with immediate effect. The accounts payable were settled at $12,000 due to the poor financial condition of the partnership firm. As a result, Ryan's capital account will be credited by:

Issac and Karl are partners. Issac has a capital balance of $25,000 and Karl has a capital balance of $20,000. Bill invested $15,000 to acquire an ownership interest of 30%. How does this transaction affect the balance sheet items?

The death of a partner dissolves the partnership.

The articles of partnership is a contract between partners that specifies such items as the name, location, and nature of the business; the name, capital contribution, and duties of each partner; and the method of sharing profits and losses among the partners.

If a withdrawing partner receives assets worth more than the book value of his equity, then he receives a bonus.

In the process of liquidation, a partnership firm sells its non-cash assets of a book value of $50,000, for $75,000. Which of the following will be included in the entry to record the sale of assets at liquidation?

A(n) ________ does not require any permission from the state to be set up.

In a general partnership business, each partner has limited personal liability for the debts of the business.

Which of the following is true of capital deficiency in the liquidation of a partnership?

Allan and Ralph are partners. Allan has a capital balance of $92,000 and Ralph has a capital balance of $75,000. Carol invested $60,000 to acquire an ownership interest of $50,000. Which of the following is true of the impact of the transaction on the balance sheet?