quiz 2- admitting new partners and withdrawals 2/4/25

Question 1

a person may be admitted to a partnership by either 2 ways. List the 2 ways.

Answer 1

1. Purchasing an interest from one or more of the existing partners
2. Contributing assets to the partnership

Question 2

When a new partner is admitted by purchasing an interest from one or more of the existing partners, the total assets and the total owners’ equity of the partnership are __________

Answer 2

not affected.

Question 3

When a new partner is admitted by contributing assets to the partnership, the total assets and the total owners’ equity of the partnership are __________.

Answer 3

increased

Question 4

When a new partner is admitted by purchasing an interest from one or more of the existing partners, the transaction is between the new and existing partners acting as __________.

Answer 4

individuals

Question 5

Even though Canter has a one-fifth (20%) interest in the partnership, he may not be entitled to a one-fifth share of the partnership net income.

The division of the net income or net loss is made according to the ________________

Answer 5

new or amended partnership agreement.

Question 6

BEFORE a new partner is admitted, the balances of a partner- ship’s asset accounts should be stated at _________

Answer 6

current values.

Question 7

Failure to adjust the partnership accounts for current values before admission of a new partner may result in ___________

Answer 7

the new partner sharing in asset gains or losses that arose in prior periods.

Question 8

the withdrawing partner’s interest is normally sold to the: (2)

Answer 8

1 Existing partners or
2. Partnership

Question 9

If the existing partners purchase the withdrawing partner’s interest, the purchase and sale of the partnership interest is between the partners as individuals. The only entry on the partnership’s records is to …

Answer 9

debit the capital account of the partner withdrawing

credit the capital account of the partner or partners buying the additional interest.

Question 10

If the partnership purchases the withdrawing partner’s interest, the assets and the owners’ equity of the partnership are ____________

The entry to record the purchase …..

Answer 10

reduced by the purchase price

debits the capital account of the withdrawing partner

credits Cash for the amount of the purchase.

(If not enough partnership cash is available to pay the withdrawing partner, a liability may be created (credited) for the amount owed the withdrawing partner.)

Question 11

After the income is divided and any assets revalued, an entry is recorded to close the deceased partner’s capital account. The entry ….

Answer 11

debits the deceased partner’s capital account for its balance

credits a liability account, which is payable to the deceased’s estate.