Chapter 19—Accounting for Partnerships

TRUE/FALSE

1. If the partnership cannot pay a bill, creditors will expect payment from the personal assets of the
partners.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

2. The partnership form of organization is more popular among professional service enterprises than
among merchandise enterprises.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

3. The Uniform Partnership Act states that a "corporation is an association of two or more persons who
carry on, as co-owners, a business for profit."

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

4. It is desirable that a partnership agreement be evidenced by a written contract.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

5. A written agreement containing the various provisions under which a partnership is to operate is
known as a partnership agreement.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

6. If one partner contributes an asset to the business, the asset is jointly owned by all partners.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
 7. Only one partner can be individually liable for all of the debts of the partnership.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

8. The interest of a partner in the partnership can be transferred freely without the consent of the other
partners.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

9. Termination of the partnership agreement, bankruptcy of the firm, or death of one of the partners
dissolves the partnership.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

10. Partner compensation is reported on the income statement but is not used to compute net income.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-2 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

11. In opening the books for a partnership, it is customary to prepare a single journal entry for the
investment of all partners.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

12. Partners may invest cash as well as other property in the partnership, but only cash increases their
capital account balances.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

13. When two single proprietors decide to combine their businesses, generally accepted accounting
principles usually require that noncash assets be recorded at their book value as of the date of
formation of the partnership.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
14. Assuming there are no known bad debts when two single proprietors decide to combine their
businesses, it is usual practice to enter the full amount of the Accounts Receivable as a debit and the
amount of the Allowance for Bad Debts as a credit in placing each partner's investment in the books of
the partnership.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

15. The basis on which profits and losses are to be shared is a matter of agreement between the partners
and not necessarily the same as their investment ratio.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-2 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

16. The compensation of partners (other than their share of profits) may be in the form of salaries,
royalties, commissions, or bonuses.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-2 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

17. Partnerships are subject to federal income taxes.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

18. Since partners' salaries are not treated as an expense of the partnership, it is not necessary to keep a
salary expense account for each partner.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-2 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

19. If the partnership agreement does not state how profits and losses are to be shared, they are allocated
according to the partners' capital interests.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-2 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

20. When two sole proprietors decide to combine their businesses, assets should be recorded at their fair
market value as of the date of formation of the partnership.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
 TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
21. Partners may agree that the most equitable method of allocating profits and losses is to base salaries on
the services rendered by each partner.
ANS: T PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-2 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
22. The allocation of net income and its impact on the partners' equity balances should be disclosed in the
financial statements.
ANS: T PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-3 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

23. Only the income statement is affected by the allocation of net income in a partnership.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-3 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

24. The statement of partners' equity reflects the equity of each partner and summarizes the allocation of
net income for the year.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-4 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

25. One of the primary characteristics of the partnership form of organization is its limited liability.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

26. Partnerships file federal income tax returns for informational purposes and notify partners of the
amount of partnership income that must be reported on their individual federal income tax returns.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

27. For a new partner to be admitted to a partnership, there must be a consensus of the existing partners.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-4 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
28. The admission of a new partner calls for the amendment of the old partnership agreement, but not the
dissolution of the old partnership.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-4 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

29. The book value of a partner's interest is shown by the credit balance of the partner's capital account,
after all profits or losses have been allocated in accordance with the partnership agreement, and the
books have been closed.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-4 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

30. If a retiring partner agrees to withdraw less than the book value of his/her interest, the effect of the
transaction will decrease the capital accounts of the remaining partners.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-4 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

31. If a partner is permitted to withdraw more than the book value of his/her interest, the effect of the
transaction will increase the capital accounts of the remaining partners.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-4 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

32. When a partner retires from the business, the partner's interest may be purchased by one of more of the
remaining partners or by an outside party.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-4 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

33. If the retiring partner's interest is sold to one of the remaining partners, the retiring partner's equity is
merely transferred to the other partner.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-4 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
34. Partners are taxed on the amount withdrawn, not on their share of net income.
ANS: F PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
 35. Liquidation of a partnership usually means that assets are sold, liabilities are paid, and remaining cash
is distributed to the partners.
ANS: T PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-5 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

36. Under the laws of some states, all partners may limit their liability for the debts of the partnership.

ANS: F PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

37. In the liquidation of the partnership, adjusting and closing entries are made when normal operations
are discontinued.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-5 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

38. In the liquidation of the partnership, the first cash realized is allocated to the creditors.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-5 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

39. A gain on the sale of assets in the liquidation process is recognized and allocated to the partners'
capital accounts.

ANS: T PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-5 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

MULTIPLE CHOICE

1. When two or more individuals engage in an enterprise as co-owners, the organization is known as a
a. single proprietorship.
b. corporation.
c. partnership.
d. closed corporation.
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
2. After closing the temporary owners' equity accounts into Income Summary, and after allocating
the net income and closing the partners' drawing accounts, assume the partners' capital accounts
had credit balances as follows: Ryan, $40,000; O'Malley, $60,000; Sullivan, $45,000. Partners
share profits and losses as follows: Ryan, 20%; O'Malley, 30%; and Sullivan, 50%. If Sullivan
retired and withdrew $40,000 in settlement of his/her equity and settlements are allocated
according to capital interests, the amount entered in Ryan's capital account would be a
a. $2,000 credit.
b. $2,000 debit.
c. $3,000 credit.
d. $3,000 debit.
ANS: A PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 19-4 NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 1 min.

3. "Limited life" means

a. a partnership may be dissolved as the result of any change in the ownership.
b. a partnership may be dissolved if the location of the business is changed.
c. a partnership is limited to the amount of revenue it can earn.
d. a partnership is limited in the amount of debt it is liable for in the course of the business.
ANS: A PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

4. A disadvantage that is NOT peculiar to the partnership form of organization includes

a. each partner is individually liable for all of the debts of the partnership.
b. the interest of a partner in the partnership cannot be transferred without the consent of the
other partners.
c. termination of the partnership agreement, bankruptcy of the firm, or death of one of the
partners dissolves the partnership.
d. the partners do not make the decisions that run the business.
ANS: D PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

5. Bernstein invests office equipment with a fair market value of $62,000, delivery equipment with a fair
market value of $75,000, and cash of $30,000. He owes $27,000, represented by a note on the delivery
equipment. The amount of Bernsteins' capital would be
a. $30,000.
b. $167,000.
c. $140,000.
d. $137,000.
ANS: C PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 19-1 NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 1 min.
6. After closing the temporary owners' equity accounts into Income Summary, and after allocating
the net income and closing the partners' drawing accounts, assume the partners' capital accounts
had credit balances as follows: Sanchez, $20,000; Dorvinsky, $30,000; Davenport, $45,000.
Partners share profits and losses as follows: Sanchez, 20%; Dorvinsky, 30%; and Davenport,
50%. If Davenport retired and withdrew $40,000 in settlement of his/her equity and settlements
are allocated according to capital interests, the amount entered in Dorvinsky's capital account
would be a
a. $2,000 credit.
b. $2,000 debit.
c. $3,000 credit.
d. $3,000 debit.
ANS: C PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 19-4 NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 1 min.

7. Delisa invests office equipment with a fair market value of $70,000, delivery equipment with a fair
market value of $89,000, and cash of $54,000. She owes $68,000, represented by a note on the
delivery equipment. If Delisa's office equipment cost $80,000 and has accumulated depreciation of
$30,000, the amount at which the asset should be entered on the books of the new partnership would
be
a. $50,000.
b. $70,000.
c. $80,000.
d. $89,000.
ANS: B PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 19-1 NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 1 min.

8. Partners are taxed on

a. the amount they withdraw from the company.
b. their share of the net profit of the company.
c. the total amount of the net profit of the company.
d. the gross revenue of the company.
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

9. "Mutual agency" means that

a. a partnership has a limited life.
b. any partner can bind the other partners to a contract.
c. each partner is personally liable for all debts.
d. partnerships are not subject to federal income taxes.
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
10. Dissolution of a partnership
a. implies that the business operations will halt.
b. occurs when there is any change in the members of the partnership.
c. implies that the business cannot continue with a new group of partners.
d. implies that the business cannot form a different ownership structure.
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-4 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

11. The basis on which profits and losses are to be shared between partners is
a. a matter of agreement between the partners.
b. the same as their investment ratio.
c. the same as their withdrawal ratio.
d. always equal between all partners.
ANS: A PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-2 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

12. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net
income and closing the partners' drawing accounts, assume the partners' capital accounts had credit
balances as follows: Rhodes, $40,000; Serrata, $60,000; Shepard, $75,000. Partners share profits and
losses as follows: Rhodes, 20%; Serrata, 30%; and Shepard, 50%. If Shepard retired and withdrew
$85,000 in settlement of his equity and settlements are allocated according to capital interests, the
amount entered in Rhodes' capital account would be a
a. $4,000 debit.
b. $4,000 credit.
c. $6,000 debit.
d. $6,000 credit.
ANS: A PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 19-4 NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 1 min.

13. In the absence of any agreement between partners, profits and losses must be shared
a. equally among all partners.
b. on the basis of the ratio of the partners' investment.
c. on the basis of the ratio of the partners' withdrawal.
d. in accordance with the Uniform Partnership Act.
ANS: A PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-2 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

14. In comparison with the single proprietorship form of organization, the partnership form offers which
of the following advantages?
a. simple transfer of interest in the partnership to outsiders
b. combination of ability and experience of the partners
c. legal liability of each partner for all the debts of the partnership
d. limited life
 ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

15. When two proprietors decide to combine their businesses, generally accepted accounting principles
usually require that noncash assets be taken over at their
a. historical cost value as of the date of formation.
b. fair market value as of the date of formation.
c. book value as of the date of formation.
d. residual value as of the date of formation.
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

16. If two or more sole proprietors combine their businesses to form a partnership, the basis for the
opening entries for the investments of such partners is based upon their respective
a. balance sheet.
b. income statement.
c. statement of owner's equity.
d. cash flow statement.
ANS: A PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

17. The allocation of net income and its impact on partners' equity balances should be disclosed on the
a. income statement.
b. balance sheet.
c. statement of partners' equity.
d. work sheet.
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-3 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

18. When a new partner is admitted,

a. the old partnership continues to exist and the name of the new partner is added.
b. the old partnership is dissolved and a new one is created.
c. the old partnership is dissolved and a new form of ownership must be chosen.
d. the old partnership continues to exist and the new partner invests in the existing business.
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-4 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
19. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net
income and closing the partners' drawing accounts, assume the partners' capital accounts had credit
balances as follows: Zott, $45,000; Payne, $60,000; Tejada, $47,000. If Tejada retired and withdrew
$47,000 in settlement of his equity, the debit to his capital account would be in the amount of
a. $60,000.
b. $58,000.
c. $47,000.
d. $94,000.
ANS: C PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 19-4 NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 1 min.

20. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net
income and closing the partners' drawing accounts, assume the partners' capital accounts had credit
balances as follows: Golden, $30,000; Chavez, $40,000; McGinnis, $55,000. If McGinnis retired and
withdrew $50,000 in settlement of his/her equity, the amount entered in McGinnis's capital account
would be a
a. $5,000 credit.
b. $50,000 credit.
c. $55,000 debit.
d. $55,000 credit.
ANS: C PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 19-4 NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 2 min.

21. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net
income and closing the partners' drawing accounts, assume the partners' capital accounts had credit
balances as follows: Boswell, $40,000; Aikido, $60,000; Cooke, $55,000. Partners share profits and
losses as follows: Boswell, 20%; Aikido, 30%; and Cooke, 50%. If Cooke retired and withdrew
$65,000 in settlement of his equity and settlements are allocated according to capital interests, the
amount entered in Aikido's capital account would be a
a. $4,000 debit.
b. $4,000 credit.
c. $6,000 debit.
d. $6,000 credit.
ANS: C PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 19-4 NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 2 min.

22. All assets held by a partnership are

a. co-owned by all partners.
b. owned by the partner(s) who purchased the assets.
c. owned by the partners based on the percentage of their investment in the business.
d. owned by the partnership.
ANS: A PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
23. After closing the temporary owners' equity accounts into Income Summary, and after allocating
the net income and closing the partners' drawing accounts, assume the partners' capital accounts
had credit balances as follows: Yang, $20,000; Wolfe, $30,000; Stamatis, $45,000. Partners share
profits and losses as follows: Yang, 20%; Wolfe, 30%; and Stamatis, 50%. If Yang purchased
Stamatis's interest in the partnership for $40,000 cash, the amount entered in Yang's capital
account is a
a. $5,000 debit.
b. $40,000 debit.
c. $40,000 credit.
d. $45,000 credit.
ANS: D PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 19-4 NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 2 min.

24. After closing the temporary owners' equity accounts into Income Summary, and after allocating the net
income and closing the partners' drawing accounts, assume the partners' capital accounts had credit
balances as follows: Peluso, $20,000; Odin, $30,000; Nazaro, $45,000. Partners share profits and
losses as follows: Peluso, 20%; Odin, 30%; and Nazaro, 50%. If Peluso purchased Nazaro's interest in
the partnership for $40,000 cash, the amount entered in Nazaro's capital account is a
a. $5,000 debit.
b. $40,000 debit.
c. $40,000 credit.
d. $45,000 debit.
ANS: D PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 19-4 NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 2 min.

25. When a partnership is liquidated, the assets are sold and the cash realized is applied first to the
a. partners' equity accounts.
b. claims of creditors.
c. partner with the largest investment in the partnership.
d. partners according to their ownership interest as indicated by their capital account.
ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-5 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

26. J. O'Keefe and J. Kisha combined for a 50/50 partnership in 1980 and continued to do business
successfully for many years. In January 2011, J. Kimley offered to contribute a sizable amount of
working capital and was accepted as a partner in the business. J. O'Keefe and J. Kisha each own 40%
of the business and J. Kimley 20% of the business partnership. Profits and losses are to be shared
according to these percentages. Due to the lagging economy and a sudden loss of profits, all three
agree to liquidate the business and enjoy a gain on the sale of their major asset, which was purchased
in 1981. This should be distributed
a. 50% to J. O'Keefe; 50% to J. Kisha.
b. 40% to J. O'Keefe; 40% to J. Kisha; 20% to J. Kimley.
c. equally among the three partners at the time of the sale.
d. 100% into the partnership dissolution revenue account.
ANS: B PTS: 1 DIF: Difficulty: Moderate
 OBJ: LO: 19-5 NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 1 min.

27. Which of the following is an incorrect step in the process of liquidation?

a. sell the assets
b. allocate gains or losses to partners
c. close all accounts payable
d. pay any liabilities
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-5 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

PROBLEM

1. Kristin Anastra and Jesse Turnbull agreed on September 1 to go into business as partners. According
to the agreement, Anastra is to contribute $80,000 cash and Turnbull is to contribute $75,000 cash.

Required:
Provide a separate journal entry for the investment of each partner.

GENERAL JOURNAL Page 1

Post
Date Description Ref. Debit Credit

ANS:

GENERAL JOURNAL Page 1

Post
Date Description Ref. Debit Credit
Sept. 1 Cash 80,000.00
Kristin Anastra, Capital 80,000.00

1 Cash 75,000.00
Jesse Turnbull, Capital 75,000.00

PTS: 1 DIF: Difficulty: Easy OBJ: LO: 19-1

NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 2 min.

2. Kate DeLeo and Joe Desmond decided to form a partnership on January 1. DeLeo invested $50,000
and Desmond invested $30,000. On December 31, the end of the fiscal year, a net income of $100,000
was earned.
 Required:
Determine the amount of net income that DeLeo and Desmond would receive under each of the
following independent assumptions:
a. There is no agreement concerning the distribution of net income.
b. Each partner is to receive 10% on their original investment, and the remainder divided
equally.
c. DeLeo and Desmond are to receive a salary allowance of $35,000 and $45,000
respectively, and the remainder divided equally.
d. Each partner is to receive 10% on their original investment, DeLeo and Desmond are to
receive a salary allowance of $30,000 and $40,000 respectively, and the remainder
divided as follows: 60% to DeLeo and 40% to Desmond.

ANS:
DeLeo Desmond Total
a. Divided equally $50,000 $50,000 $100,000

b. Interest on original investment (10%) $ 5,000 $ 3,000 $ 8,000

Remainder 46,000 46,000 92,000
$51,000 $49,000 $100,000

c. Salary allowance $35,000 $45,000 $ 80,000

Remainder 10,000 10,000 20,000
$45,000 $55,000 $100,000

d. Interest on original investment (10%) $ 5,000 $ 3,000 $ 8,000

Salary allowance 30,000 40,000 70,000
Remainder (60%  40%) 13,200 8,800 22,000
$48,200 $51,800 $100,000

PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 19-2

NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 10 min.

3. Meghan Kornett and James Higgins formed a partnership on January 1, 20--. Kornett contributed
$70,000 and Higgins contributed $40,000. During the year, Kornett contributed an additional $20,000.
The partnership agreement states that Kornett is to receive $50,000 and Higgins is to receive $40,000
as a salary allowance. Any remaining net income is to be divided as follows: Kornett 65%, Higgins
35%. For the fiscal year ending December 31, 20--, the partnership earned $140,000 in net income.
The partners withdrew only the salary portion of their compensation during the first year of operation.

Required:
a. Prepare the lower portion of the income statement showing the allocation of net income
between Kornett and Higgins for the year.
b. Prepare a statement of partners' equity, showing each individual partner's equity for the
year.
 ANS:

Kornett and Higgins

Income Statement (partial)
For the Year Ended December 31, 20--
Net income $140,000

Allocation of net income: Kornett Higgins Total

Salary allowance $50,000 $40,000 $ 90,000
Remaining income (65%  35%) 32,500 17,500 50,000
$82,500 $57,500 $140,000

Kornett and Higgins

Statement of Partners' Equity
For the Year Ended December 31, 20--
Kornett Higgins Total
Capital, January 1, 20-- $ 70,000 $40,000 $110,000
Additional investment for the year 20,000 0 20,000
$ 90,000 $40,000 $130,000
Net income for the year 82,500 57,500 140,000
$172,500 $97,500 $270,000
Withdrawals 50,000 40,000 90,000
Capital, December 31, 20-- $122,500 $57,500 $180,000

PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 19-3

NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 15 min.

4. Yon Haggerdorf and Sue Lee, who have ending capital balances of $80,000 and $60,000, respectively,
agree to admit two new partners to their business on April 1, 20--. Carlos Sanchez will buy 1/4 of
Haggerdorf's equity interest for $20,000 and 1/3 of Lee's equity interest for $25,000 directly from the
partners. Carmen Della will invest $30,000 in the business for which she is to receive a $30,000 equity
interest.

Required:
a. Prepare general journal entries showing the above transactions admitting Sanchez and
Della to the partnership.
b. Calculate the ending capital balances for all four partners after the above transactions.

GENERAL JOURNAL Page 1

Post
Date Description Ref. Debit Credit
 ANS:
a.
GENERAL JOURNAL Page 1
Post
Date Description Ref. Debit Credit
Apr. 1 Yon Haggerdorf, Capital 20,000.00
Sue Lee, Capital 20,000.00
Carlos Sanchez, Capital 40,000.00

1 Cash 30,000.00
Carmen Della, Capital 30,000.00

b.
Ending capital balances as of April 1, 20--.
Carmen Della 30,000
Yon Haggerdorf 60,000
Sue Lee 40,000
Carlos Sanchez 40,000

PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 19-4

NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 15 min.

5. Soo Yung and Saul Gazza agree to admit Millie Hillsberg into their partnership. The balance sheet of
Hillsberg's business as of September 30 is shown below:

Hillsberg's
Balance Sheet
September 30, 20--
Assets
Cash $25,000
Accounts receivable $32,000
Less allowance for bad debts 1,000 31,000
Merchandise. inventory 41,000
Total assets $97,000
Liabilities
Accounts payable $17,000

Owner's Equity
Millie Hillsberg, capital 80,000
Total liabilities and owner's equity $97,000

Yung, Gazza, and Hillsberg agree that the amounts reported on Hillsberg's balance sheet are
reasonable approximations of market value. Yung and Gazza agree to purchase all business assets,
except cash, and all business liabilities were assumed, in exchange for a $55,000 interest in their
partnership.

Required:
Prepare the journal entry showing Hillsberg's investment in the partnership of Yung and Gazza, as of
October 1, 20--.
 GENERAL JOURNAL Page 1
Post
Date Description Ref. Debit Credit

ANS:

GENERAL JOURNAL Page 1

Post
Date Description Ref. Debit Credit
Oct. 1 Accounts Receivable 32,000.00
Merchandise Inventory 41,000.00
Allowance for Bad Debts 1,000.00
Accounts Payable 17,000.00
Millie Hillsberg, 55,000.00
Capital

PTS: 1 DIF: Difficulty: Easy OBJ: LO: 19-4

NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 10 min.

6. After several years of operation, the partnership of Raimondo, Rodriguez, and Rosenfeld is being
liquidated. After making closing entries on September 30, 20--, the following accounts remain open:

Cash 18,000
Merchandise inventory 73,000
Other assets 157,000
Accounts payable 61,000
M. A. Raimondo, capital 50,000
M. E. Rodriguez, capital 50,000
C. R. Rosenfeld, capital 87,000

The noncash assets are sold for $275,000. Profits and losses are shared equally.

Required:
Prepare journal entries for the following transactions:
a. The sale of the noncash assets on October 1.
b. Payment of the liabilities on October 15.
c. Division of the remaining cash on October 20.
 ANS:
a.
GENERAL JOURNAL Page 1
Post
Date Description Ref. Debit Credit
Oct. 1 Cash 275,000.00
Merchandise Inventory 73,000.00
Other Assets 157,000.00
Gain on Sale of Assets 45,000.00

1 Gain on Sale of Assets 45,000.00

M. A. Raimondo, Capital 15,000.00
M. E. Rodriguez, Capital 15,000.00
C. R. Rosenfeld, Capital 15,000.00

b.
GENERAL JOURNAL Page 1
Post
Date Description Ref. Debit Credit
Oct. 15 Accounts Payable 61,000.00
Cash 61,000.00

c.
GENERAL JOURNAL Page 1
Post
Date Description Ref. Debit Credit
Oct. 20 M. A. Raimondo, Capital 65,000.00
M. E. Rodriguez, Capital 65,000.00
C. R. Rosenfeld, Capital 102,000.00
Cash 232,000.00

PTS: 1 DIF: Difficulty: Challenging OBJ: LO: 19-5

NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 15 min.

7. Maureen Knipper and Jordan Klein have been sole proprietors of separate animal relocation businesses
for several years. On January 1, 20--, they form a partnership called K & K Animal Kingdom. The
following balance sheets provided for each business serve as the basis for the partnership:

Maureen Knipper
Balance Sheet
December 31, 20--
Assets Liabilities
Cash $ 2,300 Accounts payable $ 6,840
Accounts receivable $ 1,940 Notes payable 14,500
Less allow. for bad debts 440 1,500 Total liabilities $21,340
Office equipment $20,900
Less accum. depr. 1,000 19,900 Owner's Equity
Vehicles $26,900 Maureen Knipper, 24,260
Less accum. depr. 5,000 21,900 capital
Total liabilities and
Total assets $45,600 owner's equity $45,600
 Jordan Klein
Balance Sheet
December 31, 20--
Assets Liabilities
Cash $ 2,545 Accounts payable $ 6,000
Accounts receivable $ 2,270 Notes payable 7,300
Less allow. for bad debts 370 1,900 Total liabilities $13,300
Equipment $16,350
Less accum. depr. 2,300 14,050
Vehicles $17,500 Owner's Equity
Less accum. depr. 3,200 14,300 Jordan Klein, 23,995
Office equipment $ 6,500 capital
Less accum. depr. 2,000 4,500 Total liabilities and
Total assets $37,295 owner's equity $37,295

Knipper and Klein agree that the information provided on the balance sheets represents market values,
except for the assets listed below for which appraisals of current market values were obtained.

Fair Market Values Knipper Klein

Office equipment $19,900 $ 4,100
Vehicles 21,000 13,900

Required:
Prepare the opening journal entries for the formation of K & K Animal Kingdom.

GENERAL JOURNAL Page 1

Post
Date Description Ref. Debit Credit
 ANS:

GENERAL JOURNAL Page 1

Post
Date Description Ref. Debit Credit
Jan. 1 Cash 2,300.00
Accounts Receivable 1,940.00
Office Equipment 19,900.00
Vehicles 21,000.00
Allowance for Bad Debts 440.00
Accounts Payable 6,840.00
Notes Payable 14,500.00
Maureen Knipper, Capital 23,360.00

1 Cash 2,545.00
Accounts Receivable 2,270.00
Equipment 14,050.00
Vehicles 13,900.00
Office Equipment 4,100.00
Allowance for Bad Debts 370.00
Accounts Payable 6,000.00
Notes Payable 7,300.00
Jordan Klein, Capital 23,195.00

PTS: 1 DIF: Difficulty: Challenging OBJ: LO: 19-1

NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 20 min.

8. Steve and Heather decided to form a partnership on April 1. Steve invested $60,000 and Heather
invested $40,000. Net income for the fiscal year ended March 31 was $110,000. Each partner is to
receive 10% on their original investment. Steve and Heather are to receive a salary allowance of
$35,000 and $45,000, respectively. The remainder is to be divided as follows: 70% to Steve and 30%
to Heather. Determine the amount of net income that Steve and Heather would have received.

ANS:
Steve Heather Total
Net income $110,000

Salary allowances $35,000 $45,000 80,000

Interest allowances 6,000 4,000 10,000
Remaining income (70%  30%) 14,000 6,000 20,000
Total of each column $55,000 $55,000 $110,000

PTS: 1 DIF: Difficulty: Easy OBJ: LO: 19-2

NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 10 min.
 9. After many years of operation, the partnership of O'Toole, Simpkins, and Fein is to be liquidated.
The September 30, 20-- post-closing trial balance for the partnership is provided below:

O'Toole, Simpkins, and Fein

Post-Closing Trial Balance
September 30, 20--
Cash $ 15,200
Inventory 31,000
Other assets 84,000
Liabilities $ 9,000
S. O'Toole, capital 42,000
O. Simpkins, capital 41,000
S. Fein, capital ________ 38,200
$130,200 $130,200

Profits and losses are shared equally. The noncash assets are sold for $121,000 on October 1. Final
cash settlements are made to the partners following the payment of all liabilities. Complete the
statement of partnership liquidation that has been provided.

Other O'Toole, Simpkins, Fein,

Cash Inventory Assets Liabilities Capital Capital Capital
$ 15,200 $ 31,000 $ 84,000 $ 9,000 $ 42,000 $ 41,000 $ 38,200
________ ________ ________ ______ ________ ________ ________
________ ________ ________ ______ ________ ________ ________
________ ________ ________ ______ ________ ________ ________
________ ________ ________ ______ ________ ________ ________
________ ________ ________ ______ ________ ________ ________

ANS:

Other O'Toole, Simpkins, Fein,

Cash Inventory Assets Liabilities Capital Capital Capital
$ 15,200 $ 31,000 $ 84,000 $ 9,000 $ 42,000 $ 41,000 $ 38,200
121,000 (31,000) (84,000) ______ 2,000 2,000 2,000
$ 136,200 $ 0 $ 0 $ 9,000 $ 44,000 $ 43,000 $ 40,200
(9,000) ________ ________ (9,000) ________ ________ ________
$ 127,200 $ 0 $ 0 $ 0 $ 44,000 $ 43,000 $ 40,200
(127,200) ________ ________ _______ (44,000) (43,000) (40,200)
$ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0

PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 19-4

NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 15 min.

10. The Green Meadows Landscaping Company, a partnership, operates a commercial landscaping
business. Ownership of the company is divided among the partners, Brandon Boskin, Collin Chang,
and Dan Delia. On May 28, after the business had been in operation for several years, Delia passed
away. His widow wishes to unload her late husband's share of the business and head for Jamaica. After
the books were closed, the partners' capital accounts had credit balances as follows:

Brandon Boskin, Capital $80,000

Collin Chang, Capital 40,000
Dan Delia, Capital 40,000
 a. Assume that Boskin has decided to buy Delia's share from his widow for $35,000 and
Chang also agrees to this arrangement.
b. Assume that Boskin and Chang have decided that the partnership will pay Delia's widow
$46,000 with any difference distributed between the remaining partners based on their
current capital balances.
c. Assume that Boskin and Chang have decided that the partnership will pay Delia's widow
$25,000 with any difference distributed between the remaining partners based on their
current capital balances.

Required:
Prepare the general journal entry that would be shown on the partnership's books for each independent
situation.

ANS:
a.
GENERAL JOURNAL Page 1
Post
Date Description Ref. Debit Credit
May 28 Dan Delia, Capital 40,000.00
Brandon Boskin, Capital 40,000.00

b.
GENERAL JOURNAL Page 1
Post
Date Description Ref. Debit Credit
May 28 Dan Delia, Capital 40,000.00
Brandon Boskin, Capital 4,000.00
Collin Chang, Capital 2,000.00
Cash 46,000.00

c.
GENERAL JOURNAL Page 1
Post
Date Description Ref. Debit Credit
May 28 Dan Delia, Capital 40,000.00
Brandon Boskin, Capital 10,000.00
Collin Chang, Capital 5,000.00
Cash 25,000.00

PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 19-4

NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 15 min.

11. Sasha McBride and Ian Jordan, who have ending capital balances of $90,000 and $40,000
respectively, agree to admit two new partners to their business on May 1, 20--. Paul Menendez will
buy 30% of McBride's equity interest for $35,000 and 20% of Jordan's equity interest for $22,000.
Alice Domski will invest $38,000 in the business for which she will receive a $38,000 equity interest.

Required:
1. Prepare the journal entries showing the above transactions admitting Menendez and
Domski to the partnership.
2. Calculate the ending capital balances for all four partners after the above transactions.
 GENERAL JOURNAL Page 1
Post
Date Description Ref. Debit Credit

ANS:
1.
GENERAL JOURNAL Page 1
Post
Date Description Ref. Debit Credit
May 1 Sasha McBride, Capital 27,000.00
Ian Jordan, Capital 8,000.00
Paul Menendez, Capital 35,000.00

1 Cash 38,000.00
Alice Domski, Capital 38,000.00

2.
Ending balances as of May 1, 20--.
S. McBride $63,000 I. Jordan $32,000
P. Menendez 35,000 A. Domski 38,000

PTS: 1 DIF: Difficulty: Easy OBJ: LO: 19-4

NAT: BUSPROG: Analytic STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Application
NOT: 10 min.

COMPLETION

1. ____________________ of the partnership results from any change in the members of the partnership.

ANS: Dissolution

PTS: 1 DIF: Difficulty: Easy OBJ: LO: 19-4

NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

2. The ____________________ is a written document containing the various provisions for operating a
partnership.
ANS: partnership agreement
PTS: 1 DIF: Difficulty: Easy OBJ: LO: 19-1
NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
 3. ____________________ means that any partner can bind the other partners in a contract if he or
she is acting within the general scope of the business.

ANS: Mutual agency

PTS: 1 DIF: Difficulty: Easy OBJ: LO: 19-1

NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

4. The process of selling the assets, paying the liabilities, and distributing the remaining cash or other
assets to the partners is known as ____________________.

ANS: liquidation

PTS: 1 DIF: Difficulty: Easy OBJ: LO: 19-5

NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.

MATCHING

Match the terms with the definitions.

a. dissolution
b. liquidation
c. partnership
d. partnership agreement
1. The form of organization in which two or more individuals engage in an enterprise as co-owners.
2. Dissolving of the partnership resulting from any change in the members of the partnership.
3. A process of selling the assets, paying the liabilities, and distributing the remaining cash or other assets
to the partners.
4. A written agreement containing the various provisions for operating a partnership.

1. ANS: C PTS: 1 DIF: Difficulty: Easy

OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
2. ANS: A PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-4 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
3. ANS: B PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-1 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.
4. ANS: D PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 19-5 NAT: BUSPROG: Communication STA: AICPA FN-Measurement
TOP: ACBSP: APC-19-Partnership Accounting KEY: Bloom's: Knowledge
NOT: 1 min.