ACCOUNTING-Which of the following is not a reason for the popularity of partnerships

QUESTION

1.

Which of the following is not a reason for the popularity of
partnerships as a legal form for businesses?

a. Partnerships
may be formed merely by an oral agreement.
b. Partnerships
can more easily generate significant amounts of capital.
c. Partnerships
avoid the double taxation of income that is found in corporations.
d. In some cases,
losses may be used to offset gains for tax purposes.

LO1 2.

How does partnership accounting differ from corporate
accounting?

a. The matching
principle is not considered appropriate for partnership accounting.
b. Revenues are
recognized at a different time by a partnership than is appropriate for a
corporation.
c. Individual
capital accounts replace the contributed capital and retained earnings balances
found in corporate accounting.
d. Partnerships
report all assets at fair value as of the latest balance sheet date.

LO2 3.

Which of the following best describes the articles of
partnership agreement?

a. The purpose of
the partnership and partners’ rights and responsibilities are required elements
of the articles of partnership.
b. The articles of
partnership are a legal covenant and must be expressed in writing to be valid.
c. The articles of
partnership are an agreement that limits partners’ liability to partnership
assets.
d. The articles of
partnership are a legal covenant that may be expressed orally or in writing,
and forms the central governance for a partnership’s operations.
4.

Pat, Jean Lou, and Diane are partners with capital balances
of $50,000, $30,000, and $20,000, respectively. These three partners share
profits and losses equally. For an investment of $50,000 cash (paid to the
business), MaryAnn will be admitted as a partner with a one-fourth interest in
capital and profits. Based on this information, which of the following best
justifies the amount of MaryAnn’s investment?

a. MaryAnn will
receive a bonus from the other partners upon her admission to the partnership.
b. Assets of the
partnership were overvalued immediately prior to MaryAnn’s investment.
c. The book value
of the partnership’s net assets was less than the fair value immediately prior
to MaryAnn’s investment.
d. MaryAnn is
apparently bringing goodwill into the partnership, and her capital account will
be credited for the appropriate amount.

LO9 5.

A partnership has the following capital balances:

Danville is going to invest $70,000 into the business to
acquire a 30 percent ownership interest. Goodwill is to be recorded. What will
be Danville’s beginning capital balance?

a. $70,000.
b. $90,000.
c. $105,000.
d. $120,000.
6.

A partnership has the following capital balances:

Oscar is going to pay a total of $200,000 to these three
partners to acquire a 25 percent ownership interest from each. Goodwill is to
be recorded. What is Jethro’s capital balance after the transaction?

a. $150,000.
b. $175,000.
c. $195,000.
d. $200,000.

LO9 7.

The capital balance for Bolcar is $110,000 and for Neary is
$40,000. These two partners share profits and losses 70 percent (Bolcar) and 30
percent (Neary). Kansas invests $50,000 in cash into the partnership for a 30
percent ownership. The bonus method will be used. What is Neary’s capital
balance after Kansas’s investment?

a. $35,000.
b. $37,000.
c. $40,000.
d. $43,000.

LO9 8.

Bishop has a capital balance of $120,000 in a local
partnership, and Cotton has a $90,000 balance. These two partners share profits
and losses by a ratio of 60 percent to Bishop and 40 percent to Cotton. Lovett
invests $60,000 in cash in the partnership for a 20 percent ownership. The
goodwill method will be used. What is Cotton’s capital balance after this new
investment?
a. $99,600.
b. $102,000.
c. $112,000.
d. $126,000.

LO9 9.

The capital balance for Messalina is $210,000 and for
Romulus is $140,000. These two partners share profits and losses 60 percent
(Messalina) and 40 percent (Romulus). Claudius invests $100,000 in cash in the
partnership for a 20 percent ownership. The bonus method will be used. What are
the capital balances for Messalina, Romulus, and Claudius after this investment
is recorded?

a. $216,000,
$144,000, $90,000.
b. $218,000,
$142,000, $88,000.
c. $222,000,
$148,000, $80,000.
d. $240,000,
$160,000, $100,000.

ANSWER:

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