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Anna and Naomi are partners. Anna has a capital balance of $50,000 and Naomi has a capital balance of $40,000. Gary invested $30,000 to acquire an ownership interest of $20,000. Which of the following is true of the partnership journal entry to record the receipt of Gary's contribution? (Assume the existing partners equally divide the bonus)


A) Cash is debited for $30,000 and Gary, Capital is credited for $20,000.
B) Cash is debited for $20,000 and Gary, Capital is credited for $20,000.
C) Cash is credited for $30,000 and Gary, Capital is debited for $20,000.
D) Cash is credited for $20,000 and Gary, Capital is debited for $20,000.

E) A) and D)
F) A) and C)

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A partnership records the partners' contributions at the ________.


A) current market value
B) historical value
C) net realizable value
D) average value

E) None of the above
F) All of the above

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An asset received from a partner as a contribution is recorded at its historical cost.

A) True
B) False

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Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows: Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows: They agreed to admit Ramelow into the business for a one-fifth interest in the new partnership. He had to bring in a cash contribution of $30,000 for the same. Assuming that Floyd and Merriam shared profits and losses in the ratio 3:1 before the admission of Ramelow. Which of the following is the correct journal entry to record the above admission? A) B) C) D) They agreed to admit Ramelow into the business for a one-fifth interest in the new partnership. He had to bring in a cash contribution of $30,000 for the same. Assuming that Floyd and Merriam shared profits and losses in the ratio 3:1 before the admission of Ramelow. Which of the following is the correct journal entry to record the above admission?


A) Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows: They agreed to admit Ramelow into the business for a one-fifth interest in the new partnership. He had to bring in a cash contribution of $30,000 for the same. Assuming that Floyd and Merriam shared profits and losses in the ratio 3:1 before the admission of Ramelow. Which of the following is the correct journal entry to record the above admission? A) B) C) D)
B) Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows: They agreed to admit Ramelow into the business for a one-fifth interest in the new partnership. He had to bring in a cash contribution of $30,000 for the same. Assuming that Floyd and Merriam shared profits and losses in the ratio 3:1 before the admission of Ramelow. Which of the following is the correct journal entry to record the above admission? A) B) C) D)
C) Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows: They agreed to admit Ramelow into the business for a one-fifth interest in the new partnership. He had to bring in a cash contribution of $30,000 for the same. Assuming that Floyd and Merriam shared profits and losses in the ratio 3:1 before the admission of Ramelow. Which of the following is the correct journal entry to record the above admission? A) B) C) D)
D) Floyd and Merriam start a partnership business on June 12, 2019. Their capital account balances as of December 31, 2020 stood as follows: They agreed to admit Ramelow into the business for a one-fifth interest in the new partnership. He had to bring in a cash contribution of $30,000 for the same. Assuming that Floyd and Merriam shared profits and losses in the ratio 3:1 before the admission of Ramelow. Which of the following is the correct journal entry to record the above admission? A) B) C) D)

E) C) and D)
F) B) and C)

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Liquidation in a partnership refers to:


A) increasing the investment in highly liquid assets.
B) shutting down the business by selling its assets and paying its liabilities.
C) the admission or withdrawal of a partner that dissolves the partnership.
D) purchase of another partnership firm which is operating in the same business.

E) C) and D)
F) B) and D)

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Rodriguez and Ying start a partnership business on July 1, 2014. Rodriguez brings in cash worth $4,000, furniture with a current market value of $50,000, and computer equipment. The computer equipment cost $45,000 in 2011 and has an accumulated depreciation of $25,000. The current market value of the computer equipment is $18,000. At what value should the computer equipment be recorded in the books of the partnership firm?


A) $45,000
B) $18,000
C) $20,000
D) $25,000

E) A) and B)
F) A) and C)

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Which of the following is true of a general partnership?


A) Each partner has all the privileges and risks of ownership.
B) The income of a general partnership is double-taxed.
C) Each partner's liability is limited to the capital contributed by him.
D) When a general partner contributes a particular asset to the firm, he is considered the sole owner of the asset.

E) A) and C)
F) A) and D)

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Alex, Brad, and Carl are partners. The profit and rule sharing rule between them is 4:3:3 in the alphabetical order. The partnership incurs a net loss of $100,000. Before preparing the closing journal entry the:


A) Income Summary account will have a debit balance of $100,000.
B) Alex, Capital account will have a debit balance of $40,000.
C) Alex, Capital account will have a credit balance of $40,000.
D) Carl, Capital account will have a debit balance of $30,000.

E) A) and B)
F) A) and C)

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Which of the following is an additional feature of a limited liability partnership compared to a limited partnership?


A) It has a general partner who does not participate in the day-to-day operations of the partnership.
B) It limits the personal liability of limited partners to their contribution in the business.
C) It restricts the general partner from taking high-risk projects.
D) It protects each partner from any malpractice or negligence of another partner's actions.

E) C) and D)
F) All of the above

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Which of the following is a characteristic of a partnership?


A) pays corporate taxes
B) listed in a stock exchange
C) organized as a corporation
D) a written agreement

E) A) and B)
F) C) and D)

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When an existing partner sells his interest to another party in a personal transaction:


A) it is considered a transaction between the partnership and the new party.
B) the old partnership will continue functioning, since the partner is replaced by another party without diluting the old partnership.
C) the journal entry simply debits the withdrawing partner's capital account and credits the new partner's capital.
D) the equity and assets in the balance sheet increase by the same amount.

E) A) and B)
F) C) and D)

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Capital deficiency refers to a partnership's claim against a partner.

A) True
B) False

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In a partnership firm, if one partner cannot pay his or her part of the debt, the other partner or partners must pay the total.

A) True
B) False

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The balance sheet of Ryan and Peter firm as on December 31, 2014, is given below. The balance sheet of Ryan and Peter firm as on December 31, 2014, is given below. Ryan and Peter share profits in the ratio 3:2. They have decided to liquidate the partnership with immediate effect. After completing all the liquidation procedures, the business is left with $34,000 cash. As a result, Ryan will receive: A) $17,000. B) $20,400. C) $13,600. D) $30,000. Ryan and Peter share profits in the ratio 3:2. They have decided to liquidate the partnership with immediate effect. After completing all the liquidation procedures, the business is left with $34,000 cash. As a result, Ryan will receive:


A) $17,000.
B) $20,400.
C) $13,600.
D) $30,000.

E) B) and D)
F) A) and B)

Correct Answer

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Gary, Peter, and Chris own a firm as partners. Gary has a capital balance of $25,000; Peter a capital balance of $40,000; and Chris has a capital balance of $31,000. As per the partnership agreement, Gary gets a profit share of 2/9; Peter has 4/9; and Chris has 3/9. Which of the following is true, if Gary withdraws from the partnership by receiving $25,000?


A) Peter, Capital and Chris, Capital will be credited for $12,500 each.
B) Gary, Capital will be debited for $25,000.
C) Cash is debited for $25,000.
D) Peter, Capital will be credited for $25,000.

E) None of the above
F) A) and D)

Correct Answer

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Felix and Ian allocate 2/5 of the profits and losses to Felix and 3/5 to Ian. The net income of the firm is $30,000. The journal entry to close the Income Summary will include:


A) credit to Ian, Capital for $18,000.
B) debit to Felix, Capital for $18,000.
C) debit to Felix, Capital for $12,000.
D) credit to Income Summary for $30,000.

E) A) and B)
F) A) and C)

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Adam, Bill, and Charlie are partners. The profit and rule sharing rule between them is 2:5:3, with Bill getting the most and Adam getting the least. The partnership incurs a net loss of $72,000. While closing the Income Summary:


A) Income Summary will be debited for $72,000.
B) Adam, Capital will be debited for $14,400.
C) Adam, Capital will be credited for $36,000.
D) Charlie, Capital will be credited for $36,000.

E) B) and C)
F) A) and C)

Correct Answer

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Which of the following is true of a liquidation of a partnership?


A) It allocates the gain or loss on sale of assets to the partners' capital accounts based on the profit-and-loss-sharing ratio.
B) The remaining cash after paying all liabilities are paid to the partners based on their profit-and-loss-sharing agreement.
C) Before a business is liquidated, its books should not be adjusted or closed.
D) It involves the selling of short-term liquid assets and does not involve the sale of fixed assets.

E) A) and C)
F) None of the above

Correct Answer

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Sasha and Michelle form a partnership. Sasha contributes $16,000 cash and merchandise inventory with a current market value of $4,000. While journalizing this transaction:


A) Merchandise Inventory will be credited for $4,000.
B) Merchandise Inventory will be debited for $4,000.
C) Merchandise Inventory will be credited for $2,400.
D) Merchandise Inventory will be debited for $2,400.

E) A) and B)
F) C) and D)

Correct Answer

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In partnership, a person can become a partner by purchasing an existing partner's interest.

A) True
B) False

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