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Exam 13: Partnerships

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Question 31

Multiple Choice

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Which of the following is NOT a characteristic of a partnership?

A) The partners have limited liability for the debts of the partnership.
B) The partnership pays no separate business profit tax.
C) Each partner has a separate capital account.
D) Each partner has mutual agency.

E) B) and C)
F) A) and C)

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Question 32

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If a partner withdraws from a partnership and elects to take some of the assets of the partnership away,the partnership will use the current book value of those assets to calculate the final settlement with the withdrawing partner.

A) True
B) False

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Question 33

Multiple Choice

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Nancy and Betty enter into a partnership agreement whereby they undertake to share profits according to the following rules: (a) Nancy and Betty will receive a salary of $1400 and $11,500 respectively. (b) The next allocation is based on 10% of the partner's capital balances. (c) Any remaining profit or loss is to be borne completely by Betty. The partnership's profit for the first year is $40,000.Nancy's capital balance is $88,000 and Betty's capital balance is $12,000 as at the end of the year.Calculate the share of profit/loss to be borne by Betty.

On 1 July,Herb Block purchased the partnership interest of James Steinfort for $40 000.The balance in Steinfort's capital account prior to the purchase was $32 000.How will this transaction be reflected on the partnership's books?

When one partner leaves the partnership for any reason,the old partnership ceases to exist.

Which of the following statements is TRUE about a limited partnership?

Which of the following statements MOST accurately describes the withdrawal of a partner at book value?

Rodriguez and Ying start a partnership business on 1 July 2017.Rodriguez brings in cash worth $3600,furniture with a current market value of $46,000 and computer equipment.The computer equipment cost $43,000 in 2014 and has an accumulated depreciation of $25,000.The current market value of the computer equipment is $15,000.At what value should the computer equipment be recorded in the books of the partnership firm?

When one person purchases the partnership interest of a partner,a new partnership agreement will have to be created.

In the process of liquidation,a partnership firm sells its non-cash assets of a book value of $46,000,for $76,000.Which of the following will be included in the entry to record the sale of assets at liquidation?

When a partnership is formed and a partner contributes property,plant and equipment,it is recorded on the books of the partnership at its net book value-the original cost less accumulated depreciation.

Allan and Ralph are partners.Allan has a capital balance of $89,000 and Ralph has a capital balance of $73,000.Carol invested $61,000 to acquire an ownership interest of $50,000.Which of the following is true of the impact of the transaction on the balance sheet?

Albert,Billy and Cathy share profits and losses of their partnership as 1:4:3.If the net profit is $70,000,calculate the profit share of Albert.

Bill and Bob share profits of their partnership firm in the ratio of 4:1.If the net profit of the firm is $25,000,calculate the share of Bill's profit.

The balance sheet of Ryan,James and Peter firm as at 30 June 2017 is given below. $\begin{array}{|l|l|l|l|}\hline{\text { Assets }} & & {\text { Liabilities }} & \\\hline \text { Cash } & \$ 16,000 & \text { Accounts payable } & \$ 17,000 \\\hline \text { Accounts receivable } & 11,000 & \text { Other liabilities } & 22,000 \\\hline \text { Furniture } & 10,000 & \text { Partner's'equity } & \\\hline \text { Equipment } & 15,000 & \text { Ryan, capital } & 12,000 \\\hline \text { Other assets } & 11,000 & \text { Peter, capital } & 11,000 \\\hline & & \text { James, capital } & 1000 \\\hline\text { Total assets }&\$63,000&\text { Total liabilities and partners' equity }&\$63,000\\\hline\end{array}$ Ryan,Peter and James share profits in the ratio 3:2:1.They have decided to liquidate the partnership with immediate effect.The furniture and the equipment were sold at a cumulative loss of $6000.The accounts receivable were duly received in cash and the other assets were written off as worthless.The accounts payable and other liabilities were paid off at book value.James argued that he should receive a portion of the remaining cash,but Peter and Ryan argued otherwise.How much cash should James receive or pay?

Ronald,Ross and Carol opened a partnership firm.Ronald has a capital of $73,000;Ross has a capital of $117,000;and Carol has a capital of $93,000.Ronald decided to withdraw from the partnership and received $84,000.Which of the following will be included in the journal entry to record this? (Assume an equal profit-loss sharing between the existing partners. )

Adam,Bill and Charlie are partners.The profit and rule sharing rule between them is 2:6:2,with Bill getting the most and Adam getting the least.The partnership incurs a net loss of $76,000.While closing the Income summary:

Which of the following statements describes the situation in which a new person pays a bonus to buy into a partnership?

Whenever there is a change in the mix of partners,the old partnership is dissolved and a new one begins.

Mathew,Patrick and Robin and have capital balances of $78,000,$125,000 and $90,000,respectively.As per the partnership agreement,Mathew gets a profit share of 2/9;Patrick gets 4/9;and Robin gets 3/9.Partnership agrees to pay $62,000 as final settlement to Mathew.How much bonus will Robin receive as a result of this transaction?