B. A partnership involves two or more persons engaged in economic activity

c. Partners own the partnership’s assets together.

d. Partners need careful planning to succeed in business.

4. Sudds and Cobblestone decide to change their general partnership into a limited partnership. The main reason business partners would want to do this is to:

a. develop synergy.

B. avoid unlimited liability.

c. initiate mutual agency.

d. increase guest satisfaction ratings for the coming week.

5. Which of the following features do general and limited partnerships share?

a. unlimited liability

b. limited liability

C. the requirement to have at least one general partner

d. none of the above

6. Which of the following is the simplest way for partners to divide profits?

A. in a fixed ratio

b. according to salaries and a fixed ratio

c. according to salaries, interest on beginning capital balances, and the remainder in a fixed ratio

d. according to productivity ratings of all partners

7. Robbins and Byrd form a partnership, with Robbins contributing $75,000 in capital and Byrd contributing $85,000. If they decide to divide income by giving 45 percent of profits to Robbins and 55 percent to Byrd, Robbins would receive ________ out of total profits of $160,000.

a. $72,000

b. $75,000

c. $85,000

d. $88,000

8. Two partners agree to share profits in the following arrangement:

1) Salary of $40,000 for each

2) Interest at 10 percent on beginning capital balances

3) The remainder in a 50-50 ratio

The first partner contributed $100,000 in beginning capital, and the second contributed $50,000. How much money would the second partner receive from total profits of $120,000?

a. $57,500

b. $52,500

c. $45,000

d. $12,500

9. If an incoming, new partner purchases an equity interest of $70,000 in a partnership and uses $90,000 in cash to do so, existing partners:

A. receive bonuses.

b. should give the new partner a one-third interest.

c. have overvalued the business’s oldest assets.

d. forfeit some capital to the new partner.

10. The Williams & Wiley partnership has two partners and each partner has $50,000 invested in the firm. Woods is admitted to the partnership for one-third interest and invests $80,000. Woods’s partnership account would be credited for:

a. $50,000.

b. $60,000.

c. $80,000.

d. $180,000.

Chapter 14 Corporate Accounting

A. corporations

b. partnerships

c. sole proprietorships

d. any of the above

2. When corporations account for their taxes, they estimate their taxes quarterly and accrue them for payment. In such a transaction, the account Income Tax Expense receives:

a. a credit.

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