OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 15: Partnership Accounting
Principles of Accounting, Volume 1: Financial Accounting
Chapter 15: Partnership Accounting
Multiple Choice
1. LO 15.1 A partnership ________.
A. has one owner
B. can issue stock
C. pays taxes on partnership income
D. can have more than one general partner
Solution
D
2. LO 15.1 Any assets invested by a particular partner in a partnership ________.
A. do not become a partnership asset but instead remain with the partner
B. can be used only by the investing partner
C. become the property of all the partners
D. are the basis for all profit sharing
Solution
C
3. LO 15.1 Which of the following is a disadvantage of the partnership form of organization?
A. limited life
B. no taxation at the partnership level
C. flexibility in business operations
D. combining of financial resources
Solution
A
4. LO 15.1 Mutual agency is defined as:
A. a mutual agreement
B. the right of all partners to represent the company's normal business operations
C. a synonym for partnership
D. a partnership between two partnerships
Solution
B
5. LO 15.2 Chani contributes equipment to a partnership that she purchased 2 years ago for
$10,000. The current book value is $7,500 and the market value is $9,000. At what value should
the partnership record the equipment?
A. $10,000
B. $9,000
C. $7,500
D. none of the above
Solution
B
6. LO 15.2 Juan contributes marketable securities to a partnership. The book value of the
securities is $7,000 and they have a current market value of $10,000. What amount should the
partnership record in Juan’s Capital account due to this contribution?
A. $10,000
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, OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 15: Partnership Accounting
B. $7,000
C. $3,000
D. none of the above
Solution
A
7. LO 15.2 Which one of the following would not be considered in the development of a
partnership agreement?
A. profit and loss levels
B. processing disputes
C. stock options
D. asset contributions
Solution
C
8. LO 15.3 A well written partnership agreement should include each of the following except
________.
A. how to settle disputes
B. the name of the partnership
C. division of responsibilities
D. Partner’s individual tax rate
Solution
D
9. LO 15.3 What type of assets may a partner not contribute to a partnership?
A. accounts receivable
B. furniture
C. equipment
D. personal credit cards
Solution
D
10. LO 15.3 How does a newly formed partnership handle the contribution of previously
depreciated assets?
A. continues the depreciation life as if the owner had not changed
B. starts over, using the contributed value as the new cost basis
C. shortens the useful life of the asset per the partnership agreement
D. does not depreciate the contributed asset
Solution
B
11. LO 15.4 Thandie and Marco are partners with capital balances of $60,000. They share profits
and losses at 50% each. Chris contributes $30,000 to the partnership for a 1/3 share. What
amount should the partnership record as a bonus to Chris?
A. $20,000
B. $15,000
C. $10.500
D. $5,000
Solution
A
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Chapter 15: Partnership Accounting
Principles of Accounting, Volume 1: Financial Accounting
Chapter 15: Partnership Accounting
Multiple Choice
1. LO 15.1 A partnership ________.
A. has one owner
B. can issue stock
C. pays taxes on partnership income
D. can have more than one general partner
Solution
D
2. LO 15.1 Any assets invested by a particular partner in a partnership ________.
A. do not become a partnership asset but instead remain with the partner
B. can be used only by the investing partner
C. become the property of all the partners
D. are the basis for all profit sharing
Solution
C
3. LO 15.1 Which of the following is a disadvantage of the partnership form of organization?
A. limited life
B. no taxation at the partnership level
C. flexibility in business operations
D. combining of financial resources
Solution
A
4. LO 15.1 Mutual agency is defined as:
A. a mutual agreement
B. the right of all partners to represent the company's normal business operations
C. a synonym for partnership
D. a partnership between two partnerships
Solution
B
5. LO 15.2 Chani contributes equipment to a partnership that she purchased 2 years ago for
$10,000. The current book value is $7,500 and the market value is $9,000. At what value should
the partnership record the equipment?
A. $10,000
B. $9,000
C. $7,500
D. none of the above
Solution
B
6. LO 15.2 Juan contributes marketable securities to a partnership. The book value of the
securities is $7,000 and they have a current market value of $10,000. What amount should the
partnership record in Juan’s Capital account due to this contribution?
A. $10,000
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, OpenStax Principles of Accounting, Volume 1: Financial Accounting
Chapter 15: Partnership Accounting
B. $7,000
C. $3,000
D. none of the above
Solution
A
7. LO 15.2 Which one of the following would not be considered in the development of a
partnership agreement?
A. profit and loss levels
B. processing disputes
C. stock options
D. asset contributions
Solution
C
8. LO 15.3 A well written partnership agreement should include each of the following except
________.
A. how to settle disputes
B. the name of the partnership
C. division of responsibilities
D. Partner’s individual tax rate
Solution
D
9. LO 15.3 What type of assets may a partner not contribute to a partnership?
A. accounts receivable
B. furniture
C. equipment
D. personal credit cards
Solution
D
10. LO 15.3 How does a newly formed partnership handle the contribution of previously
depreciated assets?
A. continues the depreciation life as if the owner had not changed
B. starts over, using the contributed value as the new cost basis
C. shortens the useful life of the asset per the partnership agreement
D. does not depreciate the contributed asset
Solution
B
11. LO 15.4 Thandie and Marco are partners with capital balances of $60,000. They share profits
and losses at 50% each. Chris contributes $30,000 to the partnership for a 1/3 share. What
amount should the partnership record as a bonus to Chris?
A. $20,000
B. $15,000
C. $10.500
D. $5,000
Solution
A
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