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ACTBFAR > 4-6: Partnerships (Intro, Formation and Operation) > Flashcards

4-6: Partnerships (Intro, Formation and Operation) Flashcards

1
Q

T/F. The beginning capital balance method of profit sharing encourages additional investments during the accounting period.

A

False.

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2
Q

A corporation may be a partner in a partnership contract.

A

False.

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3
Q

T/F. Because partnerships are treated as an artificial being created by operation of law, partnerships have a juridical personality separate and distinct from that of the partners.

A

True.

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4
Q

Partners must be both natural and ________ persons, which means that they must be capable and competent and thereby rendering insane persons & minors unqualified.

A

juridical

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5
Q

T/F. Unlike SP and in corporations, partnerships require all partners’ consent in transferring ownership interest.

A

True.

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6
Q

This is a partnership whose main activity is the rendering of services.

A

Non-trading partnership.

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7
Q

Partners, except general professional partnerships, are subject to ____% income tax.

A

30%.

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8
Q

This is a partnership wherein all partners may publicly act on behalf of the partnership and each partner can be held individually liable, pro-rata and sometimes solidarily with their personal property, for the obligations of the partnership.

A

General partnership.

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9
Q

This is a partnership which only exists as to partners and, in reality, is not a partnership.

A

Partnership by estoppel.

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10
Q

As to management, this is a partner who does not participate in the operation and affairs of the partnership.

A

Silent partner.

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11
Q

A “partner” who is not included in the partnership agreement but is made liable as a partner for the protection of innocent third persons.

A

A nominal partner.

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12
Q

This is one who takes an active part in the management and is also known to the public as a partner.

A

An ostensible partner.

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13
Q

T/F. A corporation may be a partner in a partnership contract.

A

False. Joint ventures, however, are possible.

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14
Q

T/F. A partnership ends with the death or withdrawal of a partner.

A

True.

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15
Q

T/F. All partnerships are subject to income tax.

A

False. p52

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16
Q

T/F. The by-laws governs the formation, operation, and dissolution of the partnership.

A

False. Articles of Co-partnership.

17
Q

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, the existing partnership is terminated.
C. The existing partnership agreement is dissolved and a new one is formed when a new partner joins.
D. The partnership income is subject to an income tax levied on the business but not on the partners.

A

D. The partnership income is subject to an income tax levied on the business but not on the partners.

18
Q 
The accounting method used for partnership operations is:
A. AV method
B. cost method
C. FMV method
D. accrual method
A

D. accrual method.

19
Q

T/F. The separate entity assumption requires business expenses that are paid by the partner be charged to a partner’s drawing account.

A

False.

20
Q

T/F. In the distribution of profits and losses to the partners, interest for use of partners’ capital may be provided for regardless of whether the operation results in a favorable outcome or not.

A

True.

21
Q

T/F. A stipulation in the partnership agreement that one of the partners will not share in the losses is valid for as long as all the partners agree to such a stipulation.

A

True.

22
Q

T/F. When there is no agreement, the capitalist-industrial partner is also exempt from sharing on the partnership losses.

A

False.

23
Q

T/F. The distributable shares of the partners in the business income are subject to tax whether or not the business is a GPP.

A

True.

24
Q

When the owner of a SP accepts a partner, the assets of the proprietorship:
A. must be transferred to the partnership at the values reflected in the FS of the proprietorship.
B. may be adjusted to reflect current values before being transferred to the partnership.

A

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

25
Q

A partnership P/L ratio applies to partnership profit:
A. before salaries and interest are deducted.
B. after salaries are deducted but before interest is deducted.
C. before salaries are deducted but after interest is deducted.
D. after salaries and interest are deducted.

A

D. after salaries and interest are deducted.

26
Q

In the absence of any agreement in the share of the industrial partner in the partnership profit, such partner is entitled to share in the partnership profit:
A. equally.
B. at least 10%.
C. equal to the share of the capitalist partner with the smallest share.
D. equal to the share of the capitalist partner with the largest share.

A

C. equal to the share of the capitalist partner with the smallest share.

27
Q

T/F. For the Certificate of Registration of Business Name to be issued by DTI, a partnership is required to submit articles of copartnership and SEC registration.

A

True.

28
Q 
When a partner withdraws non-cash assets, the Drawing account is:
A. not affected.
B. debited.
C. credited.
D. debited then credited.
A

B. debited.

29
Q

Which of the following are factors considered in dividing profits and losses? You may choose more than one.
A. services rendered by the partners
B. capital contribution invested
C. economic or pure profit
D. entrepreneurial and managerial skill of partners

A

A - D. All are factors considered.

30
Q

T/F. If the partners did not agree as to how profits are divided, then such should be divided equally among them.

A

False. (p.88)

31
Q 
Which theory of equity is applicable in accounting for partnerships?
A. Proprietary theory only
B. Proprietary and entity theories
C. Entity theory only
D. Neither proprietary nor entity theory
A

B. Proprietary and entity theories. (p98)

32
Q 
This compensates for the routine time and effort partners exert for the business.
A. Interest on capital balance
B. Bonus
C. Loans
D. Salary allowance
A

B. Bonus.

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