In a partnership, mutual agency means

an act by a partner is judged as binding on other partners depending on whether the act appears to be appropriate for the partnership.

each partner acts on his own behalf when engaging in partnership business.

the act of any partner is binding on all other partners, only if partners act within their cope of authority.

that partners must pay taxes on a mutual or combined basis.

is dissolved upon the acceptance of a new partner.

is dissolved only by the withdrawal of a partner.

dissolution means the business must liquidate.

Which of the following statements about partnerships is incorrect?

If the partnership agreement does not specify the manner in which net income is to be shared, it is distributed according to capital contributions.

Partnership assets are co-owned by partners.

If a partnership is terminated, the assets do not legally revert to the original contributor.

Each partner has a claim on assets equal to the balance in the partner's capital account.

Which of the following is not an advantage of the partnership form of business?

Freedom from governmental regulations and restrictions

Which of the following statements is incorrect regarding partnership agreements?

Oral agreements are preferable to written articles.

It may be referred to as the “articles of co-partnership.”

It should specify the different relationships that are to exist among the partners

It should state procedures for submitting disputes to arbitration.

Bob is investing in a partnership with Jerry. Bob contributes equipment that originally cost P63,000, has a book value of P30,000, and a fair market value of P39,000. The entry that the partnership makes to record Bob's initial contribution includes

debit to Equipment for P39,000.

credit to Accumulated Depreciation for P33,000.

An income ratio based on capital balances might be appropriate when

funds invested in the partnership are considered the critical factor.

service is a primary consideration.

some, but not all, partners plan to work in the business.

If the partnership agreement specifies salaries to partners, interest on partners' capital, and the remainder on a fixed ratio, and partnership net income is not sufficient to cover both salaries and interest,

both salaries and interest are allocated to the partners.

only salaries are allocated to the partners

only interest is allocated to the partners

the entire net income is shared on a fixed ratio.

A partners' capital statement explains

the changes in each partner's capital account and in total partnership capital during a period.

the amount of legal liability of each of the partners.

the types of assets invested in the business by each partner.

how the partnership will be capitalized if a new partner is admitted to the partnership.

The owners' equity statement for a partnership is called the

partners' proportional statement.

statement of shareholders' equity.

Which of the following would not cause an increase in partnership capital?

Additional capital investment by the partners

Initial capital investment by the partners

The partners' drawing accounts are

closed to the partners' capital accounts.

reported on the income statement.

The balance sheet of a partnership will

show a separate capital account for each partner.

report retained earnings below the partnership capital accounts.

show a separate drawing account for each partner.

show the amount of income that was distributed to each partner.

The liquidation of a partnership may result from each of the following except the

sale of the business by the partners.

In the liquidation of a partnership, any gain or loss on the realization of noncash assets should be allocated

to the partners on the basis of their income-sharing ratio.

first to creditors and the remainder to partners

to the partners on the basis of their capital balances.

only after all creditors have been paid.

In the liquidation of a partnership, any partner who has a capital deficiency

has a personal debt to the partnership for the amount of the deficiency.

is automatically terminated as a partner.

will receive a cash distribution only on the basis of his or her income-sharing ratio.

is not obligated to make up the capital deficiency.

The liquidation of a partnership

cannot be a voluntary act of the partners.

eliminates those partners with a capital deficiency.

cannot occur unless all partners approve.

Before distributing any remaining cash to partners in a partnership liquidation, it is necessary to do each of the following except

allocate the gain or loss to the partners based on their capital balances.

recognize a gain or loss on realization.

pay partnership liabilities in cash.

A bonus to a new partner

results when the new partner's capital credit is greater than his or her investment of assets in the firm.

results when the new partner's capital credit is less than his or her investment of assets in the firm.

may occur when recorded book values are lower than market values

A bonus to a new partner will

decrease the capital balances of existing partners based on their income ratios before the admission of the new partner.

increase the capital balances of existing partners based on their income ratios before the admission of the new partner.

increase the capital balances of existing partners based on their income ratios after the admission of the new partner.

decrease the capital balances of existing

Kath, Deej, and Andrea have partnership capital account balances of P225,000, P450,000 and P105,000, respectively. The income sharing ratio is Kath, 50%; Deej, 40%; and Andrea, 10%. Kath desires to withdraw from the partnership and it is agreed that partnership assets of P195,000 will be used to pay Kath for her partnership interest. The balances of Deej's and Andrea's Capital accounts after Kath's withdrawal would be

Deej, P474,000; Andrea, P111,000.

Deej, P450,000; Andrea, P105,000.

Deej, P426,000; Andrea, P99,000.

Deej, P435,000; Andrea, P90,000.

Which of the following statements is correct?

Neither salaries to partners nor interest on partners' capital are expenses of the partnership.

Salaries to partners and interest on partners' capital are expenses of the partnership.

Salaries to partners are expenses of the partnership but not interest on partners' capital.

Interest on partners' capital is an expense of the partnership but not salaries to partners.

In the liquidation of a partnership, the gains and losses from assets sold are

divided among the partners in the stated income ratio.

divided equally among the partners.

divided among the partners in proportion to their capital equity interests.

If a partner with a capital deficiency is unable to pay the amount owed to the partnership, the deficiency is allocated to the partners with credit balances

on the basis of their income ratios.

on the basis of their capital balances.

on the basis of their original investments.

An entry is not required in the liquidation of a partnership to record the

allocation of a capital deficiency to partners with credit balances when the deficient partner is expected to pay the deficiency.

distribution of cash to the partners.

The first step in the liquidation of a partnership is to

sell noncash assets and recognize a gain or loss on realization.

allocate a gain or loss on realization to the partners.

distribute remaining cash to the partners.

Quiz 12/2/2023

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Specialty

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University

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Practice Problem

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John Joson

Used 1+ times

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Each partner's share of income is taxable to the partnership.

A partnership represents an accounting entity for financial reporting purposes.

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