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When The Obligations

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1. When the obligations of a partnership can?t be met, each partner is liable for the obligation. This characteristic is called;A. limited life.;B. unlimited liability.;C. limited liability.;D. mutual agreement.;2. Which of the following is an incorrect step in the process of partnership liquidation?;A. Paying any liabilities;B. Closing all accounts payable;C. Allocating gains and losses to partners;D. Selling the assets;3. Laura?s investment in a new partnership includes $1,000 in cash and $5,000 of equipment. The new partnership is assuming $500 of Laura?s accounts payable. The partnership entry should be which of the following?;A. Debit Laura?s Capital $5,500, debit Accounts Payable $500, credit Cash $1,000, credit Equipment $5,000;B. Debit Cash $1,000, debit Equipment $5,000, credit Laura?s Capital $6,000;C. Debit Cash $1,000, debit Equipment $5,000, credit Accounts Payable $500, credit Laura?s Capital $5,500;D. Debit Laura?s Investment $5,500, credit Capital $5,500;4. The sale of assets to liquidate a partnership is called;A. a sheriff?s sale.;B. net profit.;C. net liquidation.;D. realization.;5. Mary and Jeff entered into a partnership agreement. However, the agreement didn?t state how income and losses would be divided. The law states that income will be divided;A. equally.;B. according to investments.;C. according to abilities.;D. None of the above;6. The net income earned by the Cooper, Cross, and Crane partnership is $18,000. Their respective average capital balances are $20,000, $20,000, and $40,000. What is the closing entry to allocate the net income if no agreement was made for division of income?;A. Debit Income Summary $18,000, credit Cooper?s Capital $6,000, credit Cross?s Capital $6,000, credit Crane?s Capital $6,000;B. Debit Income Summary $18,000, credit Cooper?s Capital $4,500, credit Cross?s Capital $4,500, credit Crane?s Capital $9,000;C. Debit Cooper?s Capital $6,000, debit Cross?s Capital $6,000, debit Crane?s Capital $6,000, credit Income Summary $18,000;D. Net income cannot be allocated.;7. What is the closing entry to allocate a net income of $48,000 to Sara, Ellen, and Mary? Respective capital balances are $30,000, $40,000, and $30,000. No agreement was made for division of income.;A. Debit Income Summary $48,000, credit Sara?s Capital $16,000, credit Ellen?s Capital $16,000, credit Mary?s Capital $16,000;B. Debit Income Summary $48,000, credit Sara?s Capital $14,400, credit Ellen?s Capital $19,200, credit Mary?s Capital $14,400;C. Debit Salary Expense $48,000, credit Salaries Payable $48,000;D. Net income cannot be allocated.;8. Nathan Long is entering into a partnership with Terri. Nathan is investing $2,000 in cash and equipment currently on Nathan?s books at $6,000, with an accumulated depreciation of $1,000. The equipment has a fair market value of $4,000. The entry to record Nathan?s investment should be which of the following?;A. Debit Cash $2,000, debit Equipment $6,000, credit Accumulated Depreciation $1,000, credit Nathan?s Capital $7,000;B. Debit Cash $2,000, debit Equipment $6,000, credit Accumulated Depreciation $2,000, credit Nathan?s Capital $6,000;C. Debit Nathan?s Capital $6,000, debit Accumulated Depreciation $2,000, credit Cash $2,000, credit Equipment $6,000;D. Debit Cash $2,000, debit Equipment $4,000, credit Nathan?s Capital $6,000;9. Applying the interest allowance method, compute Taylor?s and Timmy?s share of net income if Taylor invested $200,000 and Timmy invested $800,000 at a 6% interest rate, with the remainder to be divided equally. Net income was $75,000.;A. Taylor $15,000, Timmy $60,000;B. Taylor $37,500, Timmy $37,500;C. Taylor $19,500, Timmy $55,500;D. None of the above;10. The actions of one partner are binding on all of the other partners. This characteristic is called;A. mutual agency.;B. exclusive agency.;C. unlimited life.;D. limited liability.;11. When a partnership is terminated, the assets are turned into cash, and obligations are paid. This process is called;A. dissolution.;B. termination.;C. realization.;D. None of the above;12. A partnership can be terminated by which of the following?;A. Bankruptcy;B. Death of a partner;C. Agreement by partners;D. All of the above;13. The partnership dissolves when a partner leaves. This characteristic is called;A. mutual agency.;B. limited life.;C. limited liability.;D. unlimited life.;14. The accounting procedures for sole proprietorships are the same as for partnerships except;A. that the asset section includes more than one cash account.;B. for the liability section.;C. for the revenue section.;D. that the capital section is now divided per the number of partners.;15. Which method of allocating profits and losses is based on a percentage of initial investment by the partners?;A. Salary allowance;B. Salary expense;C. Profit and loss ratio;D. Interest allowance;16. Since all partners are bound together in the agreement and each acts on behalf of the partnership, _______ has been established.;A. limited life;B. limited risk;C. mutual agency;D. unlimited liability;17. In comparison with the proprietorship form of business organization, forming a partnership offers which advantage?;A. Limited life;B. Legal liability of each partner for all of the debts;C. Combination of ability and experience of the partners;D. Simple transfer of interest in the partnership to outsiders;18. A general partner is;A. personally liable for all of the debts of the partnership.;B. liable for only the amount of his investment.;C. liable for the amount of taxes paid each period.;D. None of the above;19. When a partnership is liquidated, the journal entry to pay the claims of creditors would include a debit to;A. Cash and a credit to each individual creditor.;B. each individual creditor and a credit to Cash.;C. each individual partner?s capital account.;D. each individual partner?s capital account and a credit to Cash.;20. Allison and Josh are partners in a business. Allison?s capital is $60,000, and Josh?s capital is $100,000. Profits for the year are $80,000. They agree to share profits and losses as follows;Allison;Josh;Salaries;$20,000;$40,000;Interest on capital;10%;10%;Remaining profits and losses;3/5;2/5;Allison?s share of the profits before paying salaries and interest on capital is;A. $48,000.;B. $22,000.;C. $28,000.;D. $28,400.;Calculation = xxxxxxxxxxxxxxxxxxxxxxxxxxx

 

Paper#79820 | Written in 18-Jul-2015

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