artnership terminology. BE12.1 (LO 1) K The following terms were introduced in this chapter: 1. Profit and loss ratio 2. Admission by investment 3. Partnership liquidation 4. Mutual agency 5. Salary allowance 6. Withdrawal by payment from partners' personal assets 7. Capital deficiency 8. Limited liability partnership 9. General partnership 10. Partnership dissolution Match the terms with the following descriptions: a. Partners have limited liability. b. Partners have unlimited liability. C. It is the basis for dividing profit and loss. d. Partnership assets and capital increase with the change in partners. e. Partnership assets and total capital stay the same with the change in partners. f . Actions of partners are binding on all other partners. g. It is a compensation for differences in personal effort put into the partnership. h. Partnership is changed by the addition or withdrawal of a partner. i. There is a debit balance in a partner's capital account. L. Partnership is ended. ide to organize the ALL-Star partnershipInstructions For each of the following situations, indicate which qualitative characteristic was violated. a. Allen Ltd. reported its merchandise inventory at a net realizable value of $25,000. The com- b. pany's auditors disagree with this value and estimated the net realizable value to be $20,000. Owens Corporation does not issue its annual financial statements for the year ended Decem- ber 31, 2020, until December 2021. C. Silver Mining Ltd. is the only company in the mining industry that uses the straight-line method to depreciate its mining equipment. d. Chapman Ltd. switches inventory cost formulas from average to FIFO and back to average in a three-year period. e. Enco Ltd. intentionally recorded revenue in 2020 for sales made in 2021 to ensure that man- agement would receive their bonuses, which were based on profits. f. World Talk Corporation used terminology in its financial statements and notes to the fi- nancial statements that is not commonly used in financial reporting and did not provide expla nations of the terminology. g. Precise Ltd., a multinational drilling company, reported separately its paper, paper clips, and pens in the balance sheet rather than reporting a single line item for office supplies. Total office supplies were $5,000. h. Community Health Foods Ltd. signed a legal agreement to finance the purchase of equip- ment. The agreement required annual payments of $15,000 for five years. The agreement referred to the payments as rental payments. The company records rent expense when the annual payments are made. Ider dependent situations. t the company. fairve characteristics. El1.2 (LO 3) C Presented below are selected qualitative characteristics of financial information. 1. Relevance 5. Faithful representation 2. Neutrality 6. Comparability 3. Verifiability 7. Understandability 4. TimelinessE11.5 (LO 4) K Below is a list of specific revenue recognition terms discussed in the chapter. Enforceable right to receive consideration 2. Critical event 3. Performance obligation 4. Allowance for sales returns 5. Variable consideration 6. Earnings process 7. Control 8. Refund liability
