LP5 QUIZ - ACCOUNTING

1. The financial statement of a partnership are similar to the statements of a sole proprietorship in
all aspects.
Answer: True
2. Mutual agency means that any partner can legally bind the other partners and the partnership
to business contracts within the scope of the businesses regular operations.
Answer: True
3. The net income (loss) allocated to each partner should always equal the total net income (loss)
of the partnership.
Answer: True
4. When a partner withdraws his or her interest in the partnership, both assets and equity will
decrease.
Answer: True
5. Like a sole proprietorship statement of owner's equity, the statement of partners' equity will
show all the partners' capital accounts as one account.
Answer: False
6. In a general partnership, if one partner cannot pay his or her part of the debts, the other partner

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or partners must pay the total.
Answer: True

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7. Upon liquidation, if there is a sale of assets at a loss, the loss must be allocated to the partners'

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capital accounts based on their profit-and-loss-sharing ratio.

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Answer: True
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8. When a new partner enters into a partnership by purchasing an existing partner's interests, the
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total assets and equity of the business increase.
Answer: False
9. Admission of a new partner to a partnership, by purchasing an existing partner's interests,
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simply transfers capital from one partner's account to another.

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Answer: True
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10. When a partner withdraws his or her partnership interest for cash, the liabilities in the balance
sheet remain unchanged.
Answer: True
11. A(n) ________ does not require any permission from the state to be set up.
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Answer: Partnership
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12. When a new partner is admitted at a higher-than-book-value contribution, the existing partners
will receive a bonus amount.
Answer: True
13. Capital deficiency refers to a partnership's claim against a partner.
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Answer: True
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14. Andy and Ian formed a partnership on April 1, 2017. Andy contributes equipment to the
business that originally cost $82,000 and on which accumulated depreciation of $16,000 has
been recorded. The current market value of the equipment is $74,000. The value of the
equipment recorded in the partnership journal is ________.
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Answer: $74,000

15. Steve and Roger allocate 2/3 of their partnership's profits and losses to Steve and 1/3 to Roger. If
the net income of the firm is $30,000, calculate the share of Roger's net income.
Answer: $10,000

PRINCIPALS OF ACCOUNTING II – AC1160 1

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 LP5 QUIZ - ACCOUNTING

16. In a partnership, when a partner contributes a particular asset to the firm, he or she is
considered to be the sole owner of the asset.
Answer: False
17. Upon liquidation of a partnership, gains and losses on the sale of assets are divided according to
the partner's capital balances.
Answer: False
18. A written partnership agreement is also known as the articles of partnership.
Answer: True
19. When a partner withdraws his or her equity for cash, the corresponding capital account will be
closed.
Answer: True
20. In a general partnership, the partners have unlimited personal liability for the debts of the
business.
Answer: True

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PRINCIPALS OF ACCOUNTING II – AC1160 2

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