1) The equity of a partnership of $100,000 is equally shared by Partners A and B. A new person is admitted to the partnership with an investment of $50,000 cash, for a 1/3 share of the partnership. The total equity of the partnership and the equity of the new partner is:

Select one:

a. $100,000 and $50,000

b. $100,000 and $33,333

c. $150,000 and $33,333

d. $150,000 and $50,000

2) The equity of a partnership of $150,000 is equally shared by Partners A, B and C. A new partner wants to join the partnership and will pay $45,000 for 25% of the partnership because this partner brings a valuable customer list. The entry to record the transaction includes a:

Select one:

a. Debit to the existing partners capital accounts of $1,250

b. Debit to the existing partners capital accounts of $3,750

c. Credit to the existing partners capital accounts of $1,250

d. Credit to the new partners capital account of $45,000

3) BG Partners is made up of two partners (Eagle and Falcon). This year, the partnership earned $200,000. It was agreed that Eagle will receive 75% of the profits while Falcon will receive the remaining 25%. As a result:

Select one:

a. Eagles capital account will decrease by $150,000 and Falcons will increase by $50,000

b. Eagles capital account will increase by $150,000 and Falcons will decrease by $50,000

c. Eagles capital account will decrease by $150,000 and Falcons will decrease by $50,000

d. Eagles capital account will increase by $150,000 and Falcons will increase by $50,000

4) Which of the following statement about partners drawings is correct?

i. Partners drawing does not affect equity

ii. Partners drawing directly reduces equity

iii. Partners drawing directly increases equity

Select one:

a. None of the available choices

b. i, ii, and iii

c. Only ii

d. ii, and iii

5) Changes in the Statement of Partners Equity are caused by:

Select one:

a. Drawings from the business and investments in the business only.

b. Each partners share of profit and loss only.

c. Drawings from the business, investments in the business and each partners share of profit or loss.

d. Drawings from the business and each partners share of profit and loss only.

6) A disadvantage of a partnership which means that each partner can authorize contracts and transactions on behalf of the partnership, provided the activity is within the scope of the partnerships business.

Select one:

a. Ease of formation

b. Limited life

c. Unlimited liability

d. Mutual agency

7) If a partner is unable to meet liability obligations, the amount must be paid by the:

Select one:

a. Government

b. Public

c. Remaining partners

d. Shareholders

8) In a firm organized as an LLP, partners can:

Select one:

a. Avoid all liabilities related to debts of the business

b. Limit their liability to only the amount of their investment

c. Limit their liability to some types of liability but not all of them

d. Avoid all liability