1. Which of the following is an advantage of a general partnership when compared
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Question
1. Which of the following is an advantage of a general partnership when compared to a corporation?
a. The partnership is relatively inexpensive to organize.
b. Creditors to a partnership cannot attach personal assets of partners.
c. The partnership usually hires professional managers.
d. A partnership is more likely to have a positive net income.
2. Which of the following is a disadvantage of a partnership when compared to a corporation?
a. The partnership is less expensive to organize.
b. The partnership is more likely to have a net loss.
c. The partnership is easier to organize.
d. The partnership has limited life.
3. When a limited liability company is formed
a. some of the partners have limited liability
b. none of the partners have limited liability
c. all partners have limited liability
d. the partnership activities are limited
4 When a partnership is formed, assets contributed by the partners should be recorded on the partnership books at their
a. fair market value at the time of the contribution
b. book values on the partners' books prior to their being contributed to the partnership
c. assessed values for property tax purposes
d. original costs to the partner contributing them
5. As part of the initial investment, Ray Blake 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 $29,000 for the contributed equipment, what amount should be debited to the equipment account?
a. $125,000
b. $29,000
c. $150,000
d. $100,000
6. As part of the initial investment, Jackson contributes accounts receivable that had a balance of $22,500 in the accounts of a sole proprietorship. Of this amount, $3,000 is deemed 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
a. $21,000
b. $22,500
c. $19,500
d. $18,000
7. Partnership income and losses are usually divided on the basis of interest, salaries, and stated ratios because
a. it is simpler than following the legal rules
b. partners seldom contribute time and resources equally
c. this method reflects the amount of time devoted to the partnership by the partners
d. it prevents arguments among the partners
8. Carrie and Callie form a partnership in which Carrie contributes $85,000 in assets and agrees to devote half time to the partnership. Callie contributed $50,000 in assets and agrees to devote full time to the partnership. If no additional information is available, how will Carrie and Callie share in the division of income?
a. 1:2
b. 5:8.5
c. 2:1
d. 1:1
9. Seth and Rachel have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%; salary allowances of $27,000 and $18,000, respectively; and the remainder divided equally. How much of the net loss of $16,000 is allocated to Seth?
a. $8,000
b. $6,000
c. $16,000
d. $4,000
10. Jefferson has a capital balance of $65,000 and devotes full time to the partnership. Washington has a capital balance of $45,000 and devotes half time to the partnership. If no other information is available regarding distributions, in what ratio is net income to be divided?
a. 1:1
b. 6.5:4.5
c. 4.5:6.5
d. 1:2
11. Patty and Paul are partners who share income in the ratio of 3:2. Their capital balances are $90,000 and $130,000, respectively. Income Summary has a credit balance of $40,000 after the second closing entry. What is Paul's capital balance after closing Income Summary to the capital accounts?
a. $146,000
b. $164,000
c. $160,000
d. $120,000
12. Isis and Kelsey are forming a partnership. Isis will invest a piece of equipment with a book value of $7,500 and a fair market value of $18,000. Kelsey will invest a building with a book value of $40,000 and a fair market value of $44,000.
What amount will be recorded to Kelsey's capital account?
a.$14,000
b.$24,000
c.$44,000
d.$40,000
13. Tanner and Teresa share income and losses in a 2:1 ratio after allowing for salaries to Tanner of $42,000 and $60,000 to Teresa. Net income for the partnership is $132,000. Income should be divided as follows:
a. Tanner, $75,000; Teresa, $57,000
b. Tanner, $62,000; Teresa, $70,000
c. Tanner, $57,000; Teresa, $75,000
d. Tanner, $58,000; Teresa, $74,000
14. Xavier and Yolanda have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 20%; salary allowances of $34,000 and $26,000, respectively; and the remainder to be divided equally. How much of the net income of $120,000 is allocated to Yolanda?
a. $61,000
b. $46,000
c. $66,000
d. $60,000
15. Xavier and Yolanda have original investments of $50,000 and $100,000, respectively, in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10; salary allowances of $38,000 and $28,000, respectively; and the remainder to be divided equally. How much of the net income of $77,000 is allocated to Xavier?
a. $66,000
b. $41,000
c. $43,000
d. $36,000
16. Which of the following below is not one of the four major forms of business entities that are discussed in this chapter?
a. partnership
b. subchapter S corporation
c. sole proprietorship
d. corporation
17. An advantage of the partnership form of business organization is
a. ease of formation
b. limited life
c. mutual agency
d. unlimited liability
18. Which of the following is a characteristic of a general partnership?
a. The partners have co-ownership of partnership property.
b. The partnership has an unlimited life.
c. The partners have limited liability.
d. The partnership is subject to federal income tax.
19. Bobbi and Stuart are partners. The partnership capital of Bobbi is $40,000 and Stuart is $70,000. Bobbi sells his interest in the partnership to John for $50,000. The journal entry to record the admission of John as a new partner would include
a. a credit to John's capital account for $50,000
b. a credit to John's capital account for $40,000
c. a credit to Stuart's capital account for $10,000
d. a credit to John's capital account for $40,000 and a credit to Stuart's capital account for $10,000
20. When a partner dies, the capital account balances of the remaining partners
a. will increase
b. may increase, decrease, or remain the same
c. will decrease
d. will remain the same
Explanation / Answer
1.The statement that creditors to a partnership cannot attachpersonal assets of a partnrt is one of the advantages of a a general partnership when compared to corporation. Thus answer will be B.
2. The statement that The partnership is more likely to have a net loss is one of the disdvantages of a partnership when compared to a corporation. Thus answer will be B.
3. When a limited liability company is formed all the partners have limited liability. Thus C is the answer.
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