Chapter 12: Accounting for Partnerships - 20-Minute Quiz #1

An advantage of partnerships is mutual agency.

• True

• False

In a limited partnership, all of the partners have limited liability for the debts of the firm.

• True

• False

In a limited liability partnership, a partner can be held liable for the negligence of the people directly supervised by that partner.

• True

• False

In a partnership where the division of profits and losses is based on salaries, interest, and a stated ratio, if the salary and interest allocation will exceed the profit, the profit is allocated only by the stated ratio instead.

• True

• False

A partnership is considered an accounting entity for financial reporting purposes.

• True

• False

When the partnership contract does not specify the manner in which profits and losses are to be divided, profits and losses are distributed based on the average capital balances of each partner during the year.

• True

• False

The statement of partners’ capital explains the changes in each partner’s capital account and in total partnership capital during the year.

• True

• False

Admission of a new partner to the partnership does not result in the legal dissolution of the existing partnership.

• True

• False

If a partnership is admitting a new partner to the existing partnership and the existing partners are to receive a bonus, this bonus would be allocated on the basis of their capital balances.

• True

• False

Upon liquidation, once the assets have been sold and the creditors paid, the final cash is distributed equally among partners.

• True

• False