1. Unlimited liability refers to

a. a claim to the partners' personal assets by creditors if the partnership cannot pay its debts.

b. co-ownership of partnership property.

c. the ability of any partner to bind the partnership to a business agreement as long as he or she acts within the scope of the company's normal operations.

d. the method of income and loss distribution.

2. Which of the following partnership characteristics is an advantage?

a. Unlimited liability

b. Limited life

c. Ease of dissolution

d. Mutual agency

3. A corporation has all of the following except

a. its own tax liability.

b. separation of ownership and control.

c. government regulations.

d. a limited existence.

4. Chad invests $20,000 for a one-third interest in a partnership in which the other partners have capital totaling $52,000 before admitting Chad. After distribution of the bonus, what is Chad's capital?

a. $24,000

b. $20,000

c. $10,666

d. $17,334

5. Partners A and B receive a salary of $30,000 and $60,000, respectively, and share income and losses in a 2:1 ratio, respectively. If the partnership suffers a $30,000 net loss in 20x5, the entry to close the income or loss into their capital accounts is:

a. A, Capital 40,000 B, Capital 20,000 Income Summary 20,000

b. A, Capital 20,000 B, Capital 10,000 Income Summary 30,000

c. A, Capital 50,000 B, Capital 20,000 Income Summary 30,000

d. A, Capital 30,000 B, Capital 60,000 Income Summary 90,000

6. The board of directors of Lark Corporation declared a cash dividend of $3.50 per share on 57,000 shares of common stock on June 14, 20x5. The dividend is to be paid on July 15, 20x5, to shareholders of record on July 1, 20x5. The proper entry to be recorded on July 15, 20x5 is,

a. Dividends 199,500 Cash 199,500

b. Dividends Payable 199,500 Cash 199,500

c. Cash 199,500 Dividends 199,500

d. Cash 199,500 Dividends Payable 199,500

7. If Grant Corporation has 120,000 shares of common stock authorized, 75,000 shares of common stock issued, and holds 3,000 shares of common stock as treasury stock, the total number of outstanding shares of Grant Corporation amounts to a. 72,000. b. 48,000. c. 117,000. d. 54,000. 8. Which of the following is not true about a 35 percent stock dividend?

a. Par value per share remains the same.

b. The market value of the stock is needed to record the stock dividend.

c. Contributed capital increases.

d. Retained earnings decreases.

9. A company purchases 300 shares of its $100 par value common stock at $110 per share. It then reissues 50 shares at $114 per share. The entry upon reissue of the stock is:

a. Cash 5,700 Treasury Stock-Common 5,000 Retained Earnings 700

b. Cash 5,700 Treasury Stock-Common 5,500 Paid-in Capital, Treasury Stock 200

c. Cash 5,700 Treasury Stock-Common 5,700

d. Cash 5,700 Treasury Stock-Common 5,500 Gain on Sale of Treasury Stock 200