a Choose the letter of the best answer. To close a partner's drawings account, an entry must be made that: 1. a debits that partner's drawings account and credits Income Summary. b. debits that partner's drawings account and credits that partner's capital account c. credits that partner's drawings account and debits that partner's capital account d. credits that partner's drawings account and debits the firm's dividend account 2. Which of the following statements about partnership financial statements is true? Details of the distribution of net income are shown in the owners' equity statement. 6. The distribution of net income is shown on the balance sheet. c. Only the total of all partner capital balances is shown in the balance sheet d. The owners' equity statement is called the partners' capital statement 3. In the liquidation of a partnership, it is necessary to (1) distribute cash to the partners. (2) sell noncash assets, (3) allocate any gain or loss on realization to the partners, and (4) pay liabilities. These steps should be performed in the following order: a. (2), (3), (4).(1). b. (2).(3)(1)(4) c. (3) (2) (1) (4) d. (3). (2), (4), (1) 4. Which of the following is not a characteristic of a partnership? a. Taxable entity b. Co-ownership of property. c. Mutual agency d. Limited life. a 5. A partnership agreement should include each of the following except: names and capital contributions of partners. b. rights and duties of partners as well as basis for sharing net income or loss. c. basis for splitting partnership income taxes. d. provision for withdrawal of assets. 6. The advantages of a partnership do not include: ease of formation b. unlimited liability. c. freedom from government regulation d. ease of decision-making. 7. Upon formation of a partnership, each partner's initial investment of assets should be recorded at their a. book values. b. cost. c. fair values. d. appraised values. 8. Which of the following partnership characteristics is an advantage? b. Limited life a. Unlimited liability d. C. Mutual agency Ease of formation 9. A partner who is liable for the payment of partnership debts to the extent of his personal property after the partnership assets are exhausted is called Managing partner Capitalist partner a. b. General partner d. a. b. . Limited partner 10. Which of the following stipulations in the partners' agreement is valid? to exclude a capitalist partner from sharing in the profits. To except a capitalist partner from sharing in the losses To exempt an industrial partner from losses. To exclude an industrial partner from profits. When a partner withdraws from a partnership taking assets that represent less than his capital balance: No bonus results. The remaining partners receive a bonus The withdrawing partner receives a bonus. The remaining partners owe the withdrawing partner the difference. d. 11. A. B. C. D. 22. A Which of the following will not result in dissolution of a partnership? Incapacity of a partner Negative capital balance of a partner Bankruptcy of a partner B. C. D. Admission of a new partner D. A. C. 23. The admission of a new partner under the bonus method will result in A. Bonus to either the new partner or the old partners. B. Bonus to the old partners only. C. Bonus to the new partners only Bonus to both old and new partners. 24. If a bonus is traceable to the old partners rather than to a new partner, it is allocated among the partners according to the Capital ratio of the old partners. B. Capital ratio of the new partnership. Profit and loss ratio of the old partnership. D. Profit and loss ratio of the new partnership. 25. Total partners' equity will not change when a withdrawing partner Sells his interest to a new or remaining partner. Withdraws assets equal to his capital balance. C. Withdraws assets amounting to less than his capital balance. D. Withdraws assets amounting to greater than his capital balance. 26. If a partner is insolvent, his personal properties shall first be distributed To partnership creditors To the partners by way of additional contributions when the assets of the partnership were insufficient to settle all obligations. To partnership and separate creditors in the ratio of their loan exposures. D. To separate creditors. 27. In a liquidation, the liabilities of the partnership should be paid Before any sales of assets. Before the distribution of cash to partners. C. Before the distribution of gains and losses on the disposal of assets. A. B. A. B. C. A. B. D. After a revaluation of assets. 28. Which of the following is not correct with respect to an instalment liquidation of partnership? A. All remaining liquidation expenses are anticipated. B. All non cash assets are assumed to be worthless. C. Distributions to partners are always made according to their profit sharing percentages. D. Partners with the greatest ability to absorb losses and expenses are first to receive instalment distributions. 29. They are preferred in distribution of partnership assets in the event of liquidation: A. Inside creditors. B. Outside creditors. C. Partners with regards to their capital balances. D. Partners with respect to their profit and loss sharing. 30. Partner A is a deficient partner and an insolvent partner at the same time. A. He must invest additional cash to cover his deficiency. B Partners with positive capital balances will absorb the deficiency of partner A. Solvent partners will absorb the deficiency of partner A. C. D. bando
