1. The ability of one partner to enter into a contract binding all other partners is termed:
A) Mutual Agency
B) Unlimited liability
C) Partnership agreement
D) Pass-through entity
2. As a part of the initial investment, a partner contributes office equipment that had a cost of $20,000 and accumulated depreciation of $12,500. If the partners agree on a valuation of $9,000 for the equipment, what amount should be debited to the office equipment account?
A) $7,500
B) $9,000
C) $12,500
D) $20,000
3. Lee and Stills are partners who share income in the ratio of 2:1 and who have capital balances of $65,000 and $35,000 respectively. If Mor, with the consent of Stills, acquired ½ of Lee's interest for $40,000 for what amount would Mor's capital account be credited?
A) $32,500
B) $40,000
C) $50,000
D) $72,500
4. Chip and Dale agree to form a partnership. Chip is to contribute $50,000 in assets and to devote ½ time to the partnership. Dale is to contribute $20,000 and to devote full time to the partnership. How will Chip and Dale split the net income/loss?
A) 5:2
B) 1:2
C) 1:1
D) 2.5:1
5. Henry and Thomas share gains and losses in the ratio of 2:1. After selling all assets for cash and paying all liabilities, the cash account has $12,000 in it. The capital accounts were as follows:
Henry $10,000; Thomas $2,000. How much of the $12,000 cash would Henry receive?
A) $2,000
B) $8,000
C) $10,000
D) $12,000
6. Which of the following is not true about a partnership?
A) It is easy to form a partnership.
B) A partnership has personal limited liability.
C) There is no double taxation in a partnership.
D) A partnership has a limited life.
7. On which financial statement is each partner's capital account?
A) Balance Sheet
B) Income State
C) Statement of Retained Earnings
D) Cash Flow Statement
8. The partner's Capital account is what type of account and what is the Capital account's normal balance?
A) Asset account, normal debit balance
B) Equity account, normal debit balance
C) Asset account, normal credit balance
D) Equity account, normal credit balance
9. Which of the following is not true for a corporation?
A) A corporation is a separate entity from its owners.
B) Ownership can be transferred when stock is exchanged.
C) Owners have limited liability.
D) Corporations are not taxed.
10. In a sole proprietorship the Drawing account is similar to what account in a corporation?
A) Capital account
B) Retained Earnings
C) Dividends
D) Common Stock