1. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #63 (Points: 1.75) Benson and Orton are partners who share income in the ratio of 2:3 and have capital balances of $30,000 and $50,000 respectively. Ramsey is admitted to the partnership and is given a 10% interest by investing $20,000. What is Ortons capital balance after admitting Ramsey? 1. $20,000 2. $56,000 3. $34,000 4. $44,000 Save Answer 2. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #80 (Points: 1.75) Everett, Miguel, and Ramona are partners, sharing income 1:2:3. After selling all of the assets for cash, dividing losses on realization, and paying liabilities, the balances in the capital accounts are as follows: Everett, $50,000 Cr.; Miguel, $40,000 Dr.; and Ramona, $30,000 Cr. How much cash should be distributed to Everett assuming that Miguel pays the deficiency? 1. $30,000 2. $50,000 3. $40,000 4. $20,000 Save Answer 3. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #1 (Points: 1.75) Which of the following is characteristic of a general partnership? 1. The partners have co-ownership of partnership property. 2. The partners have limited liability. 3. The partnership has an unlimited life. 4. The partnership is subject to federal income tax. Save Answer 4. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #41 (Points: 1.75) Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $40,000 and $60,000 respectively. Income Summary has a credit balance of $20,000. What is Tomass capital balance after closing Income Summary to Capital? 1. $75,000 2. $45,000 3. $65,000 4. $55,000 Save Answer 5. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #38 (Points: 1.75) Xavier and Yolanda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 10%, salary allowances of $38,000 and $28,000 respectively, and the remainder equally. How much of the net income of $75,000 is allocated to Yolanda? 1. $40,000 2. $43,000 3. $35,000 4. $66,000 Save Answer 6. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #89 (Points: 1.75) The capital accounts of Harrison and Marti have balances of $180,000 and $130,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Harrison invested an additional $20,000. During the year, Harrison and Marti withdrew $96,000 and $78,000, respectively, and net income for the year was $248,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners equity for 2010 would show what amount as total capital for the partnership on December 31, 2010? 1. $404,000 2. $176,000 3. $752,000 4. $228,000 Save Answer 7. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #49 (Points: 1.75) Bobbi and Stuart are partners. The partnership capital of Bobbi is $40,000 and Stuart is $70,000. Bobbi sells his interest in the partnership to John for $50,000. The journal entry to record the admission of John as a new partner would include 1. a credit Johns capital for $50,000 2. a credit to Johns capital for $40,000 3. a credit to Stuarts capital for $10,000 4. a credit to Johns capital for $40,000 and a credit to Stuarts capital for $10,000 Save Answer 8. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #84 (Points: 1.75) Partners Ken and Macki each have a $40,000 capital balance and share income and losses in a 3:2. Cash equals $20,000, noncash assets equal $120,000, and liabilities equal $60,000. If the noncash assets are sold for $80,000, the Mackis capital account will 1. decrease by $24,000. 2. increase by $24,000. 3. decrease by $16,000. 4. decrease by $40,000. Save Answer 9. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #20 (Points: 1.75) Xavier and Yolonda have original investments of $50,000 and $100,000 respectively in a partnership. The articles of partnership include the following provisions regarding the division of net income: interest on original investment at 15%, salary allowances of $22,000 and $20,000 respectively, and the remainder equally. How much of the net income of $90,000 is allocated to Xavier? 1. $47,750 2. $30,250 3. $42,250 4. $45,000 Save Answer 10. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #75 (Points: 1.75) Harriet, Mickey, and Zack decide to liquidate their partnership. All assets are sold and the liabilities are paid. Following these transactions, the capital balances and profit and loss percentages are as follows: Harriet, $27,000 and 30%; Mickey, $(12,000) and 40%; Zack, $43,000 and 30%. Mickey is unable to contribute any assets to reduce the deficit. How much cash will Harriet receive as a results of the partnership liquidation? 1. $23,400 2. $21,000 3. $27,000 4. $15,000 Save Answer 11. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #27 (Points: 1.75) Pia and Ramona are partners who share income in the ratio of 3:2. Their capital balances are $80,000 and $120,000 respectively. Income Summary has a credit balance of $40,000. What is Ramonas capital balance after closing Income Summary to Capital? 1. $144,000 2. $140,000 3. $136,000 4. $96,000 Save Answer 12. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #23 (Points: 1.75) If there is no written agreement as to the way income will be divided among partners 1. they will share income and losses according to their capital balances 2. they will share income and losses equally 3. there really is no partnership agreement 4. they will share income and losses according to the time devoted to the business. Save Answer 13. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #57 (Points: 1.75) When a new partner is admitted to a partnership, there should be a(n) 1. new capital account added to the ledger for the new partner. 2. debit amount to the partners capital account for the cash received by the current partner. 3. increase in the total owner's equity of the partnership. 4. increase in the total assets of the partnership. Save Answer 14. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #44 (Points: 1.75) Tomas and Saturn are partners who share income in the ratio of 3:1. Their capital balances are $40,000 and $60,000 respectively. Income Summary has a credit balance of $20,000. What is Saturns capital balance after closing Income Summary to Capital? 1. $55,000 2. $75,000 3. $45,000 4. $65,000 Save Answer 15. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #66 (Points: 1.75) Singer and McMann are partners in a business. Singers original capital was $40,000 and McManns was $60,000. They agree to salaries of $12,000 and $18,000 for Singer and McMann respectively and 10% interest on original capital. If they agree to share remaining profits and losses on a 3:2 ratio, what will Singers share of the income be if the income for the year was $50,000? 1. $22,000 2. $23,400 3. $24,000 4. $16,000 Save Answer 16. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #74 (Points: 1.75) The balance sheet of Morgan and Rockwell was as follows immediately prior to the partnership's being liquidated: cash, $20,000; other assets, $160,000; liabilities, $40,000; Morgan capital, $60,000; Rockwell capital, $80,000. The other assets were sold for $139,000. Morgan and Rockwell share profits and losses in a 2:1 ratio. As a final cash distribution from the liquidation, Morgan will receive cash totaling 1. $49,500 2. $60,000 3. $51,000 4. $46,000 Save Answer 17. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #46 (Points: 1.75) Lambert invests $10,000 for a 1/3 interest in a partnership in which the other partners have capital totaling $26,000 before admitting Lambert. After distribution of the bonus, what is Lamberts capital? 1. $5,333 2. $12,000 3. $8,667 4. $10,000 Save Answer 18. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #29 (Points: 1.75) Use the following information to answer the following questions. Izabelle and Marta are forming a partnership. Izabelle will invest a piece of equipment with a book value of $5,000 and a fair market value of $15,000. Marta will invest a building with a book value of $30,000 and a fair market value of $35,000. At what amount will Izabelles capital account be recorded? 1. $20,000 2. $15,000 3. $50,000 4. $5,000 Save Answer 19. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #56 (Points: 1.75) When a new partner is admitted to a partnership, there should be a(n) 1. revaluation of assets 2. return of assets 3. realization of assets 4. allocation of assets Save Answer 20. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #33 (Points: 1.75) Ofelia and Teresa share income and losses in a 2:1 ratio after allowing for salaries to Ofelia of $48,000 and $60,000 to Teresa. Net income for the partnership is $132,000. Income should be divided as follows: 1. Ofelia, $56,000; Teresa, $76,000 2. Ofelia, $60,000; Teresa, $72,000 3. Ofelia, $72,000; Teresa, $60,000 4. Ofelia, $64,000; Teresa, $68,000 Save Answer 21. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #90 (Points: 1.75) The capital accounts of Hawk and Martin have balances of $160,000 and $140,000, respectively, on January 1, 2010, the beginning of the current fiscal year. On April 10, Hawk invested an additional $10,000. During the year, Hawk and Martin withdrew $86,000 and $68,000, respectively, and net income for the year was $258,000. The articles of partnership make no reference to the division of net income. Based on this information, the statement of partners equity for 2010 would show what amount in the capital account for Martin on December 31, 2010? 1. $211,000 2. $201,000 3. $232,000 4. $173,000 Save Answer 22. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #51 (Points: 1.75) A partner withdraws from a partnership by selling her interest to another person who currently is not associated with the firm. As a results of this transaction, the capital account balance of the other partners in the partnership 1. may increase, decrease, or remain the same 2. will remain the same 3. will increase 4. will decrease Save Answer 23. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #47 (Points: 1.75) Douglas pays Selena $39,000 for her 30% interest in a partnership with total net assets of $105,000. Following this transaction, Selenas capital account should have a credit balance of 1. more than $39,000 2. $31,500 3. $35,250 4. $39,000 Save Answer 24. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #54 (Points: 1.75) A new partner may be admitted to a partnership by 1. purchasing a specific quantity of assets from the partnership 2. the consent of the majority of the current partners 3. inheriting a partnership interest 4. contributing assets to the partnership Save Answer 25. Chapter 12Accounting for Partnerships and Limited Liability Companies Question MC #61 (Points: 1.75) Immediately prior to the admission of Abbott, the Smith-Jones Partnership assets had been adjusted to current market prices, and the capital balances of Smith and Jones were $40,000 and $60,000 respectively. If the parties agree that the business is worth $120,000, what is the amount of bonus that should be recognized in the accounts at the admission of Abbott? 1. $60,000 2. $40,000 3. $20,000 4. $80,000 Save Answer 26. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #8 (Points: 1.75) Which of the following is not true of a corporation? 1. The acts of its owners bind the corporation. 2. It may enter into binding legal contracts in its own name. 3. It may buy, own, and sell property. 4. It may sue and be sued. Save Answer 27. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #13 (Points: 1.75) The state charter allows a corporation to issue only a certain number of shares of each class of stock. This amount of stock is called 1. outstanding stock 2. issued stock 3. authorized stock 4. treasury stock Save Answer 28. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #50 (Points: 1.75) A corporation purchases 10,000 shares of its own $10 par common stock for $35 per share, recording it at cost. What will be the effect on total stockholders' equity? 1. decrease, $100,000 2. decrease, $350,000 3. increase, $350,000 4. increase, $100,000 Save Answer 29. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #54 (Points: 1.75) Which of the following amounts should be disclosed in the stockholders' equity section of the balance sheet? 1. the number of shares of common stock issued 2. the number of shares of common stock outstanding 3. all of the above 4. the number of shares of common stock authorized Save Answer 30. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #23 (Points: 1.75) The charter of a corporation provides for the issuance of 100,000 shares of common stock. Assume that 60,000 shares were originally issued and 10,000 were subsequently reacquired. What is the number of shares outstanding? 1. 60,000 2. 50,000 3. 40,000 4. 70,000 Save Answer 31. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #29 (Points: 1.75) Alma Corp. issues 1,000 shares of $10 par value common stock at $16 per share. When the transaction is recorded, credits are made to: 1. Common Stock $10,000 and Retained Earnings $6,000. 2. Common Stock $16,000. 3. Common Stock $10,000 and Paid-in Capital in Excess of Stated Value $6,000. 4. Common Stock $10,000 and Paid-in Capital in Excess of Par Value $6,000. Save Answer 32. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #36 (Points: 1.75) The cumulative effect of the declaration and payment of a cash dividend on a companys financial statements is to 1. increase total assets and stockholders equity. 2. decrease total liabilities and stockholders equity. 3. decrease total assets and stockholders equity. 4. increase total expenses and total liabilities. Save Answer 33. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #14 (Points: 1.75) Which of the following is not a right possessed by common stockholders of a corporation? 1. the right to share in assets upon liquidation 2. the right to receive a minimum amount of dividends 3. the right to sell their stock to anyone they choose 4. the right to vote in the election of the board of directors Save Answer 34. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #12 (Points: 1.75) Stockholders' equity 1. is shown on the income statement 2. includes paid-in capital and liabilities 3. includes retained earnings and paid-in capital 4. is usually equal to cash on hand Save Answer 35. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #43 (Points: 1.75) Which statement below is not a reason for a corporation to buy back its own stock. 1. for supporting the market price of the stock 2. bonus to employees 3. resale to employees 4. to increase the shares outstanding Save Answer 36. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #52 (Points: 1.75) Which of the following is not classified as paid-in capital on the balance sheet? 1. donated capital 2. common stock distributable 3. treasury stock 4. common stock Save Answer 37. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #47 (Points: 1.75) Treasury stock which was purchased for $3,000 is sold for $3,500. As a result of these two transactions combined 1. stockholders' equity will be increased by $500 2. income will be increased by $500 3. stockholders' equity will not change 4. stockholders' equity will be increased by $3,500 Save Answer 38. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #56 (Points: 1.75) Retained earnings 1. changes are summarized in the retained earnings statement 2. is the same as contributed capital 3. cannot have a debit balance 4. is equal to cash on hand Save Answer 39. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #10 (Points: 1.75) Which of the following statements concerning taxation is accurate? 1. Corporations pay income taxes but their owners do not. 2. Only the owners must pay taxes on corporate income. 3. Corporations pay federal and state income taxes. 4. Corporations pay federal income taxes but not state income taxes. Save Answer 40. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #7 (Points: 1.75) Which one of the following would not be considered an advantage of the corporate form of organization? 1. Government regulation 2. Continuous life 3. Separate legal existence 4. Limited liability of stockholders Save Answer 41. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #24 (Points: 1.75) Par value 1. represents the original selling price for a share of stock. 2. is established for a share of stock after it is issued. 3. is the monetary value assigned per share in the corporate charter. 4. represents what a share of stock is worth. Save Answer 42. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #59 (Points: 1.75) The Dayton Corporation began the current year with a retained earnings balance of $25,000. During the year, the company corrected an error made in the prior year, which was a failure to record depreciation expense of $3,000 on equipment. Also, during the current year, the company earned net income of $12,000 and declared cash dividends of $5,000. Compute the year end retained earnings balance. 1. $45,000 2. $35,000 3. $39,000 4. $29,000 Save Answer 43. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #4 (Points: 1.75) A disadvantage of the corporate form of business entity is 1. the ease of transfer of ownership 2. unlimited liability for stockholders 3. mutual agency for stockholders 4. corporations are subject to more governmental regulations Save Answer 44. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #42 (Points: 1.75) Treasury stock shares are 1. part of the total outstanding shares but not part of the total issued shares of a corporation 2. shares held by the U.S. Treasury Department 3. unissued shares that are held by the treasurer of the corporation 4. issued shares that have been reacquired by a corporation Save Answer 45. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #57 (Points: 1.75) Which of the following would appear as a prior-period adjustment? 1. loss resulting from the sale of fixed assets 2. difference between the actual and estimated uncollectible accounts receivable 3. error in the computation of depreciation expense in the preceding year 4. loss from the restructuring of assets Save Answer 46. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #66 (Points: 1.75) The primary purpose of a stock split is to 1. increase the market price of the stock per share 2. reduce the market price of the stock per share 3. increase paid-in capital 4. increase retained earnings Save Answer 47. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #51 (Points: 1.75) In which section of the financial statements would Paid-In Capital from Sale of Treasury Stock be reported? 1. stockholders' equity on balance sheet 2. intangible asset on balance sheet 3. other expense on income statement 4. other income on income statement Save Answer 48. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #72 (Points: 1.75) A corporation has 50,000 shares of $25 par value stock outstanding that has a current market value of $120. If the corporation issues a 5-for-1 stock split, the par value of the stock after the split will be: 1. $24 2. $5 3. $60 4. $25 Save Answer 49. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #16 (Points: 1.75) The par value per share of common stock represents 1. the minimum selling price of the stock established by the articles of incorporation. 2. the amount of dividends per share to be received each year 3. an arbitrary amount established in the articles of incorporation 4. the minimum amount the stockholder will receive when the corporation is liquidated Save Answer 50. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question MC #9 (Points: 1.75) The ability of a corporation to obtain capital is 1. enhanced because of limited liability and ease of share transferability. 2. about the same as a partnership. 3. restricted because of the limited life of the corporation. 4. less than a partnership. Save Answer 51. Chapter 12Accounting for Partnerships and Limited Liability Companies Question PR #6 (Points: 2) Jackson and Campbell have capital balances of $100,000 and $300,000 respectively. Jackson devotes full time and Campbell one-half time to the business. Determine the division of $150,000 of net income under each of the following assumptions: (a) No agreement as to division of net income. (b) In ratio of capital balances. (c) In ratio of time devoted to business. Paragraph Insert equation Go Save Answer 52. Chapter 12Accounting for Partnerships and Limited Liability Companies Question OT #11 (Points: 2) S. Stephens and J. Perez are partners in Space Designs. Stephens and Perez share income equally. D. Fredricks will be admitted to the partnership. Prior to the admission, equipment was revalued downward by $8,000. The capital balances of each partner are $100,000 and $139,000, respectively, prior to the revaluation. Required: (1) Provide the journal entry for the asset revaluation. (2) Provide the journal entry for Fredricks admission under the following independent situations: a. Fredricks purchased a 20% interest for $50,000. b. Fredricks purchased a 30% interest for $125,000. Paragraph Insert equation Go Save Answer 53. Chapter 12Accounting for Partnerships and Limited Liability Companies Question PR #8 (Points: 2) Derek and Hailey, partners sharing net income in the ratio of 2:1, admit Ben to the partnership in accordance with the following agreement: (1) Merchandise inventory recorded in the partnership accounts at $62,500 is to be revalued at its current replacement price of $68,500. (2) Ben is to invest $48,000 in cash for a 30% interest in the partnership, which has total net assets (assets minus liabilities) of $130,000 after the inventory is revalued. (3) The income-sharing ratio of Derek, Hailey, and Ben is to be 2:1:1. Required: (a) Journalize the entries to record the revaluation of merchandise inventory, and the admission of Ben to the partnership. (b) A few years later, the capital balances of Derek, Hailey, and Ben were $150,000, $90,000, and $55,000 respectively. At this time, Kacy is admitted to the partnership by the purchase of one-half of Dereks interest for $80,000. Journalize the entry to record the admission of Kacy to the partnership. Paragraph Insert equation Go Save Answer 54. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question OT #11 (Points: 2.17) The dates of importance in connection with a cash dividend of $65,000 on a corporations common stock are January 15, February 15, and March 15. Journalize the entries required on each date. Paragraph Insert equation Go Save Answer 55. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question OT #12 (Points: 2.17) Vincent Corporation has 100,000 share of $100 par common stock outstanding. On June 30, Vincent Corporation declared a 5% stock dividend to be issued July 30 to stockholders of record July 15. The market price of the stock was $132 a share on June 30. Journalize the entries required on June 30, July 15 and July 30. Paragraph Insert equation Go Save Answer 56. Chapter 13Corporations: Organization, Stock Transactions, and Dividends Question PR #10 (Points: 2.17) Journalize the following selected transactions completed during the current fiscal year: Jan. 3 The board of directors declared a stock split which reduced the par of common shares from $100 to $20. This action increased the number of outstanding shares to 400,000. 22 Declared a dividend of $1.50 per share on the outstanding shares of common stock. Feb. 8 Paid the dividend declared on January 22. Sep. 1 Declared a 5% stock dividend on the common stock outstanding (the fair market value of the stock to be issued is $30). Oct. 1 Issued the certificates for the common stock dividend declared on September 1. Paragraph Insert equation Go Save