ACCOUNTING-Fundamental of Advanced Accounting,5th ed, Hoyl , chapter 9

QUESTION

Fundamental of Advanced Accounting,5th ed, Hoyl ,
chapter 9
Problem 1-6
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.

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.
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.
5. A partnership has
the following capital balances:
Albert (50% of gains and losses) Barrymore (20%) Candroth
(30%)
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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:
Elgin (40% of gains and losses) Jethro (30%) Foy (30%)
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.

ANSWER:

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