1.

 
When a new partner is admitted, it will dissolve the old partnership.

 a. True  b. False

2. 
A partnership agreement need not be in writing.

 a. True  b. False

3. 
An informational tax return must be filed for a partnership.

 a. True  b. False

4. 
If the partnership agreement does not describe the method of income and loss distribution, the partners must share income and
losses equally.

 a. True  b. False

5. 
When individuals invest property in a partnership, the property becomes an asset of the partnership and is owned jointly by the
partners.

 a. True  b. False

6. 
If a partnership agreement does not specify how income and losses are to be distributed, the partners share them equally.

 a. True  b. False

7. 
When a newly admitted partner pays a bonus to the existing partners, the new partner's capital account is credited.

 a. True  b. False

8. 
Admission of a new partner never has an impact on net income.

 a. True  b. False

9. 
The death of a partner dissolves the partnership.

 a. True  b. False

10. 
In a liquidation, partners are given back the assets that they originally invested.

 a. True  b. False

11. 
A partnership need not obtain permission from the state before it legally conducts business.

 a. True  b. False

12. 
Which of the following does not result in the dissolution of a partnership?
a. Death of a partner
b. Admission of a new partner
c. Withdrawal of a partner
d. Sale of partnership assets
13. 
Disadvantages of a partnership include
a. Mutual agency.
b. Facilitates pooling of resources.
c. No corporate tax burden.
d. Freedom and flexibility for partners.
14. 
Which of the following partnership characteristics is an advantage?
a. Ease of dissolution
b. Mutual agency
c. Limited life
d. Unlimited liability
15. 
A partner invests into a partnership a building with a $50,000 carrying value and $80,000 fair market value. The related mortgage
payable of $25,000 is assumed by the partnership. The entry to record the investment in partnership is:
a. Capital                               50,000 
                Mortgage Payable                       25,000
                 Building                                       25,000
b. Capital                              80,000 
                Mortgage Payable                      25,000
                Building                                      55,000
c. Building                            50,000 
                Mortgage Payable                      25,000
                Capital                                        25,000
d. Building                             80,000 
                Mortgage Payable                       25,000
                 Capital                                        55,000
16. 
Which of the following statements is correct regarding partnerships?
a. Accounting for a partnership is similar to accounting for a corporation.
b. It is necessary to maintain separate Capital and Withdrawals accounts for each partner.
c. If the partnership assumes a liability related to an asset invested in the partnership, the partner's capital account is
credited and a liability account is debited.
d. All of these choices.
17. 
Zach has bought Biannca's interest in the A&B Partnership for a $120,000 direct payment to Biannca. Zach and Biannca's capital
balances before the sale were $48,000 and $72,000, respectively. The entry to record the purchase of interest in partnership is:
a. Biannca, Capital           72,000 
                Zach, Capital                          72,000
b. Biannca, Capital          120,000 
                 Zach, Capital                        120,000
c. Cash                            120,000 
                 Zach, Capital                         120,000
d. Zach, Capital              120,000 
                Cash                                     120,000
18. 
In a partnership liquidation, the Gain or Loss from Realization
a. the last entry made to the partners' Capital accounts.
b. is closed to Retained Earnings.
c. is distributed according to the partners' stated ratios.
d. All of these choices.
19. 
Shannon, Thomas, and Williman are in a partnership that is being dissolved. The stated ratios of Shannon, Thomas, and William
are 3:3:4, respectively. The partnership's assets are sold at a loss of $240,000. Which of the following is correct?
a. The Loss from Realization will be debited for $240,000.
b. Shannon's Capital account will be credited for $72,000.
c. William's Capital account will be debited for $96,000.
d. All of these choices.
20. 
In a limited partnership
a. the general partners have limited liability
b. all but the general partners have limited liability
c. all but the general partners have unlimited liability
d. all partners have limited liability
21. 
A __________ is an association of two or more entities for the purpose of achieving a specific goal, such as the manufacture of a
product in a new market.
a. Limited liability company.
b. Limited partnership.
c. S corporation.
d. Joint venture.
22. 
Which of the following describes a limited liability company?
a. An association of two or more entities for the purpose of achieving a specific goal.
b. Entities with limited lives that a company creates to achieve a specific objective.
c. A special type of partnership that confines the limited partner's potential loss to the amount of his or her investment.
d. Corporations that U.S. tax laws treat as partnerships, and they do not pay income taxes.

ANSWER KEY 

1 True
2 True
3 True
4 True
5 True
6 True
7 True
8 True
9 True
10 False
11 True
12 d
13 a
14 a
15 d
16 b
17 a
18 c
19 c
20 b
21 d
22 c