Multiple Choice

1. it is the change in the relation of the partners caused by any partner being disassociated from the business

a. Formation

b. Operation

c. Dissolution

d. Liquidation

2. Which of the following is correct when a new partner is admitted through purchase of interest from existing partners?

a. The incoming partner's contribution is recorded in the partnership books.

b. Partnership capital is increased by the incoming partners

c. The incoming Partner's contribution is not recorded in the partnership books

d. this is not allowed under the law. The new partner can only purchase interest from the partnership and not from the partners themselves.

Use the following information for the next eight questions:

The partners' capital account in AB partnership before the admission of a new partner are as follows:

Capital Accounts P/L ratios

A - Capital 200,000 60%

B - Capital 120,000 40%

3. C purchases 20% interest in the partnership from A for P 120,000. How much is the capital balance of A after the admission of C?

a. 133,333

b. 24,000

c. 96,000

d. 148,000

4. C Purchases 20% interest in the partnership proportionately from A and B for 120,000. how much is the gain and loss recorded in the partnership books?

a. 48,000

b. 56,000

c. 60,000

d. 0

5. Using the case in #4 above, how much is the total equity of the partnership after the admission of C

a. 320,000

b. 440,000

c. 240,000

d. 200,000

6. C acquires 20% interest in the partnership by investing 120,000 to the business. No bonus is given to C

how much is the capital balance of A after the admission of C?

a. 200,000

b. 264,000

c. 240,000

d. 0

7. What is the P/L ratio of B after the admission of C

a. 22%

b. 28%

c. 32%

d. 40%

8. before the admission of C, B decided to retire A acquires B's interest for 180,000

How much is the capital balance of A after the retirement of B?

a. 200,000

b. 264,000

C. 280,000

d. 320,000

9. Before admission of C, B Decides to retire the partnership pays B 180,000 in settlement

of his partnership interest. How much is the capital balance of A after the retirment of B?

a. 200,000

b. 140,000

c. 260,000

d. 320,000

10. Using the Case in# 8 above, how much is the total Equity of the partnership after the

retirement of B

a. 320,000

b. 440,000

c. 240,000

d. 500,000