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Principles of Accounting, Volume 1: Financial Accounting

Chapter 15

Principles of Accounting, Volume 1: Financial AccountingChapter 15

Chapter 15

Multiple Choice

1.

D

3.

A

5.

B

7.

C

9.

D

11.

A

13.

A

15.

C

17.

B

Questions

1.

No; it is a passthrough entity, meaning the taxation flows to the owners. The partners pay taxes on their distributive share of the partnership’s income.

3.

Yes, the partnership can assume liabilities as part of one partner’s contributions. However, that should be agreed upon during the creation of the partnership agreement, where each partner lists assets and value. In addition, the assumption of liabilities by the partnership reduces the amount of assets the partner is contributing and thus the relevant capital account.

5.

A strong response would include fixed ratios; a ratio based on beginning-of-year capital balances, end-of-year capital balances, or an average capital balance during the year; salaries to partners and the remainder on a fixed ratio; interest on the partners’ capital balances and the remainder on a fixed ratio; and some combination of all or some of the above methods (salaries to partners, interest on capital balances, and the remainder on a fixed ratio).

7.
JOURNAL
Date 2016 Account Debit Credit
Feb. 3 Cash 90,000  
       S. Singh, Capital   90,000
Table 15.3
9.

1. sell noncash assets, 2. allocate any gain or loss, 3. fulfill liabilities, and 4. distribute remaining cash

11.

Sell non-cash assets

13.

The general partners would be expected to make the vendors whole.

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