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| 1.
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A partnership is an incorporated association of two or more persons to pursue a business for profit as co-owners. |
| | A) | True |
| | B) | False |
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| 2.
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A written contract is necessary for the legal formation of a partnership. |
| | A) | True |
| | B) | False |
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| 3.
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Partnerships are subject to income taxes. |
| | A) | True |
| | B) | False |
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| 4.
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Partners can agree to limit the power of negotiating contracts for the partnership to any one or more of the partners. Such an agreement is binding on all outsiders, whether or not they know it exists. |
| | A) | True |
| | B) | False |
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| 5.
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If Partner A contributes cash of $20,000 to the partnership of A and B, and Partner B contributes a building valued at $30,000 to the partnership, the investments become joint property of both partners. |
| | A) | True |
| | B) | False |
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| 6.
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A general partnership may consist of limited partners and general partners. |
| | A) | True |
| | B) | False |
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| 7.
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Limited partners are liable for any debt that cannot be paid through the resources of the partnership. |
| | A) | True |
| | B) | False |
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| 8.
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General partners are included in limited partnerships. |
| | A) | True |
| | B) | False |
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| 9.
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If Partner A invested twice as much as Partner B, and there are only two partners, the income must be divided in a ratio of 2:1, respectively. |
| | A) | True |
| | B) | False |
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| 10.
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If partners agree to a method of sharing net income, but say nothing about net losses, losses are shared in the same way as net income. |
| | A) | True |
| | B) | False |
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| 11.
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When a partnership agreement provides for the division of earnings based on time spent and investment balances, the resulting amounts may be treated by the partners as deductible salary expenses and interest expenses in determining the net income of the partnership. |
| | A) | True |
| | B) | False |
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| 12.
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In the purchase of partnership interest, the capital accounts of the exiting partner(s) will be reduced. |
| | A) | True |
| | B) | False |
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| 13.
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With a 100% purchase of the interest of a partner, a new partner has all the rights of the remaining partner(s) . |
| | A) | True |
| | B) | False |
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| 14.
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The capital of an existing partnership is $160,000 after Keith invested $40,000 in the partnership. Keith is entitled to 25% (1/4) of the income or loss of the partnership. |
| | A) | True |
| | B) | False |
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| 15.
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When the current value of the partnership is greater than the recorded amounts of equity, the bonus resulting from a purchase of interest is given to the old partner(s). |
| | A) | True |
| | B) | False |
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| 16.
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The withdrawal of a partner from a partnership may result in an increase in the capital accounts of the remaining partners. |
| | A) | True |
| | B) | False |
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| 17.
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There is more than one reason for giving a withdrawing partner assets of value greater than the withdrawing partner's recorded equity. |
| | A) | True |
| | B) | False |
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| 18.
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The death of a partner will require that all noncash assets are sold for cash, all liabilities are paid, and remaining cash be distributed to the estate of the dead partner on the basis of the partnership income and loss agreement. |
| | A) | True |
| | B) | False |
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| 19.
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Partners will share gains and losses on liquidation in their capital investment ratio. |
| | A) | True |
| | B) | False |
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| 20.
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A capital deficiency occurs when a partner has insufficient equity to cover his or her share of losses resulting from liquidation. |
| | A) | True |
| | B) | False |
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| 21.
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In the purchase of a partnership interest, the cash accounts should be debited to record the sale price. |
| | A) | True |
| | B) | False |
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| 22.
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The relationship between partners in a general partnership involves mutual agency, which means each partner is a fully authorized agent of the partnership. |
| | A) | True |
| | B) | False |
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| 23.
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When admitting a new partner to the partnership, the new partner always pays a bonus or premium for the privilege of joining. |
| | A) | True |
| | B) | False |
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| 24.
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When investing assets in a partnership, new partners always have a right to income for the percentage they invest in the partnership. |
| | A) | True |
| | B) | False |
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