2024 – 1 Question The terms of a partnership agreement provide that one

1. Question :

The terms of a partnership agreement provide that one of the partners is to receive a salary allowance of $30,000, plus a bonus of 20 percent of income after deduction of the bonus and the salary allowance. If income is $150,000, the bonus should be:

 $18,000 

$20,000 

$24,000 

$30,000 

2. Question :

During the liquidation of the FGH partnership, a cash distribution was made to all the partners, who share profits and losses 60 percent, 20 percent, and 20 percent, respectively. Assuming that the cash distribution referred to was made properly, how much would G receive if an additional $60,000 was distributed?

 $60,000 

$20,000 

$17,000 

$12,000 

3. Question :

Which of the following items are important in the determination of safe installment payments to partners?

I. Deficits created in capital accounts are distributed to the remaining partners.

II. All unsold noncash assets are assumed to be worthless.

I only 

II only 

Both I and II 

Neither I nor II 

4. Question :

Which of the following statements best describes accounting for a partnership?

A partnership may be a profit or a nonprofit entity. 

A partnership may use federal income tax rules to account for transactions in their journals and ledger accounts. 

A partnership’s equity section contains both capital and retained earnings accounts. 

A partnership may only distribute money through a dividend payment. 

5. Question :

A partnership is a(n):

I. accounting entity.

II. taxable entity.

I only 

II only 

Neither I nor II 

Both I and II 

6. Question :

Griffin and Rhodes formed a partnership on January 1, 2009. Griffin contributed cash of $120,000 and Rhodes contributed land with a fair value of $160,000. The partnership assumed the mortgage on the land which amounted to $40,000 on January 1. Rhodes originally paid $90,000 for the land. On July 31, 2009, the partnership sold the land for $190,000. Assuming Griffin and Rhodes share profits and losses equally, how much of the gain from sale of land should be credited to Griffin for financial accounting purposes?

$0 

$15,000 

$35,000 

$45,000 

7. Question :

In the computation of a partner’s Loss Absorption Power (LAP), the individual partner’s capital balance and profit-and-loss percentage are used in which of the following ways?

Option A 

Option B 

Option C 

Option D

8. Question :

On a partner’s personal statement of financial condition, assets and liabilities are presented:

I. As current and noncurrent.

II. In order of liquidity and maturity.

I 

II 

Both I and II 

Neither I nor II

9. Question :

The capital balances, prior to the liquidation of the XYZ partnership, were as follows:

X, Y, and Z share profits and losses in the ratio of 5:3:2. As a result of a loan, the partnership owes Y $80,000. Using the information above, which partner has the highest Loss Absorption Power (LAP) prior to liquidation? 

X 

Y 

Z 

Both X and Y 

10. Question :

The BIG Partnership has decided to liquidate at December 31, 20X8. The capital and loan balances of the partners at December 31, 20X8, are provided below:

 If you were to calculate the Loss Absorption Power for each partner, how would the partners rank (from highest to lowest LAP)? 

B, I, G 

I, B, G 

B, G, I 

G, I, B 

 

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