Partnership Accounting Quiz

Which of the following is not a characteristic of most partnerships?

• Limited liability

• Mutual agency

• Limited life

• Ease of formation

Which of the following is not a characteristic of the proprietary theory that influences accounting for partnerships?

• Partners’ salaries are viewed as a distribution of income rather than a component of net income

• A partnership is not viewed as a separate entity, distinct, taxable entity

• A partnership is characterized by limited liability

• Changes in the ownership structure of the partnership result in the dissolution of the partnership

Which of the following statements is correct with respect to a limited partnership?

• A limited partner may not be an unsecured creditor of the limited partnership

• A general partner may not also be limited partner at the same time

• A general partner may be a secured creditor of the limited partnership

• A limited partnership can be formed with limited liability for all partners

Mary admits Jane as a partner in the business. Balance sheet accounts of Mary just before the admission of Jane show: Cash, P 26,000, Accounts receivable, P 120,000, Merchandise inventory, P 180,000, and Accounts payable, P 62,000. It was agreed that for purposes of establishing Mary’s interest, the following adjustments be made: 1. An allowance for doubtful accounts of 3% of accounts receivable is to be established; 2. Merchandise inventory is to be adjusted upward by P 25,000; and 3. Prepaid expenses of P 3,600 and accrued liabilities of P 4,000 are to be recognized. If Jane is to invest sufficient cash to obtain 2/5 interest in the partnership, how much would Jane contribute to the new partnership?

• P 95,000

• P 113,980

• P 176,000

• P 190,000

If a partnership has net income of P 44,000 and Partner X is to be allocated bonus of 10% of income after the bonus. What is the amount of bonus Partner X will receive?

• P 3,000

• P 3,300

• P 4,000

• P 4,400

During 2016, Young and Zinc maintained average capital balances in their partnership of P 160,000 and P 100,000, respectively. The partners receive 10% interest on average capital balances, and residual profit or loss is divided equally. Partnership profit before interest was P 4,000. By what amount should Zinc’s capital account change for the year?

• P 1,000 decrease

• P 11,000 decrease

• P 2,000 increase

• P 12,000 increase

Partnership A has an existing capital of P 70,000. Two partners currently own the partnership and split profits 50/50. A new partner is to be admitted and will contribute net assets with a fair value of P 90,000. For no goodwill or bonus to be recognized, what is the interest in the partnership granted the new partner?

• 33.33%

• 50.00%

• 56.25%

• 75.00%

Ranken purchases 50% of Lark’s capital interest in the K and L partnership for P 22,000. If the capital balances of Kim and Lark are P 40,000 and P 30,000, respectively, Ranken’s capital balance following the purchase is

• P 15,000

• P 20,000

• P 22,000

• P 35,000

In the final cash distribution, what would be the respective share of the partners?

• P 150,000

• P 175,000

• P 200,000

• P 275,000

What amount should be allocated to Partner AA?

• P 41,000

• P 41,167

• P 44,250

• P 47,500