Partnerships Practice Exam Flashcards
A partnership is comprised of two elements: An agreement to contribute money, property, or industry to a common fund and an intent to divide the amount of the profits among the contracting partners. True or False?
True
A partnership is involuntarily formed by each partner. True or False?
False. Voluntarily
The partnership agreement must be filed with the Securities and Exchange Commission when the partnership exceeds P3,000. True or False?
True
General partners are personally liable for the partnership’s debts after the exhaustion of its assets. True or False?
True
When non-cash assets are invested, the invested capital of the partners is equal to the fair value of the assets invested less any liabilities to be assumed by the partnership. True or False?
True
When a partner contributes assets together with liabilities assumed by the partnership, the assets are to be valued at the book value or fair market value, whichever is applicable. True or False?
False. Assets are to be valued at the agreed value
In the absence of agreement, the capital contribution shall be made equally. True or False?
False. No such rule
Payment of salaries, interests, and bonuses of profit to partners should be treated as part of profit distribution, not as an expense. True or False?
True
The purpose of the interest on capital balances component of allocating partnership profits and losses is to reward labor and expertise contributions. True or False?
False. Encourage investments
Once the industrial partner becomes a capitalist too, he shall not absorb a share from the net losses of the partnership. True or False?
False. If besides his services he has contributed capital, he shall also receive a share in the profits in proportion to his capital.
Which of the following statement is FALSE?
A. A general partner is one whose liability to third persons extends to his private property.
B. An Industrial partner is one who contributes industry, labor, skill or service.
C. A nominal partner is a partner in name only.
D. A dormant partner is one who does not participate in the management of partnership affairs.
D. A dormant partner is one who does not participate in the management of partnership affairs.
A partnership in which the term or period for which the partnership is to exist is agreed upon
A. Partnership with a Fixed Term
B. Partnership at will
C. Universal partnership of all present property
D. Limited partnership
A. Partnership with a Fixed Term
The advantages of the partnership do not include
A. Ease of formation
B. Unlimited liability
C. Freedom from government regulations
D. Ease of decision making
C. Freedom from government regulations
A partner who is appointed to administer the realization and distribution of partnership assets
after dissolution
A. Industrial partner
B. Managing partner
C. Liquidating partner
D. Ostensible partner
C. Liquidating partner
What is the basis of capital sharing if the partners do not have an agreement as to the amount of their individual capital contribution?
A. Equal share
B. Based on profit or loss agreement
C. Actual contributions of the partner
D. Service
C. Actual contributions of the partner
When property other than cash is invested in a partnership, at what amount should the noncash property be credited to the contributing partner’s capital account?
A. Fair value at the date of contribution.
B. Contributing partner’s original cost.
C. Assessed valuation for property tax purposes.
D. Estimated value at the date of contribution
A. Fair value at the date of contribution.
What is the entry for the acceptance of an industrial partner’s skills as his contribution?
A. General journal through a memorandum entry
B. General ledger through a debit-credit entry
C. General journal through a debit-credit entry
D. General ledger through a memorandum entry
A. General journal through a memorandum entry
Under the bonus method, the capital of the partner receiving the bonus is
A. Credited at amount greater than the fair value of the asset contributed
B. Credited at an amount lesser than the fair value of the asset contributed
C. Credited at an amount equal to the fair value of the asset contributed
D. Credited at an amount greater or less than the fair value of the asset contributed
A. Credited at amount greater than the fair value of the asset contributed
A partner who is given priority to get first a just and equitable share for his services rendered to the partnership
A. Industrial partner
B. Capitalist partner
C. Managing partner
D. General partner
A. Industrial partner
Which of the following is not considered as legitimate expense of a partnership?
A. Interest paid to partners based on the average capital
B. Depreciation on assets contributed to the partnership
C. Salaries for management hired to run the business
D. Supplies used in the partners’ offices
A. Interest paid to partners based on the average capital
