Question :
55. During the current year, Lisa, Tony, and Brian, who : 1370045
55. During the current year, Lisa, Tony, and Brian, who are partners in the Corsetti Company, had average capital balances of $41,000, $53,000, and $48,000, respectively. The partners share profits and losses by allowing a $16,000 salary to Lisa and a $14,000 salary to Brian, and a 12% return on average capital balances to all the partners. Any remaining income or loss is divided equally. If the company’s income was $101,040, Brian’s capital account would increase by:
A)$13,920
B)$33,680
C)$37,760
D)$53,440
56. During the current year, Julia, Vanessa, and Connie, who are partners in the MacIntosh Company, had average capital balances of $62,000, $56,000, and $74,000, respectively. The partners share profits and losses by allowing a $15,000 salary to Julia and a $19,000 salary to Vanessa, and a 12% return on average capital balances to all the partners. Any remaining income or loss is divided equally. If the company had a loss of $2,960, Julia’s capital account would:
A)decrease by $987
B)increase by $2,440
C)increase by $14,013
D)decrease by $20,000
57. Which of the following statements is true about distribution of partners earning?
A) The interest on capital reduces net income on the income statement
B) The salary component is reported as salary expense on the income statement.
C) The interest and salary allocations have no effect on cash flows
D) Owners’ equity is reduced by the salary allocation.
58. Which of the following is not one of the advantages of sole proprietorships and partnerships, as compared to corporations?
A)limited liability
B)ease of formation
C)income is only taxed once
D)owners are more likely to be managers
59. Which of the following is not one of the advantages of the corporation as compared to sole proprietorships and partnerships?
A)ability to raise large sums of money
B)ease of formation
C)limited liability
D)unlimited life
60. Which of the following statements about a limited liability partnership (LLP) is true?
A)an LLP has one or more general partners and one or more limited partners
B)partners in an LLP are liable only for their investments in the partnership
C)partners in an LLP are not liable for the misdeeds of another partner
D)only the general partners in an LLP can participate in management
61. Preferred stock for which unpaid dividends must be paid before dividends can be paid to common stockholders is referred to as
A)callable
B)convertible
C)cumulative
D)participating
62. If preferred stock has the right to receive dividends in excess of its stated dividend rate it is referred to as
A)callable
B)convertible
C)redeemable
D)participating
63. If preferred stockholders have the right to sell their stock for cash to the corporation it is referred to as
A)callable
B)convertible
C)redeemable
D)participating
64. If you own convertible preferred stock, what right does the convertibility feature give you?
A)You can convert the stock into cash whenever you want
B)You can convert the stock into the firm’s common shares
C)You can convert the stock into cash but only at pre-specified times
D)You have the right to receive dividends in arrears before common stock gets a dividend
