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True of False
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1
A partnership is an incorporated association of two or more persons to pursue a business for profit as co-owners.
A)True
B)False
2
A written contract is necessary for the legal formation of a partnership.
A)True
B)False
3
Partnerships are subject to income taxes.
A)True
B)False
4
Partners can agree to limit the power of any one or more of the partners to negotiate contracts for the partnership. Such an agreement is binding on all outsiders, whether or not they know it exists.
A)True
B)False
5
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
6
A general partnership may consist of limited partners and general partners.
A)True
B)False
7
Limited partners are liable for any debt that cannot be paid through the resources of the partnership.
A)True
B)False
8
General partners are included in limited partnerships.
A)True
B)False
9
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
10
When partners invest in a partnership, their capital accounts are credited for the invested amounts.
A)True
B)False
11
During the closing process of a partnership, each partner's withdrawal account is closed to the income summary account.
A)True
B)False
12
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
13
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
14
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
15
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
16
In the purchase of partnership interest, the current capital accounts of the exiting partner(s) will be reallocated.
A)True
B)False
17
With a purchase of the interest of a partner, a new partner has all the rights of the remaining partner(s).
A)True
B)False
18
The capital of an existing partnership is $160,000 after Keith invested $40,000 in the partnership. Keith is automatically entitled to 25% (1/4) of the income or loss of the partnership.
A)True
B)False
19
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
20
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
21
There are two reasons why a withdrawing partner may receive assets of value greater than the withdrawing partner's recorded equity – that is receive a bonus.
A)True
B)False
22
The death of a partner will require that all noncash assets are liquidated, 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
23
Partners will share gains and losses on liquidation in their capital investment ratio.
A)True
B)False
24
In the purchase of a partnership interest, the cash accounts should be debited to record the sale price.
A)True
B)False
25
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
26
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
27
In step one of the liquidation prices, if the proceeds resulting from the sale of the non-cash assets are higher than the non-cash asset's cost, a gain is recorded.
A)True
B)False
28
In step three of the liquidation process of a partnership, obligations are paid.
A)True
B)False
29
In the fourth and last step of the liquidation process, the distribution of cash to the partners is based on income-and-loss ratio.
A)True
B)False







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