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Unformatted text preview: Chapter 14 - Partnerships: Formation and Operations Chapter 14 Partnerships: Formation and Operations Multiple Choice Questions 1. Cherryhill and Hace had been partners for several years, and they decided to admit Quincy to the partnership. The accountant for the partnership believed that the dissolved partnership and the newly formed partnership were two separate entities. What method would the accountant have used for recording the admission of Quincy to the partnership? A. The bonus method. B. The equity method. C. The goodwill method. D. The proportionate method. E. The cost method. 2. When the hybrid method is used to record the withdrawal of a partner, the partnership A. revalues assets and liabilities and records goodwill to the continuing partner but not to the withdrawing partner. B. revalues liabilities but not assets, and no goodwill is recorded. C. can recognize goodwill but does not revalue assets and liabilities. D. revalues assets but not liabilities, and records goodwill to the continuing partner but not to the withdrawing partner. E. revalues assets and liabilities but does not record goodwill. 3. The disadvantages of the partnership form of business organization, compared to corporations, include A. the legal requirements for formation. B. unlimited liability for the partners. C. the requirement for the partnership to pay income taxes. D. the extent of governmental regulation. E. the complexity of operations. 14-1 Chapter 14 - Partnerships: Formation and Operations 4. The advantages of the partnership form of business organization, compared to corporations, include A. single taxation. B. ease of raising capital. C. mutual agency. D. limited liability. E. difficulty of formation. 5. The dissolution of a partnership occurs A. only when the partnership sells its assets and permanently closes its books. B. only when a partner leaves the partnership. C. at the end of each year, when income is allocated to the partners. D. only when a new partner is admitted to the partnership. E. when there is any change in the individuals who make up the partnership. 6. The partnership of Clapton, Seidel, and Thomas was insolvent and will be unable to pay $30,000 in liabilities currently due. What recourse was available to the partnership's creditors? A. they must present equal claims to the three partners as individuals. B. they must try obtain a payment from the partner with the largest capital account balance. C. they cannot seek remuneration from the partners as individuals. D. they may seek remuneration from any partner they choose. E. they must present their claims to the three partners in the order of the partners' capital account balances. Cleary, Wasser, and Nolan formed a partnership on January 1, 2010, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for...
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- Spring '11
- Accounting, Corporation, partner, Limited liability partnership, Formation and Operations