Question : Multiple Choice Questions 31. Which of the following statements not correct? A. Each general : 1197646

Multiple Choice Questions

31. Which of the following statements is not correct?

A. Each general partner has unlimited liability for the debts of a partnership.

B. Federal income tax is levied on the net income of a partnership and on the earnings of the individual partners when the net income is distributed to them.

C. Any general partner can make valid contracts for a partnership and can otherwise conduct its affairs.

D. When a partner dies or is incapacitated, the partnership is dissolved.

32. Federal income tax is levied on

A. a partnership based on its total net income when earned.

B. the partners for their individual shares of the reported partnership income.

C. the partners only when they withdraw earnings from the partnership for personal use.

D. the partnership at the end of the fiscal period.

33. Which of the following is not a characteristic of a partnership?

A. Each general partner has unlimited liability for the debts of the partnership.

B. If one partner dies or leaves the partnership, the existing partnership is terminated.

C. The partnership income is subject to a federal income tax that is levied on the business but not on the partners.

D. The existing partnership agreement is dissolved and a new agreement is formed when a new partner joins the partnership.

34. The amount that each partner withdraws from a partnership

A. cannot exceed the net income reported by the partnership.

B. should be specified in the partnership agreement.

C. is the base on which federal income taxes are levied on the partnership income.

D. is usually determined by the amount of the net income.

35. Which of the following statements is correct?

A. The general ledger of a partnership will include a single capital account, whose balance represents the combined equity of all the partners.

B. Past-due accounts receivable should not be transferred from the financial records of a sole proprietorship to a newly formed partnership.

C. The financial records of a new partnership are opened with a memorandum entry in the general journal.

D. A new partner must purchase the partnership interest of another partner.

36. The entry to record the investment of cash in a partnership by one partner would consist of a debit to

A. the partner’s capital account and a credit to Cash.

B. Cash and a credit to an account called Partners’ Equities.

C. Cash and a credit to the partner’s capital account.

D. Cash and a credit to the partner’s drawing account.

37. Ryan Fuller, a sole proprietor, entered into partnership with another individual. Fuller’s investment in the partnership included equipment that cost $32,000 when it was purchased. The equipment has a book value of $13,000 and a net agreed-on value of $16,000. In the financial records of the partnership, this equipment and its accumulated depreciation should be recorded at

A. $16,000 and $0, respectively.

B. $13,000 and $0, respectively.

C. $32,000 and $19,000, respectively.

D. $16,000 and $3,000, respectively.

38. Robert Ballard, a sole proprietor, entered into partnership with another individual. Ballard’s investment in the partnership included equipment that cost $64,000 when it was purchased. The equipment has a book value of $26,000 and a net agreed-on value of $32,000. In the financial records of the partnership, this equipment and its accumulated depreciation should be recorded at

A. $64,000 and $38,000, respectively.

B. $32,000 and $6,000, respectively.

C. $32,000 and $0, respectively.

D. $26,000 and $0, respectively.

39. When the owner of a sole proprietorship accepts a partner, the assets of the proprietorship

A. must be transferred to the partnership at the values reflected in the financial records of the proprietorship.

B. must be converted to cash and used to pay any debts of the proprietorship, with excess cash available for investment in the new partnership.

C. cannot be invested in the new partnership.

D. may be adjusted to reflect current values before being transferred to the partnership.

40. The general ledger of a partnership will

A. not contain a separate drawing account for each partner.

B. contain one capital account that reflects the total equity of all partners.

C. not contain a capital account or accounts.

D. contain a separate capital account for each partner.