Question

Which of the following is a characteristic of a partnership?

a. The partnership is subject to federal income tax.

b. The partners have limited liability.

c. The partnership distributes only net income to partners, but does not distribute net losses.

d.

The partnership has a limited life.

Which of the following characteristics refers to the fact that the property invested in a partnership by a partner becomes the joint property of all the partners?

a. Mutual ownership

b. Mutual agency

c. Co-ownership

d.

Participation in partnership

Price and Phil share income and losses equally after allowing for salaries of $24,000 to Price and $30,000 to Phil. Net income for the partnership is $45,000. Income should be divided as

a. Price, $19,500; Phil, $25,500.

b. Price, $22,500; Phil, $22,500.

c. Price, $20,000; Phil, $25,000.

d.

Price, $27,000; Phil, $18,000.

Arrow and Inlet share income and losses equally after allowing for salaries to Arrow of $27,000 and $33,000 to Inlet. Net income for the partnership is $75,000. If income should be divided $34,500 to Arrow and $40,500 to Inlet, the journal entry will include a

a. credit to Arrow, Capital of $34,500 and a credit to Inlet, Capital of $40,500.

b. debit to Arrow, Capital of $34,500 and a credit to Inlet, Capital of $40,500.

c. debit to Cash of $75,000.

d.

credit to Arrow, Capital of $34,500 and a debit to Inlet, Capital of $40,500

Income or losses of the partnership may be divided

a. equally, if there is no specification or agreement.

b. based on services and investments of the partners.

c. as specified in the partnership agreement.

d.

All of these choices may be correct

Jorge is admitted to an existing partnership by investing cash. Jorge agrees to pay a bonus for his ownership interest because of the past success of the partnership. When Jorge's investment in the partnership is recorded,

a. his capital account will be credited for the amount of cash he invested.

b. his capital account will be credited for more than the cash he invested.

c. a bonus will be distributed to the old partners' capital accounts and Jorge's capital account will be credited for less than his cash investment.

d.

a bonus will be credited for the amount of cash he invested.

Tom and leon are partners. The partnership capital of Tom is $45,000 and leon is $70,000. Tom sells his interest in the partnership to Harry for $60,000. The journal entry to record the admission of Harry as a new partner would include a credit to

a. leon capital for $10,000.

b. Harry's capital for $60,000.

c. Harry's capital for $60,000 and a credit to Dick's capital for $15,000.

d.

Harry's capital for $45,000.

A person may be admitted to a partnership by

a. contributing liabilities to a partnership.

b. purchasing an interest from one or more of the existing partners and contributing liabilities to a partnership.

c. purchasing an interest from one or more of the existing partners.

d.

None of these choices are correct.

A debit balance in the capital account of a partner after selling noncash assets as part of liquidation is known as a

a. cash balance.

b. gain on realization.

c. deficiency.

d.

gain.

Charles, Carissa, and Clay are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Charles, $50,000 Cr.; Carissa, $40,000 Dr.; and Clay, $20,000 Cr. How much cash is available for distribution to the partners?

a. $20,000

b. $110,000

c. $30,000

d.

$40,000

When a partnership goes out of business, it is liquidated. The last step in this process is

a. payment of liabilities.

b. division of gain or loss.

c. realization.

d.

distribution to partners.

A limited liability corporation's (LLC) equity is reported similar to that of a

a. regular corporation.

b. trust.

c. sole proprietor.

d.

partnership.

The statement of partnership equity shows all of the following except

a. a capital account for each partner.

b. realization.

c. net income (loss).

d. a total partnership capital account.

Answer 1

As per policy only first four questions will be answered

1. Answer is option D. The partnership has a limited life

Like sole proprietorship, Partnerships are unincorporated business entities with limited life and unlimited liability.

2. Answer is option C Co-ownership

Partners have co-ownership of partnership property. The property invested in a partnership by a partner becomes the joint property of all partners.

3. Answer is option A Price, $19,500; Phil, $25,500.

Total salary = 24000+30000 = 54000

Net income = 45000

So, there is loss of 9000 (45000-54000) which equally distributed between price and Phil and will be deducted from their Salaries.

4. Answer is option A credit to Arrow, Capital of $34,500 and a credit to Inlet, Capital of $40,500.

The partners' portion of net income is then added to their capital account.

5. Answer is option D All of these choices may be correct

Profit or loss in partnership is distributed among partners according to terms mentioned in agreement. If not specified in agreement then equally.