Question 1

A partnership that has at least two classes of partners, general and limited, allows the limited partners to have no personal liability beyond the amounts they invest in the partnership, and the limited partners have no active role except as specified in the partnership agreement is a ________________________ partnership.

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The answer of A partnership that has at least two...

Question 2

During the closing process, each partner's withdrawals account is closed to _______________.

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The answer of During the closing process, each partner's withdrawals...

Question 3

Partners in a partnership are taxed on ____________________, not on their withdrawals.

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The answer of Partners in a partnership are taxed on...

Question 4

A _____________________ is an unincorporated association of two or more people to pursue a business for profit as co-owners.

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Question 5

___________________________ implies that each partner in a partnership can be called on to pay a partnership's debts.

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The answer of ___________________________ implies that each partner in a...

Question 6

On May 1, Fine and Max formed a partnership. Fine contributed cash of $90,000 and equipment valued at $152,000. Max contributed land valued at $120,000 and a building valued at $250,000. The partnership also assumed responsibility for Max's $110,000 long-term note payable associated with the land and building. The partners agreed to share income as follows: Fine is to receive a salary allowance of $38,000, both are to receive an annual interest allowance of 8% of their beginning-year capital investments, and any remaining income or loss is to be shared equally. During the year, Fine withdrew $40,000 and Max withdrew $42,000 cash. After the adjusting and closing entries are made to the revenue and expense accounts at the end of the year, the Income Summary account had a credit balance of $140,000. Prepare the journal entries to record (a) the partners' initial capital investments, (b) their cash withdrawals, and (c) closing of both the Withdrawals and Income Summary accounts.

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The answer of On May 1, Fine and Max formed...

Question 7

A relatively new form of business organization that protects partners with limited liability, allows limited partners to assume an active management role, and is taxed as a partnership is a _____________________________.

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The answer of A relatively new form of business organization...

Question 8

A _________________________ means that at least one partner has a debit balance in his/her capital account at the point of the final distribution of cash.

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The answer of A _________________________ means that at least one...

Question 9

Partner return on equity is calculated as ___________________________.

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The answer of Partner return on equity is calculated as...

Question 10

___________________________ means that partners can commit or bind the partnership to any contract within the scope of the partnership business.

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The answer of ___________________________ means that partners can commit or...

Question 11

When a partner invests in a partnership, his/her capital account is __________ for the invested amount.

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The answer of When a partner invests in a partnership,...

Question 12

If a partner withdraws from a partnership and the recorded value of his or her equity is overstated, then a bonus goes to ________________________; if the recorded value of the withdrawing partner's equity is understated, then a bonus goes to ____________________.

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The answer of If a partner withdraws from a partnership...

Question 13

Jane, Castle, and Sean are partners who share income and loss in a 4:2:2 ratio. The partnership's capital balances are as follows: Jane, $292,000; Castle, $114,000; and Sean, $194,000. Conner is admitted to the partnership on March 1 with a 25% equity. Prepare the journal entries to record Conner's entry into the partnership under each of the following separate assumptions: Conner invests (a) $200,000; (b) $180,000; and (c) $240,000.

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The answer of Jane, Castle, and Sean are partners who...

Question 14

A partnership designed to protect innocent partners from malpractice or negligence claims resulting from the acts of other partners is a ____________________________ partnership.

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The answer of A partnership designed to protect innocent partners...

Question 15

If partners agree on how to share income, but say nothing about losses, then losses are shared ________________.

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The answer of If partners agree on how to share...

Question 16

The life of a partnership is ____________________ in duration.

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The answer of The life of a partnership is ____________________...

Question 17

During the closing process, partner's capital accounts are _______________ for their share of net income and _________________ for their share of net loss.

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The answer of During the closing process, partner's capital accounts...

Question 18

Sam and Dave's company is organized as a partnership. At the prior year-end, Sam's equity balance was $258,000 and Dave's was $212,000. For the current year, partnership net income is $125,000 ($75,000 allocated to Sam and $50,000 allocated to Dave); withdrawals are $77,000 ($40,000 for Sam and $37,000 for Dave). Compute the total partnership return on equity and the individual partner return on equity ratios.

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The answer of Sam and Dave's company is organized as...

Question 19

A partner can be admitted into a partnership by ________________________ or by ___________________________.

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The answer of A partner can be admitted into a...

Quiz 12: Accounting for Partnerships