Acct422 Ch.9 Conceptual

Front 1

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.

Back 1

The goodwill method.

Front 2

When the hybrid method is used to record the withdrawal of a partner, the partnership
A. revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner.
B. revalues liabilities but not assets, and no goodwill is recorded.
C. can recognize goodwill but does not revalue assets and liabilities.
D. revalues assets but not liabilities, and records goodwill to the continuing partner but not to the withdrawing partner.
E. revalues assets and liabilities but does not record goodwill.

Back 2

E. revalues assets and liabilities but does not record goodwill.

Front 3

. The disadvantages of the partnership form of business organization, compared to corporations, include
A. the legal requirements for formation.
B. unlimited liability for the partners.
C. the requirement for the partnership to pay income taxes.
D. the extent of governmental regulation.
E. the complexity of operations.

Back 3

B. unlimited liability for the partners.

Front 4

The advantages of the partnership form of business organization, compared to corporations, include
A. single taxation.
B. ease of raising capital.
C. mutual agency.
D. limited liability.
E. difficulty of formation.

Back 4

A. single taxation.

Front 5

The dissolution of a partnership occurs
A. only when the partnership sells its assets and permanently closes its books.
B. only when a partner leaves the partnership.
C. at the end of each year, when income is allocated to the partners.
D. only when a new partner is admitted to the partnership.
E. when there is any change in the individuals who make up the partnership.

Back 5

E. when there is any change in the individuals who make up the partnership.

Front 6

. 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?
A. They must present equal claims to the three partners as individuals.
B. They must try obtain a payment from the partner with the largest capital account balance.
C. They cannot seek remuneration from the partners as individuals.
D. They may seek remuneration from any partner they choose.
E. They must present their claims to the three partners in the order of the partners' capital account balances.

Back 6

D. They may seek remuneration from any partner they choose.

Front 7

38. 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.

Back 7

D. A partnership requires written Articles of Partnership.

Front 8

39. Partnerships have alternative legal forms including all of the following except:
A. General Partnership.
B. Limited Partnership.
C. Subchapter S Partnership.
D. Limited Liability Partnership.
E. Limited Liability Company.

Back 8

C. Subchapter S Partnership.

Front 9

40. 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.

Back 9

E. I, II, and III.

Front 10

41. 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.

Back 10

C. The right to participate in management of the business can be conveyed without the consent of other existing partners.

Front 11

42. 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.

Back 11

C. to record interest earned on a partner's capital balance.

Front 12

52. 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.

Back 12

E. 1, 2, 3, and 4