Chapter 14 Flashcards
Which of the following is not a reason for the popularity of partnerships as a legal form for businesses?
Partnerships may be formed merely by an oral agreement.
In some cases, losses may be used to offset gains for tax purposes.
Partnerships avoid the double taxation of income that is found in corporations.
Partnerships can more easily generate significant amounts of capital.
Partnerships can more easily generate significant amounts of capital.
How does partnership accounting differ from corporate accounting?
Individual capital accounts replace the contributed capital and retained earnings balances found in corporate accounting.
The matching principle is not considered appropriate for partnership accounting.
Partnerships report all assets at fair value as of the latest balance sheet date.
Individual capital accounts replace the contributed capital and retained earnings balances found in corporate accounting.
Which of the following best describes the articles of partnership agreement?
The articles of partnership are an agreement that limits partners’ liability to partnership assets.
The articles of partnership are a legal covenant that may be expressed orally or in writing, and forms the central governance for a partnership’s operations.
The purpose of the partnership and partners’ rights and responsibilities are required elements of the articles of partnership.
The articles of partnership are a legal covenant that may be expressed orally or in writing, and forms the central governance for a partnership’s operations.
The disadvantages of the partnership form of business organization, compared to corporations, include
the legal requirements for formation.
unlimited liability for the partners.
the requirement for the partnership to pay income taxes.
unlimited liability for the partners.
Partnerships have alternative legal forms including all of the following except:
General Partnership.
Limited Partnership.
Subchapter S Partnership.
Limited Liability Partnership.
Subchapter S Partnership.
When the hybrid method is used to record the withdrawal of a partner, the partnership…
revalues assets and liabilities but does not record goodwill.
The advantages of the partnership form of business organization, compared to corporations, include
single taxation
The partnership of Clapton, Seidel, and Thomas was insolvent and will be unable to pay $30,000 in liabilities currently due. What recourse was available to the partnership’s creditors?
they may seek remuneration from any partner they choose
The dissolution of a partnership occurs…
when there is any change in the individuals who make up the partnership
Cherryhill and Hace had been partners for several years, and they decided to admit Quincy to the partnership. The accountant for the partnership believed that the dissolved partnership and the newly formed partnership were two separate entities. What method would the accountant have used for recording the admission of Quincy to the partnership? A. The bonus method. B. The equity method. C. The goodwill method. D. The proportionate method. E. The cost method.
C. The goodwill method.
Which of the following is not a characteristic of a partnership?
A. The partnership itself pays no income taxes.
B. It is easy to form a partnership.
C. Any partner can be held personally liable for all debts of the business.
D. A partnership requires written Articles of Partnership.
E. Each partner has the power to obligate the partnership for liabilities.
D. A partnership requires written Articles of Partnership.
Which of the following type of organization is classified as a partnership, or similar to a partnership, for tax purposes? (I.) Limited Liability Company (II.) Limited Liability Partnership (III.) Subchapter S Corporation A. II only. B. II and III. C. I and II. D. I and III. E. I, II, and III.
E. I, II, and III.
Which of the following statements is correct regarding the admission of a new partner?
A. A new partner must purchase a partnership interest directly from the business.
B. The right of co-ownership in the business property can be transferred to a new partner without the consent of other existing partners.
C. The right to participate in management of the business can be conveyed without the consent of other existing partners.
D. The right to share in profits and losses can be sold to a new partner without the consent of other existing partners.
E. A new partner always pays book value.
C. The right to participate in management of the business can be conveyed without the consent of other existing partners.
Withdrawals from the partnership capital accounts are typically not used
A. to reward partners for work performed in the business.
B. to reduce the partners’ capital account balances at the end of an accounting period.
C. to record interest earned on a partner’s capital balance.
D. to reduce the basic investment that has been made in the business.
E. to record the partnership’s payment of a partner’s personal expense such as income tax
C. to record interest earned on a partner’s capital balance.
Which of the following could be used as a basis to allocate profits among partners who are active in the management of the partnership?
1) Allocation of salaries.
2) The number of years with the partnership.
3) The amount of time each partner works.
4) The average capital invested.
A. 1 and 2.
B. 1 and 3.
C. 1, 2, and 4.
D. 1, 3, and 4.
E. 1, 2, 3, and 4.
E. 1, 2, 3, and 4.
