Deck 13: Partnerships: Characteristics, Formation, and Accounting for Activities

Question 1

A partner's liability adopted by the partnership should be recorded at which value:

A)​Book
B)​Fair market
C)Labor​
D)​Asset

Answer 1

B

Question 2

RUPA ' deals with such topics as:

A)​the rights of partners
B)​Capital distribution,
C)​partnership lending
D)​Partnership drawing

Answer 2

A

Question 3

A & B formed a partnership on January 1 Partners A and B withdraw cash of $800 and $1,500, respectively.Drawings in excess of $1,000 are viewed as excessive withdrawals and are charged against capital.What is the logical entry?​

A)​Debit to Drawing Partner A for $800, Debit to Drawing partner B $1,500
B)​Debit to Capital Partner A for $800, Debit to Drawing Partner B for $1,500
C)​Debit to Capital Partner A for $800, Debit to Capital Partners B for $1,500
D)​Debit to Drawing Partner A for $800, Debit to Capital Partner B for $1,500

Answer 3

A

Question 4

D & E are equal partners and are closing their drawing accounts on December 31.Each partner had withdrawn $75,000.The correct entry to close their drawing accounts would be a credit to D Drawing and E drawing for $75,000 and debit to:

A)​D & E Capital for $75,000
B)​D & E Cash for $150,000.00
C)​D & E Capital for $150,000
D)​D & E Assets for $75,000

Question 5

Unlike a corporation, the capital investment in a partnership generally is accounted for through two accounts for each partner, a temporary account referred to as the drawing account and a permanent account referred to as:

A)​Stock
B)​Cash
C)​Capital
D)​Salary

Question 6

The allocation of profits or losses may be based on salaries, interest on invested Capital, a profit/loss percentage and:​

A)​Assets
B)​Bonus
C)​Contributed Capital
D)Liabilities​
E)​None of the above

Question 7

Which of the following statements is most likely false?

A)​A partners dissociation may result in dissolution
B)​A partner becoming a debtor in bankruptcy
C)A partners dissociation may be involuntary​
D)​None of the above

Question 8

The division of partnership income should be based on an analysis of the correlation between the __________________ and ______________ committed to the firm by individual partners and the income that subsequently is generated.

A)​Capital and labor
B)​Investment and Assets
C)​Labor and Investments
D)​Capital and Contributed Capital

Question 9

A, B, C form a partnership with an agreed ratio to share profit and loss in the ratio of 4/3/2.With a net income of $50,000, Partner B would receive:

A)​$25,000
B)​$16,667
C)​$22,222
D)$11,111​

Question 10

Partners X & Y have each invested $60,000.00 in a business.According to the articles of copartner ship Partner Y is to receive 20% interest on invested capital.How much of a distribution would Partner X receive?

A)​The same
B)​Undetermined
C)​$12,000
D)​None of the above

Question 11

An LLP is a subcategory of:

A)​Mutual partnership
B)​General partnership
C)LLC​
D)​Corporation

Question 12

Partners H & I share profit and loss in an agreed ratio of 90/10.In the case of a net loss of $10,000, Partner I's capital account would be:

A)​Credited for $1,000
B)​Debited for $9,000
C)​Debited for $1,000
D)​Would not be affected

Question 13

The characteristic of a partnership in which partners exercise good faith, loyalty, and sound judgement best describes:

A)​Mutual agency
B)​Mutual distinction
C)​Fiduciary relationship
D)​Financial Relationship

Question 14

Assume the articles of partnership state that partnership profits and losses should be divided between Partners F and G in the ratio of 70:30.Partnership income of $100,000 would be divided as follows:

A)​F would receive $70,000
B)​G would receive $70,000
C)​F & G each would receive $50,000
D)​F would receive $30,000

Question 15

If J & M have an equal partnership and share profit and loss in the agreed ration of 50/50, the entry to record a net income distribution of $100,000.00 would be a credit to J & M capital for $50,000 and a debit to:

A)​Assets for $100,000.00
B)​Liabilities for$100,000.00
C)​Income Summary for $100,000.00
D)​Salary Expense for $100,000.00

Question 16

Characteristics of a partnership that emphasize that the entity is viewed as the individual owners include the following:

A)​Salaries to partners are viewed as distribution of income rather than a component of income.
B)​Limited liability of general partners extends beyond the entity to the individual partners.
C)​Income of the partnership is not taxed at the partnership level but, rather, is included as part of the partners' individual taxable income.
D)A & C​
E)​All of above

Question 17

In the absence of a partnership agreement, RUPA would indicate profit and losses are to be:

A)​Divided in a ratio according to capital
B)​Divided in a ration according to initial investment
C)​Divided in a ratio according to ending capital investment
D)​Dividend equally

Question 18

L & M form a 50/50 partnership on January 1.L invested Land with a market value of $90,000.The Land account would be:

A)​Credited for $90,000
B)​Debited for $90,000
C)​Not recorded
D)​Debited for $45,000

Question 19

As is the case with all entities, the investment of capital in a partnership should initially be measured at what value:

A)​Book
B)​Fair market
C)​Labor
D)​Asset

Question 20

Partners Y & Z each had $75,000 of capital on December 31.The partnership agreement calls for a profit and loss distribution of 10% on invested capital at the beginning of the year.Assuming a net income of $100,000 what would the distribution be for both partners?

A)​Undetermined
B)​$7,500
C)​$15,000
D)​Y would receive $7500 and Z would receive $15,000

Question 21

X & Y form a partnership with initial investments of $40,000 and $125,000 respectively.Partner X works three fourths and partner Y works full time.The partners agree to split profit and loss in the ratio of their initial investment.Assuming a net income of $25,000 what would each partners division be?

Question 22

When specific assets are contributed by a partner, they lose their identity as to source and become:

A)​Unidentified
B)​Shared property
C)​Ownership of the contributing partner
D)​None of the above

Question 23

J & K are forming a partnership.J is investing a building that has a market value of $80,000.However, the building carries a $45,000 mortgage that will be assumed by the partnership.K is investing $20,000 cash.The balance of J's capital is

A)​$25,000
B)​$35,000
C)​$45,000
D)​$125,000

Question 24

O & P form a partnership on January 1 and agrees to share profit and loss in the ration of 5/4.Each partner contributes $75,000 of cash.The cash account would be:

A)​Debited for $75,000
B)​Debited for $150,000
C)​Debited for $83,333
D)​Debited for $33,333

Question 25

Record the entry for the partnership of E & R assuming a net loss of $15,000.The agreement calls for profit and loss to be distributed equally.

Question 26

T & U form a partnership with initial investments of $100,000 and $200,000 respectively.Their agreement calls for a salary to T of $40,000 and a salary to U for $60,000.Each partner is to receive interest of 10% on their initial investment and they agree the remaining profit or loss is to be divided equally.If the net income for the period is $230,000 show the distribution to each partner:

Question 27

L & S have invested $80,000 and $100,000 in a partnership.L's beginning capital investment is $80,000 and S initial capital investment is $100,000.Their ending capital balances were $85,000 and $105,000 respectively.L's share of net income was $6,000 .What is L partners return on equity

A)​7%
B)​8%
C)​9%
D)​10%

Question 28

A personal debt of $10,000 in the T & H partnership is paid by Partner H.The correct entry to pay this debt would be:

A)​Debit to Partners T & H capital accounts for $10,000
B)​Debit to Partner H capital for $10,000
C)​Debit to partner T capital for $5,000, Debit to partner H capital for $5,000
D)Debit to Partner H drawing for $10,000​
E)​None of the above

Question 29

Partners A and B have a profit and loss agreement with the following provisions: salaries of $30,000 and $45,000 for A and B, respectively; a bonus to A of 12% of net income after salaries and bonus; and interest of 10% on average capital balances of $50,000 and $65,000 for A and B, respectively.One-fourth of any remaining profits are allocated to A and the balance to B.If the partnership had net income of $108,600, how much should be allocated to Partner A?

A)​$43,225
B)​$43,816
C)​$47,850
D)​$65,375

Question 30

An LLC is a hybrid type of organization that has advantages of

A)​Proprietor and partner
B)​Partner and corporation
C)​Proprietor and corporation
D)​S corporation and C corporation

Question 31

Partners G have withdrawn $65,000 and partner H has withdrawn $1 from the partnership of G & H for the year ending December 31.What is the correct entry to close their capital accounts on December 31?

A)​Debit G Drawing for $65,000 Debit H Drawing for $1
B)​Debit G Capital for $65,000, Debit H Capital for $1
C)​Debit Each partners Capital accounts for $33,000
D)​None of above

Question 32

D & E.share profits and loss in an agreed ratio of 5/7.With a net income of $85,000 E's share of net income would be:

A)​$42,500
B)​$49,583
C)​$60,714
D)​$45,000

Question 33

S & T form a partnership with $30,000 and $90,000 respectively.Their article of copartnerhsip call for the net income distribution based on initial investment.What would partner S share of net income be under this provision assuming net income was $50,000?

Question 34

Partners active in a partnership business should have their share of partnership profits based on the following

A)​A combination of salaries plus interest based on average capital balances.
B)​a combination of salaries and percentage of net income after salaries and any other allocation basis.
C)​salaries only.
D)​percentage of net income after salaries is paid to inactive partners.

Question 35

Abbott and Costello are partners.Abbott draws a salary of $90,000 per year and Costello draws a salary of $150,000 per year.Each partners Drawing account however shows they have withdrawn $50,000 and $60,000 respectively.What is the total amount of salary they would show on their income distribution?

A)​$240,000
B)​$350,000
C)​$110,000
D)​None of the above

Question 36

Assume the partnership of V & X had a net income of $62,000 for the year and the partners agree to share profit and loss in the ratio of 4 to 5.Give the journal entry to record the distribution of net income.