Accounting > QUESTIONS & ANSWERS > Chapter 13 — Partnerships: Characteristics, Formation, and Accounting for Activities QUESTIONS WIT (All)

Chapter 13 — Partnerships: Characteristics, Formation, and Accounting for Activities QUESTIONS WITH 100% CORRECT ANSWERS AND CALCULATIONS

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Chapter 13 — Partnerships: Characteristics, Formation, and Accounting for Activities MULTIPLE CHOICE 1. Which of the following is NOT a characteristic of the proprietary theory that influences a... ccounting for partnerships? a. Partners' salaries are viewed as a distribution of income rather than a component of net income. b. A partnership is not viewed as a separate, distinct, taxable entity. c. A partnership is characterized by limited liability. d. Changes in the ownership structure of a partnership result in the dissolution of the partnership. ANS: C DIF: M OBJ: 1 2. Don and Key form a partnership. Don contributes into the partnership a personal computer that he has used at home in nonbusiness related activities. Don had paid $10,000 for the computer 2 years ago. The current market value of the computer is $9,000. The partners, after reviewing IRS rules, assigned the computer a useful life of 5 years. For financial reporting purposes, at what amount should the computer be recorded in the partnership ledger? a. $10,000 b. $9,000 c. $7,500 d. $6,000 ANS: B DIF: M OBJ: 5 3. Which of the following would be least likely to be used as a means of allocating profits among partners who are active in the management of the partnership? a. Salaries b. Bonus as a percentage of net income before the bonus c. Bonus as a percentage of sales in excess of a targeted amount d. Interest on average capital balances ANS: D DIF: E OBJ: 4 4. Which of the following best describes the use of interest on invested capital as a means of allocating profits? a. If interest on invested capital is used, it must be used for all partners. b. Interest is allocated only if there is partnership net profit. c. Invested capital balances are never affected by drawings of the partnerships. d. Use of beginning or ending measures of invested capital may be subject to manipulation that distorts the measure of invested capital [Show More]

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