Question 1

The financial statements of a partnership are similar to the statements of a sole proprietorship in all aspects.

Accepted Answer

While there are many similarities between the financial statements of a partnership and a sole proprietorship, there are also some differences. For example, a partnership will typically have a separate statement of partnership equity to keep track of each partner's investment and share of profits or losses. Additionally, the partnership's income statement and balance sheet may include information about each partner's capital account and drawing account.

Question 2

Which of the following is true of a partnership balance sheet?

Accepted Answer

A partnership balance sheet shows the total assets, liabilities, and equity of the partnership as a whole, but the equity section should break down each partner's capital account individually. Therefore, each partner's equity will be shown separately on the balance sheet.

Question 3

An asset received from a partner as a contribution is recorded at its historical cost.

Accepted Answer

An asset received from a partner as a contribution is recorded at its fair market value at the time of contribution, not its historical cost.

Question 4

Andy and Ian formed a partnership on April 1, 2015. Andy contributes equipment, purchased at a price of $85,000 on April 1, 2014, to the business. The accumulated depreciation of the equipment is $15,000. The current market value of the equipment is $75,000. The value of the equipment recorded in the partnership journal is ________.

Accepted Answer

The value of the equipment recorded in the partnership journal is the current market value, which is $75,000.

Question 5

Tim and Michelle have decided to form a partnership. Tim contributes $8,000 cash and $2,000 in merchandise inventory. While journalizing this transaction:

Accepted Answer

Tim's total contribution to the partnership is $10,000 ($8,000 cash + $2,000 inventory), so Tim, Capital will be credited for $10,000.

Question 6

Rodriguez and Ying start a partnership business on July 1, 2014. Rodriguez brings in cash worth $4,000, furniture with a current market value of $50,000, payables with a current market value of $15,000 and equipment with a current market value of $26,000. Which of the following is the correct journal entry to record the above transaction?

Accepted Answer

The journal entry to record Rodriguez's contribution to the partnership is:
Cash                  $4,000
Furniture              50,000
Payables              (15,000)
Equipment              26,000
Rodriguez, Capital   $65,000

Option A is incorrect because it does not take into account the value of furniture and equipment contributed by Rodriguez.
Option C is incorrect because it only accounts for the cash contribution by Rodriguez and does not include the value of furniture and equipment.
Option D is incorrect because it incorrectly assumes that payables are an asset, when in fact they are a liability.

Question 7

A partnership records the partners' contributions at the ________.

Accepted Answer

A partnership records the partners' contributions at the current market value, which reflects the fair value of the assets at the time of contribution rather than their historical cost or net realizable value. This approach ensures that each partner's ownership interest in the partnership is based on their actual contributions, which can be helpful in determining profit-sharing ratios and other important decisions.

Question 8

Profits and losses in a partnership must be shared based on each partner's capital balances.

Accepted Answer

Profits and losses in a partnership are shared according to the agreement between the partners, which may or may not be based on their capital balances.

Question 9

Sasha and Michelle form a partnership. Sasha contributes $16,000 cash and merchandise inventory with a current market value of $4,000. While journalizing this transaction:

Accepted Answer

When Sasha contributes merchandise inventory with a current market value of $4,000, the entry to be made is to debit the merchandise inventory account for $4,000. This reflects the increase in assets contributed by Sasha to the partnership.

Question 10

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

Accepted Answer

A partnership can be set up without requiring any permission or formal registration with the state.

Question 11

Steve owns 60% and Mark owns 40% of a partnership business. For developing the business, they purchased equipment for $10,000. The current market value of the equipment at the time of purchase was $9,500. At the time of the balance sheet preparation, depreciation of $200 was incurred. Based on the information provided, which of the following is true of the partnership balance sheet?

Accepted Answer

The answer of Steve owns 60% and Mark owns 40%...

Question 12

If a partner's capital account is credited with a certain amount that he contributed in cash, which of the following statements will be affected?

Accepted Answer

The statement of partners' equity shows the changes in the capital accounts of each partner, including any contributions they have made. Crediting a partner's capital account with a cash contribution will increase their capital balance, which will be reflected in the statement of partners' equity. The other options listed are not affected by a partner's cash contribution.

Question 13

The statement of partners' equity shows the changes in each partner's capital account for a specific period of time.

Accepted Answer

The statement of partners' equity displays the changes in the capital account of each partner during a specific interval of time, including contributions, distributions, and profits or losses.

Question 14

In a partnership business, Jack has an ownership of 60% and Teresa has an ownership of 40%. For developing the business, Jack contributed $7,000 and Teresa contributed $3,000 on July 1. Which of the following is true of this scenario?

Accepted Answer

Each partner's individual contribution is recorded to reflect their investment in the business accurately.

Question 15

Rodriguez and Ying start a partnership business on July 1, 2014. Rodriguez brings in cash worth $4,000, furniture with a current market value of $50,000, and computer equipment. The computer equipment cost $45,000 in 2011 and has an accumulated depreciation of $25,000. The current market value of the computer equipment is $18,000. At what value should the computer equipment be recorded in the books of the partnership firm?

Accepted Answer

The computer equipment should be recorded at its current market value of $18,000. This is because the partnership should record assets at their fair market value as of the date they are contributed to the partnership. The fact that the equipment has accumulated depreciation does not affect its fair market value or the amount at which it should be recorded in the partnership's books. Therefore, choice (B) is the correct answer.

Question 16

Edwin and Darren have decided to form a partnership. Edwin contributes $80,000 cash and merchandise inventory with a current market value of $20,000. Darren contributes $2,100 cash and office furniture with a current market value of $2,800. While journalizing this transaction:

Accepted Answer

According to the information given, Darren has contributed office furniture with a current market value of $2,800. This means that the office furniture is an asset, which is being brought into the partnership. Therefore, we need to debit the Office Furniture account, not credit it. Option A and D are incorrect because they credit the account instead. Option B is incorrect because it suggests that the value of the office furniture is only $1,120, which is not consistent with the information given. Thus, the correct choice is C.

Question 17

Given below is a balance sheet of Incrad Clothes, a partnership firm, as of December 31, 2013.  With regard to the above table, which of the following statements is true?

Accepted Answer

The answer of Given below is a balance sheet of...

Question 18

In a partnership balance sheet, the each partner's assets, liabilities, and equity will be shown separately.

Accepted Answer

In a partnership balance sheet, the assets, liabilities, and equity of the partnership as a whole are shown, not separately for each partner. Each partner's capital account is reflected in the equity section.

Question 19

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?

Accepted Answer

As George and Ben have a respective ownership of 60% and 40%, the purchase of equipment for $10,000 will be recorded on the balance sheet in the same ratio. 
Thus, George's portion will be $6,000 ($10,000 x 0.6) and Ben's portion will be $4,000 ($10,000 x 0.4). 
Subsequently, George will contribute $7,000 and Ben will contribute $3,000. As a result, George, Capital will increase by $7,000 and Ben, Capital will increase by $3,000. 
Therefore, Choice B is correct.

Question 20

Which of the following is true of a partnership balance sheet?

Accepted Answer

A partnership balance sheet reports a separate capital account for each partner. This allows for transparency and accuracy in tracking the ownership interests of each partner in the business. Choice A is incorrect because a partnership balance sheet typically only includes information related to the assets, liabilities, and equity of the business, not necessarily all information from its income statement. Choice B is incorrect because depreciation expense is typically included in the balance sheet as a reduction in the value of the assets. Choice D is incorrect because interest expenses are typically reported in the income statement, not the balance sheet.

Quiz 12: Partnerships

The financial statements of a partnership are similar to the statements of a sole proprietorship in all aspects.

Which of the following is true of a partnership balance sheet?

An asset received from a partner as a contribution is recorded at its historical cost.

Tim and Michelle have decided to form a partnership. Tim contributes $8,000 cash and $2,000 in merchandise inventory. While journalizing this transaction:

A partnership records the partners' contributions at the ________.

Profits and losses in a partnership must be shared based on each partner's capital balances.

Sasha and Michelle form a partnership. Sasha contributes $16,000 cash and merchandise inventory with a current market value of $4,000. While journalizing this transaction:

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

If a partner's capital account is credited with a certain amount that he contributed in cash, which of the following statements will be affected?

The statement of partners' equity shows the changes in each partner's capital account for a specific period of time.

In a partnership business, Jack has an ownership of 60% and Teresa has an ownership of 40%. For developing the business, Jack contributed $7,000 and Teresa contributed $3,000 on July 1. Which of the following is true of this scenario?

Edwin and Darren have decided to form a partnership. Edwin contributes $80,000 cash and merchandise inventory with a current market value of $20,000. Darren contributes $2,100 cash and office furniture with a current market value of $2,800. While journalizing this transaction:

Given below is a balance sheet of Incrad Clothes, a partnership firm, as of December 31, 2013. With regard to the above table, which of the following statements is true?

In a partnership balance sheet, the each partner's assets, liabilities, and equity will be shown separately.

Which of the following is true of a partnership balance sheet?