Question 1: A real estate development business in Los Angeles is managed by two

Question

Question 1:

A real estate development business in Los Angeles is managed by two experienced developers and is finance by 50 investors from throughout the state of California. To allow maximum income tax benefits to the investors, the business is organized as a ‘partnership’.

Explain why this type of business probably would be a limited partnership rather than a regular partnership. Provide at least 2 comparisons of a limited partnership versus a regular partnership and explain.

ANSWER:

Question 2:

Joey Malone is the proprietor of a small auto body business. He is considering the possibility of joining in partnership with Dennis Barts, whom he considers to be thoroughly competent and congenial.

Prepare a brief statement outlining the advantages and disadvantages of the potential partnership from Malone’s point of view. Provide at least one paragraph explanation for both the advantages and disadvantages.

Identify 3 items that Malone should incorporate to protect his interests in the partnership in developing a contract with Barts.

ANSWER:

Question 3

The basic accounting equation for the Balance Sheet for a business is:

Assets = Liabilities + Stockholder’s Equity.

In examining the category of Stockholder’s Equity:

Name the two categories of Stockholder’s Equity.

Name three major transactions that affect the amount of ‘paid-in capital’ of a company and

Indicate whether the transaction would increase or decrease the amount of paid-in capital.

ANSWER:

Explanation / Answer

Question 1: A real estate development business in Los Angeles is managed by two

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