Partnership

Partnership
1. When a partner invests assets other than cash into a

partnership, these assets should be listed on the statement of
financial position at
a. their original cost
b. their fair market value
c. the carrying (book value)
d. the value the investing partner assigns to them
Answer: B
2. Which of the following partnership characteristics is
an advantage?
a. Ease of formation
b. Mutual agency
c. Unlimited liability
d. Limited life
Answer: A
3. In a limited partnership,
a. all partners have limited liability.
b. the general partners have limited liability.
c. all but the general partners have limited liability.
d. all but the general partners have unlimited
liability.
Answer: C
4. Non-cash assets invested into partnership are
recorded at
a. zero.
b. their original cost.
c. their carrying value.
d. their fair market value.
Answer: D
5. All of the following are true for both general and limited
partnerships except
a. both are easily dissolved.
b. all partners are liable for all debts of the firm.
c. both must have at least one general partner.
d. all partners have the right to participate in the profits of the
business.
Answer: C
6. A partner invested into a partnership a building with a 250,000 carrying
value and 400,000 fair market value. The related mortgage payable of
125,000 was assumed by the partnership. As a result of the investment, the
partner’s capital account will be credited for
a. 400,000
b. 250,000
c. 275,000
d. 125,000
Answer: C
7. A partnership records a partner’s investment of assets in the
business at
a. a value set by the partners.
b. the market value of the assets invested.
c. the partner’s book value of the assets invested.
d. any of the above.
ANSWER:B
8. On July 1, 2010, Danica and Danielle formed a partnership. Danica
contributed cash. Danielle, previously a sole proprietor, contributed property
other than cash including land subject to a mortgage, which was assumed by
the partnership. Danielle’s capital account at July 1, 2010 should be
recorded at
a. the fair value of the property at July 1, 2010.
b. Danielle’s book value of the property less the mortgage payable at July 1,
2010.
c. Danielle’s book value of the property at July 1, 2010.
d. the fair value of the property less the mortgage payable at July 1, 2010.
ANSWER: D
9. Which of the following is not a characteristic of most
partnerships?
a. Ease of formation
b. Mutual agency
c. Limited liability
d. Limited life
ANSWER: C
10. A partnership
a. is created by mere agreement of the partners.
b. has a juridical personality separate and distinct from that of each
of the partners.
c. may be constituted in any form, except where immovable
property or real rights are contributed, in which case, the law
requires that a public instrument be executed.
d. is dissolved by death of a partner.
e. all of the above
Answer: E
11. A large cash withdrawal by partner Ben from the 4B partnership,
which is viewed by all partners as a permanent reduction of Ben’s
ownership equity in the partnership, is recorded with a debit to
a. Ben, Capital
b. Retained earnings
c. Loan receivable from Ben
d. Ben, Drawing
ANSWER: A
12. One who takes charge of the winding up of partnership affairs
upon dissolution:
a. Dormant partner
b. Liquidating partner
c. Silent partner
d. Ostensible partner
ANSWER: B
13. Partner’s investments may include which of the
following?
a. Cash
b. Non-cash assets
c. Non-cash assets with liabilities to be assumed.
d. All of the above
e. Only a and b.
Answer: D
14. Two sole proprietor’s formed a partnership. Non-cash assets
forming part of the initial investment in the partnership would be
recorded at the
a. Fair value of the property at the date of the investment.
b. Proprietor’s book values of the property at the date of investment.
c. Proprietor’s book values or the fair value of the property at the
date of investment whichever is higher.
d. Proprietor’s book values or the fair value of the property at the
date of investment whichever is lower.
ANSWER: A
15. The partnership agreement is contained in the articles of
partnership, an express contract among partners. Such an
agreement ordinarily does not include
a. the rights and duties of the partners in the event of partnership
dissolution.
b. the allocation of income between partners.
c. a limitation on a partner’s liability to creditors.
d. the rights and duties of the partners.
ANSWER: C
16. A partner whose liability for partnership debts is
limited to his capital contribution is called
a. secret partner
b. general partner
c. industrial partner
d. limited partner
ANSWER: D
17. A partnership which comprises all the profits that the
partners may acquire by the work or industry during the
existence of the partnership is called
a. de jure partnership
b. Universal partnership of profits
c. Particular partnership
d. Universal partnership of all present property.
ANSWER: B
18. The most appropriate lead to look for the
relationships among partners is in the
a. accounting records
b. voluntary association
c. partnership agreement
d. relevant professional journals
ANSWER: C
19. An advantage of the partnership as a form of business
organization would be:
a. A partnership is created by mere agreement of the partners.
b. A partnership is bound by the acts of the partners.
c. Partners do not pay income taxes on their share in partnership
profit.
d. The death or withdrawal of a partner may terminate a partnership.
ANSWER: A
20. A partner who contributes his work, labor or industry
to the common fund of the partnership is called
a. limited partner
b. industrial partner
c. capitalist partner
d. managing partner
ANSWER: B
21. A partner who is liable for the payment of partnership debts to
the extent of his separate property after the partnership assets are
exhausted is called
a. limited partner
b. managing partner
c. general partner
d. capitalist partner
ANSWER: C
22. The partner’s capital account is credited in the
following cases except when it involves the recording of
the
a. share in profit
b. additional investment
c. original investment
d. debit balance of the drawing account at the end of the
period.
ANSWER: d
23. Which of the following partnership characteristics is a
disadvantage?
a. Unlimited liability
b. Ease of dissolution
c. voluntary association
d. participation in partnership income
ANSWER: A
24. Which of these characteristics does not apply to a general
professional partnership?
a. Mutual agency
b. Unlimited life
c. Unlimited liability
d. No business income tax
ANSWER: B
25. Which of the following is a characteristic of most
partnerships?
a. Unlimited life
b. Limited liability
c. Mutual contribution
d. Division of profits only
ANSWER: C
26. Which of the following is not a characteristic of
partnerships?
a. Limited life
b. Limited liability
c. Mutual agency
d. Voluntary association
Answer: B
27. Partnership capital and drawing accounts are similar to the
corporate
a. Retained earnings account
b. Paid-in capital and retained earnings accounts
c. Preferred and common stock accounts
d. Paid in capital, retained earnings and dividends accounts
ANSWER: D
28. A partner will not bind the partnership to an outside purchase
contract when the
a. partner was not authorized by the other partners to make the
purchase.
b. partner who made the purchase withdraws from the partnership.
c. item purchased is not within the normal scope of business.
d. the item purchased is considered immaterial in amount.
ANSWER: C
29. A partnership agreement should include
a. the purpose of the business
b. each partner’s duties.
c. the method of allocating profits and losses.
d. all of these.
ANSWER: D

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Partnership

1. When a partner invests assets other than cash into a

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