Accounting for Partnership-Part 1

Which of the following is characteristic of a general professional partnership?

• The partners have co-ownership of partnership property

• The partnership is subject to corporate income tax.

• The partnership has an unlimited life.

• The partners have limited liability

Which of the following is not a characteristic of a general partnership?

• the partnership is created by a contract

• mutual agency

• partners share equally in net income or net losses unless an agreement states differently

• dissolution occurs only when all partners agree

The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is called

• unlimited liability

• ease of formation

• mutual agency

• dissolution

When a limited partnership is formed

• the partnership activities are limited

• all partners have limited liability

• some of the partners have limited liability

• none of the partners have limited liability

When a partnership is formed, assets contributed by the partners should be recorded on the partnership books at their

• book values on the partners' books prior to their being contributed to the partnership

• fair value at the time of the contribution

• original costs to the partner contributing them

• assessed values for property purposes

As part of the initial investment, a partner contributes equipment that had originally cost $125,000 and on which accumulated depreciation of $100,000 has been recorded. If similar equipment would cost $150,000 to replace and the partners agree on a valuation of $38,000 for the contributed equipment, what amount should be debited to the equipment account

• 38,000

• 150,000

• 125,000

• 100,000

As part of the initial investment, Omar contributes accounts receivable that had a balance of $22,500 in the accounts of a sole proprietorship. Of this amount, $2,000 is completely worthless. For the remaining accounts,the partnership will establish a provision for possible future uncollectible accounts of $1,500. The amount debited to Accounts Receivable for the new partnership is

• 19,000

• 22,500

• 21,000

• 20,500

Radley and Smithers share income and losses in a 2:1 ratio after allowing for salaries to Radley of $48,000and $60,000 to Smithers. Net income for the partnership is $96,000. Income should be divided as follows:

• Radley, $48,000; Smithers, $48,000

• Radley, $56,000; Smithers, $40,000

• Radley, $64,000; Smithers, $32,000

• Radley, $40,000; Smithers, $56,000

Franco and Elisa share income equally. During the current year the partnership net income was$40,000. Franco made withdrawals of $12,000 and Elisa made withdrawals of $17,000. At the beginning of the year, the capital account balances were: Franco capital, $40,000; Elisa capital, $58,000. Franco’s capital account balance at the end of the year is

• 74,500

• 62,500

• 60,000

• 48,000

Franco and Elisa share income equally. During the current year the partnership net income was$40,000. Franco made withdrawals of $12,000 and Elisa made withdrawals of $17,000. At the beginning ofthe year, the capital account balances were: Franco capital, $42,000; Elisa capital, $58,000. Elisa’s capitalaccount balance at the end of the year is

• 81,000

• 50,000

• 61,000

• 95,000