Question 1

How are partners' investments in a partnership recorded?

Accepted Answer

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Question 2

Match each of the following terms with the appropriate definitions.
-A corporation with 100 or fewer stockholders that can elect to be treated as a partnership for income tax purposes but retain the same limited liability as other corporations.

Accepted Answer

An S corporation is a special type of corporation created through an IRS tax election. It allows a corporation with 100 or fewer shareholders to benefit from the tax structure of a partnership, meaning income is taxed at the individual level rather than at the corporate level, while still retaining the limited liability protections of a corporation.

Question 3

Explain the steps involved in the liquidation of a partnership.

Accepted Answer

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Question 4

Match each of the following terms with the appropriate definitions.
-A partner who assumes unlimited liability for the debts of the partnership.

Accepted Answer

A general partner in a partnership assumes unlimited liability for the debts of the partnership, meaning they are personally responsible for the financial obligations of the business.

Question 5

Match each of the following terms with the appropriate definitions.
-A financial statement that shows total capital balances at the beginning of the period,any additional investment by partners,the income or loss of the period,the partners' withdrawals,and the ending capital balances.

Accepted Answer

The Statement of Partners' Equity is a financial statement that details the changes in the equity section of the balance sheet for partners in a partnership. It includes the beginning capital balances, any additional investments by partners, the income or loss for the period, withdrawals made by the partners, and the ending capital balances.

Question 6

Match each of the following terms with the appropriate definitions.
-A partnership that has two classes of partners,limited partners and general partners.Limited partners have no personal liability beyond the amount they invest in the partnership,and have no active role except as specified in the partnership agreement.

Accepted Answer

A limited partnership is characterized by having both limited and general partners. Limited partners' liability is restricted to their investment, and they typically do not participate in the day-to-day management of the business.

Question 7

Discuss the options for the allocation of income and loss among partners,including with and without a partnership agreement.

Accepted Answer

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Question 8

Caitlin,Chris,and Molly are partners and share income and losses in a 3:4:3 ratio.The partnership's capital balances are Caitlin,$120,000; Chris,$80,000; and Molly,$100,000.Paul is admitted to the partnership on July 1 with a 20% equity and invests $60,000.
-The balance in Caitlin's capital account immediately after Paul's admission is:

Accepted Answer

Paul's capital balance = ($120,000 + $80,000 + $100,000 + $60,000) * 20% = $72,000.
Bonus to Paul = ($60,000 - $72,000) = $12,000.
Caitlin's capital balance =$120,000 + (($12,000) * 30%) = $116,400.

Question 9

Match each of the following terms with the appropriate definitions.
-The agreement between partners that sets terms under which the affairs of the partnership are conducted.

Accepted Answer

A partnership contract is the agreement between partners that outlines the terms under which the partnership's affairs are conducted, including the responsibilities, profit sharing, and other obligations of the partners.

Question 10

What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.

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Question 11

Match each of the following terms with the appropriate definitions.
-A corporation that does not qualify for nor elect to be treated as a partnership for income tax purposes and therefore is subject to income taxes.

Accepted Answer

A C corporation is a type of business entity that is legally considered separate from its owners and is taxed on its own profits. Unlike S corporations or partnerships, C corporations do not pass their income, deductions, and credits through to their shareholders for federal tax purposes.

Question 12

Match each of the following terms with the appropriate definitions.
-The legal relationship among partners whereby each partner can commit or bind the partnership to any contract within the scope of the partnership's business.

Accepted Answer

Mutual agency refers to the legal relationship among partners in a partnership where each partner has the authority to commit or bind the partnership to contracts within the scope of the partnership's business. This concept is fundamental to the operation of partnerships, allowing partners to act on behalf of the partnership in conducting its business activities.

Question 13

Caitlin,Chris,and Molly are partners and share income and losses in a 3:4:3 ratio.The partnership's capital balances are Caitlin,$120,000; Chris,$80,000; and Molly,$100,000.Paul is admitted to the partnership on July 1 with a 20% equity and invests $160,000.
-The balance in Caitlin's capital account immediately after Paul's admission is:

Accepted Answer

Paul's capital balance = ($120,000 + $80,000 + $100,000 + $160,000) * 20% = $92,000.
Total bonus = ($160,000 - $92,000) = $68,000.
Caitlin's capital balance =$120,000+ ($68,000 * 30%) = $140,400.

Question 14

What are the ways that a new partner can be admitted to an existing partnership? Explain how to account for the admission of the new partner under each of these circumstances.

Accepted Answer

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Question 15

Define the partner return on equity ratio and explain how a specific partner would use this ratio.

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Question 16

Match each of the following terms with the appropriate definitions.
-An unincorporated association of two or more persons to pursue a business for profit as co-owners.

Accepted Answer

A partnership is defined as an unincorporated association of two or more persons who come together to pursue a business for profit as co-owners.

Question 17

Caitlin,Chris,and Molly are partners and share income and losses in a 3:4:3 ratio.The partnership's capital balances are Caitlin,$120,000; Chris,$80,000; and Molly,$100,000.Paul is admitted to the partnership on July 1 with a 20% equity and invests $60,000.
-The balance in Paul's capital account immediately after his admission is:

Accepted Answer

Paul's capital balance = ($120,000 + $80,000 + $100,000 + $60,000) * 20% = $72,000.

Question 18

Match each of the following terms with the appropriate definitions.
-A partnership that protects innocent partners from malpractice or negligence claims resulting from the acts of another partner.

Accepted Answer

A Limited Liability Partnership (LLP) is designed to offer protection to partners from being personally liable for the negligent acts of other partners or employees not under their direct control.

Question 19

Identify and discuss the key characteristics of partnerships.Also,identify other organizations that possess partnership characteristics.

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Question 20

Match each of the following terms with the appropriate definitions.
-The legal relationship among general partners that makes each of them personally responsible for paying the debts of the partnership if the partnership cannot pay.

Accepted Answer

Unlimited liability of partners refers to the legal responsibility that general partners in a partnership have, making them personally liable for the debts of the partnership if it cannot pay. This means each partner can be held responsible for the full amount of any debts, not just a portion corresponding to their share of ownership.

Quiz 16: Partnership Accounting

How are partners' investments in a partnership recorded?

Match each of the following terms with the appropriate definitions. -A corporation with 100 or fewer stockholders that can elect to be treated as a partnership for income tax purposes but retain the same limited liability as other corporations.

Explain the steps involved in the liquidation of a partnership.

Match each of the following terms with the appropriate definitions. -A partner who assumes unlimited liability for the debts of the partnership.

Match each of the following terms with the appropriate definitions. -A financial statement that shows total capital balances at the beginning of the period,any additional investment by partners,the income or loss of the period,the partners' withdrawals,and the ending capital balances.

Discuss the options for the allocation of income and loss among partners,including with and without a partnership agreement.

Match each of the following terms with the appropriate definitions. -The agreement between partners that sets terms under which the affairs of the partnership are conducted.

What are the ways a partner can withdraw from a partnership? Explain how to account for the withdrawal of a current partner from a partnership.

Match each of the following terms with the appropriate definitions. -A corporation that does not qualify for nor elect to be treated as a partnership for income tax purposes and therefore is subject to income taxes.

Match each of the following terms with the appropriate definitions. -The legal relationship among partners whereby each partner can commit or bind the partnership to any contract within the scope of the partnership's business.

What are the ways that a new partner can be admitted to an existing partnership? Explain how to account for the admission of the new partner under each of these circumstances.

Define the partner return on equity ratio and explain how a specific partner would use this ratio.

Match each of the following terms with the appropriate definitions. -An unincorporated association of two or more persons to pursue a business for profit as co-owners.

Match each of the following terms with the appropriate definitions. -A partnership that protects innocent partners from malpractice or negligence claims resulting from the acts of another partner.

Identify and discuss the key characteristics of partnerships.Also,identify other organizations that possess partnership characteristics.

Match each of the following terms with the appropriate definitions. -The legal relationship among general partners that makes each of them personally responsible for paying the debts of the partnership if the partnership cannot pay.