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Principles of Accounting, Volume 1: Financial Accounting

Multiple Choice

Principles of Accounting, Volume 1: Financial AccountingMultiple Choice
1.

LO 15.1A partnership ________.

  1. has one owner
  2. can issue stock
  3. pays taxes on partnership income
  4. can have more than one general partner
2.

LO 15.1Any assets invested by a particular partner in a partnership ________.

  1. do not become a partnership asset but instead remain with the partner
  2. can be used only by the investing partner
  3. become the property of all the partners
  4. are the basis for all profit sharing
3.

LO 15.1Which of the following is a disadvantage of the partnership form of organization?

  1. limited life
  2. no taxation at the partnership level
  3. flexibility in business operations
  4. combining of financial resources
4.

LO 15.1Mutual agency is defined as:

  1. a mutual agreement
  2. the right of all partners to represent the company’s normal business operations
  3. a synonym for partnership
  4. a partnership between two partnerships
5.

LO 15.2Chani contributes equipment to a partnership that she purchased 2 years ago for $10,000. The current book value is $7,500 and the market value is $9,000. At what value should the partnership record the equipment?

  1. $10,000
  2. $9,000
  3. $7,500
  4. none of the above
6.

LO 15.2Juan contributes marketable securities to a partnership. The book value of the securities is $7,000 and they have a current market value of $10,000. What amount should the partnership record in Juan’s Capital account due to this contribution?

  1. $10,000
  2. $7,000
  3. $3,000
  4. none of the above
7.

LO 15.2Which one of the following would not be considered in the development of a partnership agreement?

  1. profit and loss levels
  2. processing disputes
  3. stock options
  4. asset contributions
8.

LO 15.3A well written partnership agreement should include each of the following except ________.

  1. how to settle disputes
  2. the name of the partnership
  3. division of responsibilities
  4. Partner’s individual tax rate
9.

LO 15.3What type of assets may a partner not contribute to a partnership?

  1. accounts receivable
  2. furniture
  3. equipment
  4. personal credit cards
10.

LO 15.3How does a newly formed partnership handle the contribution of previously depreciated assets?

  1. continues the depreciation life as if the owner had not changed
  2. starts over, using the contributed value as the new cost basis
  3. shortens the useful life of the asset per the partnership agreement
  4. does not depreciate the contributed asset
11.

LO 15.4Thandie and Marco are partners with capital balances of $60,000. They share profits and losses at 50% each. Chris contributes $30,000 to the partnership for a 1/3 share. What amount should the partnership record as a bonus to Chris?

  1. $20,000
  2. $15,000
  3. $10.500
  4. $5,000
12.

LO 15.4Thandie and Marco are partners with capital balances of $60,000. They share profits and losses at 50%. Chris contributes $30,000 to the partnership for a 1/3 share. What amount should Thandie’s capital balance in the partnership be?

  1. $60,000
  2. $50,000
  3. $45,000
  4. $30,000
13.

LO 15.4Thandie and Marco are partners with capital balances of $60,000. They share profits and losses at 50%. Chris contributes $90,000 to the partnership for a 1/3 share. What amount should the partnership record as an individual bonus to each of the old partners?

  1. $10,000
  2. $7,000
  3. $3,000
  4. $20,000
14.

LO 15.4Thandie and Marco are partners with capital balances of $60,000. They share profits and losses at 50%. Chris contributes $60,000 to the partnership for a 1/3 share. What amount should the partnership record as an individual bonus to each of the old partners?

  1. $10,000
  2. $7,000
  3. $0
  4. $5,000
15.

LO 15.5When a partnership dissolves, the first step in the dissolution process is to ________.

  1. allocate the gain or loss on sale based on income sharing ratio
  2. pay off liabilities
  3. sell noncash assets
  4. divide the remaining cash among the partners
16.

LO 15.5When a partnership dissolves, the last step in the dissolution process is to ________.

  1. allocate the gain or loss on sale based on income sharing ratio
  2. pay off liabilities
  3. sell noncash assets
  4. divide the remaining cash among the partners
17.

LO 15.5Prior to proceeding with the liquidation, the partnership should ________.

  1. prepare adjusting entries without closing
  2. complete the accounting cycle for final operational period
  3. prepare only closing entries
  4. complete financial statements only
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