Question

In: Accounting

Which of the following statements is true of​ partnerships? If the partners have no partnership agreement specifying...

Which of the following statements is true of​ partnerships?

If the partners have no partnership agreement specifying how to divide profits and​ losses, then they share profits and losses equally.

B.

The profit sharing is always based on each​ partner's capital balances and any losses will be shared equally.

C.

It is legally required to share the profit and losses​ equally, irrespective of the partnership agreement.

D.

The stated ratio of profit sharing needs to be approved by the SEC.

Solutions

Expert Solution

Correct option is (A)

If the partners have no partnership agreement specifying how to divide profits and​ losses, then they share profits and losses equally.

When partners have not made any partnership agreement or they have made a partnership agreement but the partnership agreement does not contain any provision regarding sharing of profits, in that case profits are shared equally among all the partners, ignoring the capital contributions by the partners.

Statements B, C and are not correct.

The profit sharing is always based on each​ partner's capital balances and any losses will be shared equally.- It is false since it is possible only when provided in the partnership agreement. Thus this is not always true.

It is legally required to share the profit and losses​ equally, irrespective of the partnership agreement.- It is false since there is no legal provision to share profits equally.

The stated ratio of profit sharing needs to be approved by the SEC- It is false since SEC has nothing to do with the approval of profit sharing ratio of partners.

ekkarill92 answered 10 months ago
Next > < Previous

Related Solutions

16. Which of the following statements about partnerships are true? A. Partnerships afford their owners a...
16. Which of the following statements about partnerships are true? A. Partnerships afford their owners a liability shield against claims from third parties. B. For tax purposes, partnerships are pass through entities. C. Absent an agreement to the contrary partnerships do not survive the death of one of the partners. D. Partnerships are relatively easy to form. 17.The Securities and Exchange Commission holds primary responsibility for which of the following. Check all that apply. A. Determining the offering price for...
The partnership agreement of Ahmed and Ali has the following provisions: 1 - Partners are to...
The partnership agreement of Ahmed and Ali has the following provisions: 1 - Partners are to earn 10% interest on their average capital balances 2 - Ali is to earn a 5% bonus on any net income above 40,000 3 - Ahmed and Ali are to earn salaries of 25,000 and 20,000 respectively 4 - Any remaining income or loss is to be divided using a 4:2 ratio Ahmed's average capital balance is 130,000 and Ali's is 30,000 Net income...
Indicate whether each of the following statements is e true or false. ________ 1. Partnerships have...
Indicate whether each of the following statements is e true or false. ________ 1. Partnerships have unlimited life. Corporations do not. ________ 2. Partners jointly own partnership assets. A partner’s claim on partnership assets does not attach to specific assets. ________ 3. In a limited partnership, the general partners have unlimited liability. ________ 4. The members of a limited liability company have limited liability, like shareholders of a corporation, and they are taxed like corporate shareholders. ________ 5. Because of...
The following balance sheet is for a local partnership in which the partners have become very...
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other. Cash $ 41,000 Liabilities $ 31,000 Land 135,000 Adams, capital 84,000 Building 125,000 Baker, capital 30,000 Carvil, capital 62,000 Dobbs, capital 94,000 Total assets $ 301,000 Total liabilities and capital $ 301,000 To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as...
The following balance sheet is for a local partnership in which the partners have become very...
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other. Cash $ 43,000 Liabilities $ 33,000 Land 145,000 Adams, capital 89,000 Building 135,000 Baker, capital 36,000 Carvil, capital 66,000 Dobbs, capital 99,000 Total assets $ 323,000 Total liabilities and capital $ 323,000 To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as...
The following balance sheet is for a local partnership in which the partners have become very...
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other.   Cash $ 61,000   Liabilities $ 51,000   Land 235,000   Adams, capital 156,500   Building 225,000   Baker, capital 45,000   Carvil, capital 102,000   Dobbs, capital 166,500        Total assets $521,000        Total liabilities and capital $521,000 To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as an independent...
The following balance sheet is for a local partnership in which the partners have become very...
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other. Cash $ 49,000 Liabilities $ 39,000 Land 175,000 Adams, capital 108,500 Building 165,000 Baker, capital 45,000 Carvil, capital 78,000 Dobbs, capital 118,500 Total assets $ 389,000 Total liabilities and capital $ 389,000 To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as...
The following balance sheet is for a local partnership in which the partners have become very...
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other. Cash $ 65,000 Liabilities $ 55,000 Land 255,000 Adams, capital 169,500 Building 245,000 Baker, capital 51,000 Carvil, capital 110,000 Dobbs, capital 179,500 Total assets $ 565,000 Total liabilities and capital $ 565,000 To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as...
The following balance sheet is for a local partnership in which the partners have become very...
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other. Cash $ 40,000 Liabilities $ 30,000 Land 130,000 Adams, capital 80,000 Building 120,000 Baker, capital 30,000 Carvil, capital 60,000 Dobbs, capital 90,000 Total assets $ 290,000 Total liabilities and capital $ 290,000 To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as...
The following balance sheet is for a local partnership in which the partners have become very...
The following balance sheet is for a local partnership in which the partners have become very unhappy with each other. Cash $ 64,000 Liabilities $ 54,000 Land 250,000 Adams, capital 165,500 Building 240,000 Baker, capital 51,000 Carvil, capital 108,000 Dobbs, capital 175,500 Total assets $ 554,000 Total liabilities and capital $ 554,000 To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as...
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT