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WorksheetsQuiz 12/2/2023
Total questions: 45
Worksheet time: 45mins
The individual assets invested by a partner in a partnership
revert back to that partner if the partnership liquidates.
determine that partner's share of net income or loss for the year.
are jointly owned by all partners.
determine the scope of authority of that partner.
Which one of the following would not be considered a disadvantage of the partnership form of organization?
Limited life
Unlimited liability
Mutual agency
Ease of formation
The partnership form of business is
restricted to law and medical practices.
restricted to firms having fewer than 10 partners
not restricted to any particular type of business.
most often used in relatively large companies.
Which of the following is not a principal characteristic of the partnership form of business organization?
Mutual agency
Association of individuals
Limited liability
Limited life
The partnership agreement should include each of the following except the
date of the partnership inception. .
principal location of the firm
surviving family members in the event of a partner's death.
Each of these should be included.
Which of the following statements is true regarding the form of a legally binding partnership contract?
The partnership contract must be in writing.
The partnership contract may be based on a handshake.
The partnership contract may be implied.
The partnership contract cannot be oral.
Which of the following statements about a partnership is correct?
The personal assets of a partner are included in the partnership accounting records.
A partnership is not required to file an information tax return.
Each partner's share of income is taxable to the partnership.
A partnership represents an accounting entity for financial reporting purposes.
In a partnership, mutual agency means
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.
an act by a partner is judged as binding on other partners depending on whether the act appears to be appropriate for the partnership.
that partners must pay taxes on a mutual or combined basis.
A partnership
is dissolved only by the withdrawal of a partner.
is dissolved upon the acceptance of a new partner.
dissolution means the business must liquidate.
has unlimited life.
The partner in a limited partnership that has unlimited liability is referred to as the
lead partner.
head partner.
general partner.
unlimited partner.
Which of the following statements about partnerships is incorrect?
Partnership assets are co-owned by partners.
If a partnership is terminated, the assets do not legally revert to the original contributor.
If the partnership agreement does not specify the manner in which net income is to be shared, it is distributed according to capital contributions.
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?
Mutual agency
Ease of formation
Ease of decision making
Freedom from governmental regulations and restrictions
The basis for dividing partnership net income or net loss is referred to as any of the following except the
income ratio.
income and loss ratio.
profit and loss ratio.
income sharing ratio.
Which of the following statements is incorrect regarding partnership agreements?
It may be referred to as the “articles of co-partnership.”
Oral agreements are preferable to written articles.
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 P33,000
debit to Equipment for P63,000
debit to Equipment for P39,000.
credit to Accumulated Depreciation for P33,000.
Which one of the following would not be considered an expense of a partnership in determining income for the period?
Expired insurance
Salary allowance to partners
Supplies used
Freight-out
A partner invests into a partnership a building with an original cost of P90,000 and accumulated depreciation of P40,000. This building has a P70,000 fair market value. As a result of the investment, the partner’s capital account will be credited for
P70,000.
P50,000.
P90,000.
P120,000.
A partner's share of net income is recognized in the accounts through
adjusting entries.
closing entries.
correcting entries.
accrual entries.
An income ratio based on capital balances might be appropriate when
service is a primary consideration.
some, but not all, partners plan to work in the business.
funds invested in the partnership are considered the critical factor.
little net income is expected.
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,
only salaries are allocated to the partners
only interest is allocated to the partners
the entire net income is shared on a fixed ratio.
both salaries and interest are allocated to the partners.
Which of the following would not be considered an expense of a partnership in determining income for the period?
Expired insurance
Income tax expense
Rent expense
Utilities expense
A partners' capital statement explains
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 changes in each partner's capital account and in total partnership capital during a period.
Each of the following is used in preparing the partners’ capital statement except the
balance sheet.
income statement.
partners’ capital accounts.
partners’ drawing accounts.
The owners' equity statement for a partnership is called the
partners' proportional statement.
partners' capital statement.
statement of shareholders' equity.
capital and drawing statement.
Which of the following would not cause an increase in partnership capital?
Drawings
Net income
Additional capital investment by the partners
Initial capital investment by the partners
The partners' drawing accounts are
reported on the income statement.
reported on the balance sheet.
closed to Income Summary.
closed to the partners' capital accounts.
The balance sheet of a partnership will
report retained earnings below the partnership capital accounts.
show a separate capital account for each partner.
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
bankruptcy of the partnership.
death of a partner.
retirement of a partner.
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
first to creditors and the remainder to partners
to the partners on the basis of their capital balances.
to the partners on the basis of their income-sharing ratio.
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.
When a partnership terminates business, the sale of noncash assets is called
liquidation.
realization.
recognition.
disposition.
The liquidation of a partnership
cannot be a voluntary act of the partners.
terminates the business.
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
sell noncash assets for cash.
recognize a gain or loss on realization.
allocate the gain or loss to the partners based on their capital balances.
pay partnership liabilities in cash.
A bonus to a new partner
is prohibited by GAAP.
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
results when the new partner's capital credit is greater than his or her investment of assets in the firm.
A bonus to a new partner will
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 partners based on their income ratios before 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, P450,000; Andrea, P105,000.
Deej, P474,000; Andrea, P111,000.
Deej, P426,000; Andrea, P99,000.
Deej, P435,000; Andrea, P90,000.
All of the following are characteristics of partnerships except
co-ownership of property.
mutual agency.
unlimited life.
association of individuals.
When a partner invests noncash assets in a partnership, the assets should be recorded at their
book value.
carrying value
fair market value.
original cost.
The partnership agreement of Rossi and Petry provides for salary allowances of P45,000 to Rossi and P35,000 to Petry, with the remaining income or loss to be divided equally. During the year, Rossi and Petry each withdraw cash equal to 80% of their salary allowances. If partnership net income is P100,000, Rossi's equity in the partnership would
increase more than Petry’s.
decrease more than Petry's.
increase the same as Petry's.
decrease the same as Petry's.
Which of the following statements is correct?
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.
Neither salaries to partners nor interest on partners' capital are expenses of the partnership.
In the liquidation of a partnership, the gains and losses from assets sold are
divided equally among the partners.
divided among the partners in the stated income ratio.
divided among the partners in proportion to their capital equity interests.
ignored.
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
equally.
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
payment of cash to creditors.
distribution of cash to the partners.
sale of noncash assets.
allocation of a capital deficiency to partners with credit balances when the deficient partner is expected to pay the deficiency.
The first step in the liquidation of a partnership is to
allocate a gain or loss on realization to the partners.
distribute remaining cash to the partners.
pay partnership liabilities.
sell noncash assets and recognize a gain or loss on realization.
Mavy is admitted to a partnership with a 25% capital interest by a cash investment of P120,000. If total capital of the partnership is P520,000 before admitting Mavy, the bonus to Mavy is
P40,000.
P20,000.
P60,000.
P80,000.
