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29 Cards in this Set
- Front
- Back
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A partnership is a(n):
I. accounting entity. II. taxable entity. A. I only B. II only C. Neither I nor II D. Both I and II |
A. I only
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Which of the following accounts could be found in the general ledger of a partnership?
Income Tax Expense Int Exp on Partner Loans A) NO NO B) YES NO C) YES YES D) NO YES A. Option A B. Option B C. Option C D. Option D |
D. Option D
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Which of the following accounts could be found in the PQ partnership's general ledger?
I. Due from P II. P, Drawing III. Loan Payable to Q A. I, II B. I, III C. II, III D. I, II, and III |
D. I, II, and III
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A joint venture may be organized as a:
I. Partnership. II. Corporation. III. Undivided interest. A. I only B. II only C. I or III only D. I, II, or III |
D. I, II, or III
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Transferable interest of a partner includes all of the following except:
A. the partner's share of the profits and losses of the partnership. B. the right to receive distributions. C. the right to receive any liquidating distribution. D. the authority to transact any of the partnership's business operations. |
D. the authority to transact any of the partnership's business operations.
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A limited liability company (LLC):
I. is governed by the laws of the state in which it is formed. II. provides liability protection to its investors. II. does not offer pass-through taxation benefits of partnerships. A. Both I and II. B. III. C. Both I and II. D. I, II and III. |
C. Both I and II.
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Which of the following statements best describes limited partnerships?
A. In an LLP, there must be at least one general partner that is personally liable for the obligations of the partnership and has management responsibilities. B. There are no general or limited partners in an LP; each partner has the rights and duties of a general partner, but limited legal liability. C. The identifier LP or LLP need not be included in the name or identification of a limited partnership. D. If the presumption of control by the general partner can be overcome, the partner would account for its investment using the equity method of accounting. |
D. If the presumption of control by the general partner can be overcome, the partner would account for its investment using the equity method of accounting.
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Which of the following statements best describes accounting for a partnership?
A. A partnership may be profit or an nonprofit entity B. A partnership may use federal income tax rules to account for transactions in their journals and ledger accounts. C. A partnership's equity section contains both capital and retained earnings accounts. D. A partnership may only distribute money through a dividend payment |
B. A partnership may use federal income tax rules to account for transactions in their journals and ledger accounts.
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Which of the following accounts is not maintained for each partner in its accounting records?
A. Capital account B. Drawing account C. Earnings account D. Loan account |
C. Earnings account
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A partner's tax basis in a partnership is comprised of which of the following items?
I. The partner's tax basis of assets contributed to the partnership/ II. The amount of the partner's liabilities assumed by the other partners. III. The partner's share of other partners' liabilities assumed by the partnership. A. I plus II minus III B. I plus II plus III C. I minus II plus III D. I minus II minus III |
C. I minus II plus III
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Which of the following observations is true of an S corporation?
A. It elects to be taxed in the same manner as a corporation. B. It does not have the burden of double taxation of corporate income. C. Its shareholders have personal liability for the corporation's obligations. D. Its primary income source should be passive investments. |
B. It does not have the burden of double taxation of corporate income.
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. When a new partner is admitted into a partnership and the new partner receives a capital credit less than
the tangible assets contributed, which of the following explains the difference? I. The new partner's goodwill has been recognized. II. The old partners received a bonus from the new partner. A. I only B. II only C. Either I or II D. Neither I nor II |
B. II only
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When a new partner is admitted into a partnership and the new partner receives a capital credit greater
than the tangible assets contributed, which of the following explains the difference? I. The old partners' goodwill is being recognized. II. The new partner's goodwill is being recognized. A. I only B. II only C. Either I or II D. Both I and II |
B. II only
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When a new partner is admitted into a partnership and the capital of the old partners decreases, which of
the following explains the reason for the decrease? I. Undervalued liabilities were written up to their fair values. II. Undervalued assets were written up to their fair values. A. I only B. II only C. Both I and II D. Neither I nor II |
A. I only
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When a partner retires from a partnership and the retiring partner is paid more than the capital balance in
her account, which of the following explains the difference? I. The retiring partner is receiving a bonus from the other partners. II. The retiring partner's goodwill is being recognized. A. I only B. II only C. Either I or II D. Neither I nor II |
C. Either I or II
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When the old partners receive a bonus upon admission of a new partner into a partnership, the bonus is
allocated to: I. all the partners in their profit and loss sharing ratio. II. the existing partners in their profit and loss sharing ratio. A. I only B. II only C. Either I or II D. Neither I nor II |
B. II only
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When a new partner is admitted into a partnership and the old partners' goodwill is recognized, the
goodwill is allocated to: I. all the partners in their profit-and-loss-sharing ratio. II. the old partners in their profit and loss sharing ratio. A. I only B. II only C. Either I or II D. Neither I nor II |
B. II only
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On a partner's personal statement of financial condition, how should liabilities be valued?
I. Present value II. Lower of present value or cash settlement amount A. I B. II C. Both I and II D. Neither I nor II |
B. II
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On a partner's personal statement of financial condition, assets and liabilities are presented:
I. As current and noncurrent. II. In order of liquidity and maturity. A. I B. II C. Both I and II D. Neither I nor II |
B. II
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The personal financial statements of a partner include which of the following?
I. Statement of financial condition. II. Statement of changes in net worth. III. Statement of cash flows. A. I and II B. I and III C. II and III D. I, II, and III |
A. I and II
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On a partner's personal statement of financial condition, how are assets valued?
A. Historical cost B. Book value C. Discounted value D. Estimated current value |
D. Estimated current value
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On a partner's personal statement of changes in net worth, what type(s) of income is (are) recognized?
I. Realized II. Unrealized A. I only B. II only C. Both I and II D. Neither I nor II |
C. Both I and II
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When is a partnership considered to be insolvent?
I. When the total of all partners' capital accounts results in a debit balance. II. When at least one of the partners is personally insolvent. A. I only B. II only C. Both I and II D. Neither I nor II |
A. I only
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According to UPA 1997, during partnership liquidation, loans the partners have made to the partnership
have the same status as loans from third-party creditors. As a practical matter, most loans from partners: A. are subordinated to third-party creditors. B. have the same status as loans from third-party creditors. C. are paid prior to third-party creditors. D. None of the above. |
A. are subordinated to third-party creditors.
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In order to avoid inequalities in the liquidation process the legal doctrine of set-off effectively treats loans
from partners to the partnership as: A. outside debt that can offset a deficit capital account balance. B. inside debt that can offset a deficit capital account balance. C. additional capital investments that can offset a deficit capital account balance. D. additional capital investments that can offset a partnership loss. |
additional capital investments that can offset a deficit capital account balance
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Which of the following statements is (are) true?
I. In the calculation of the loss absorption power for a partner, a partner's loan balance (an amount that is owed by the partnership) should be added to the partner's capital balance. II. In liquidation, a partner's loan balance (an amount that is owed by the partnership) should be paid to the partner as a creditor of the partnership after the outside creditors. A. I only B. II only C. Both I and II D. Neither I nor II |
C. Both I and II
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When a partnership is liquidated on a piecemeal basis and cash has been distributed properly to all
partners as noncash assets have been turned into cash, all future cash distributions should be made: I. In the profit and loss ratio. II. According to the balances in the partners' capital accounts. A. I only B. II only C. Both I and II D. Neither I nor II |
A. I only
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The computation of a safe installment payment for the XYZ partnership resulted in only partner Z
receiving cash. Which of the following statements is correct? I. Partner Z lent the partnership cash, and the partnership had to pay back the loan to Z before distributing cash to X and Y. II. After assuming all noncash assets were potentially worthless and that assumed capital deficits created in X's and Y's capital balances were losses to be allocated to Z; Z's capital balance was the only capital balance left with a credit. A. I only B. II only C. Either I or II D. Neither I nor II |
B. II only
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The JKL partnership liquidated its business in 20X9. Due to an expected long liquidation period, a cash
distribution plan was developed. The initial sale and realization of cash from noncash assets resulted in partner K properly getting $24,000. No other partners received cash along with K. Based upon this information, which of the following statements is correct? I. K's loss absorption power (LAP) was higher than J's LAP and L's LAP. II. K's capital balance was substantially larger than the balances of J and L. A. I only B. II only C. Either I or II D. Neither I nor II |
A. I only
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