Questions -
Question 1 - Xavier and Yolonda 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 15%, salary allowances of $22,000 and $20,000 respectively, and the remainder equally. How much of the net income of $90,000 is allocated to Xavier?
$30,250
$47,750
$45,000
$42,250
Question 2 - Xavier and Yolonda 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 equally. How much of the net income of $40,000 is allocated to Xavier?
$20,000
$22,000
$32,000
$0
Question 3 - Which of the following below is not one of the four major forms of business entities that are discussed in this chapter?
Sole proprietorship
Corporation
Partnership
Subchapter S corporation
Question 4 - When an additional partner is admitted to a partnership by contribution of assets to the partnership
the total assets of the partnership do not change
no liabilities can be contributed at the same time
the amount of the cash contribution is the same as the amount of the debit to the new partner's capital account
the total of the owner's equity accounts increases
Question 5 - When a partnership is formed, assets contributed by the partners should be recorded on the partnership books at their
book values on the partners' books prior to their being contributed to the partnership
fair market value at the time of the contribution
original costs to the partner contributing them
assessed values for property purposes
Question 6 - When a new partner is admitted to a partnership, there should be a(n)
revaluation of assets
realization of assets
allocation of assets
return of assets
Question 7 - Use the following information to answer the following questions.
Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $5,000 and a fair market value of $15,000. Marta will invest a building with a book value of $30,000 and a fair market value of $35,000.
At what amount will Marta's capital account be recorded?
$50,000
$15,000
$30,000
$35,000
Question 8 - Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $80,000 and $120,000 respectively. Income Summary has a credit balance of $30,000. What is Tomas' capital balance after closing Income Summary to Capital?
$102,500
$22,500
$57,500
$127,500
Question 9 - The remaining cash of a partnership (after creditors have been paid) upon liquidation is divided among partners according to their
capital balances
contribution of assets
drawing balances
income sharing ratio
Question 10 - The characteristic of a partnership that gives the authority to any partner to legally bind the partnership and all other partners to business contracts is called
unlimited liability
ease of formation
mutual agency
dissolution
Question 11 - The balance sheet of Morgan and Rockwell was as follows immediately prior to the partnership's being liquidated: cash, $20,000; other assets, $160,000; liabilities, $40,000; Morgan capital, $60,000; Rockwell capital, $80,000. The other assets were sold for $139,000. Morgan and Rockwell share profits and losses in a 2:1 ratio. As a final cash distribution from the liquidation, Morgan will receive cash totaling
$46,000
$51,000
$60,000
$49,500
Question 12 - The Craig-Doran Partnership owns inventory that was purchased for $85,000, has a current replacement cost of $54,500, and is priced to sell for $98,000. At what amount should the inventory be recorded in the accounts of the new partnership if Alexis is to be admitted?
$98,000
$54,500
$85,000
$79,167
Question 13 - Soledad and Winston are partners who share income in the ratio of 1:3 and have capital balances of $100,000 and $140,000 at the time they decide to terminate the partnership. After all noncash assets are sold and all liabilities are paid, there is a cash balance of $130,000. What amount of loss on realization should be allocated to Soledad?
$60,000
$27,500
$92,500
$32,500
Question 14 - Singer and McMann are partners in a business. Singer's original capital was $40,000 and McMann's was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will Singer's share of the income be if the income for the year was $50,000?
$24,000
$22,000
$16,000
$23,400
Question 15 - Samuel and Darci are partners. The partnership capital for Samuel is $50,000 and for Darci is $60,000. Josh is admitted as a new partner by investing $50,000 cash. Josh is given a 20% interest in return for his investment. The amount of the bonus to the old partners is
$0
$18,000
$8,000
$10,000
Question 16 - Radley and Smithers share income and losses in a 2:1 ratio after allowing for salaries to Radley of $24,000 and $30,000 to Smithers. Net income for the partnership is $48,000. Income should be divided as follows:
Radley, $24,000; Smithers, $24,000
Radley, $21,000; Smithers, $27,000
Radley, $32,000; Smithers, $16,000
Radley, $20,000; Smithers, $28,000
Question 17 - Partnership income and losses are usually divided on the basis of interest, salaries, and stated ratios because
partners seldom contribute time and resources equally
this method reflects the amount of time devoted to the partnership by the partners
it is simpler than following the legal rules
it prevents arguments among the partners
Question 18 - Nick is admitted to an existing partnership by investing cash. Nick agrees to pay a bonus for his ownership interest because of the past success of the partnership. When Nick's investment in the partnership is recorded
his capital account will be credited for more than the cash he invested
his capital account will be credited for the amount of cash he invested
a bonus will be credited for the amount of cash he invested
a bonus will be distributed to the old partners' capital accounts.
Question 19 - Lambert invests $10,000 for a 1/3 interest in a partnership in which the other partners have capital totaling $26,000 before admitting Lambert. After distribution of the bonus, what is Lambert's capital?
$12,000
$10,000
$8,667
$5,333
Question 20 - If there is no written agreement as to the way income will be divided among partners
they will share income and losses equally
they will share income and losses according to their capital balances
they will share income and losses according to the time devoted to the business.
there really is no partnership agreement
Question 21 - Douglas pays Selena $39,000 for her 30% interest in a partnership with total net assets of $105,000. Following this transaction, Selena's capital account should have a credit balance of
$31,500
$39,000
$35,250
more than $39,000
Question 22 - A gain or loss on realization is divided among partners according to their
income sharing ratio
capital balances
drawing balances
contribution of assets
Question 23 - A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm. As a results of this transaction, the capital account balance of the other partners in the partnership
will increase
will decrease
will remain the same
may increase, decrease, or remain the same
Question 24 - A partnership liquidation occurs when
a new partner is admitted
a partner dies
the ownership interest of one partner is sold to a new partner
the assets are sold, liabilities paid, and business operations terminated
Question 25 - A ratio of 2:2:1 is the same as
20%:20%:10%
2/5:2/5:1/5
2/10:2/10:1/20
both (a) and (c)