Partnerships Practice Exam

Question 1

A partnership is comprised of two elements: An agreement to contribute money, property, or industry to a common fund and an intent to divide the amount of the profits among the contracting partners. True or False?

Answer 1

True

Question 2

A partnership is involuntarily formed by each partner. True or False?

Answer 2

False. Voluntarily

Question 3

The partnership agreement must be filed with the Securities and Exchange Commission when the partnership exceeds P3,000. True or False?

Answer 3

True

Question 4

General partners are personally liable for the partnership’s debts after the exhaustion of its assets. True or False?

Answer 4

True

Question 5

When non-cash assets are invested, the invested capital of the partners is equal to the fair value of the assets invested less any liabilities to be assumed by the partnership. True or False?

Answer 5

True

Question 6

When a partner contributes assets together with liabilities assumed by the partnership, the assets are to be valued at the book value or fair market value, whichever is applicable. True or False?

Answer 6

False. Assets are to be valued at the agreed value

Question 7

In the absence of agreement, the capital contribution shall be made equally. True or False?

Answer 7

False. No such rule

Question 8

Payment of salaries, interests, and bonuses of profit to partners should be treated as part of profit distribution, not as an expense. True or False?

Answer 8

True

Question 9

The purpose of the interest on capital balances component of allocating partnership profits and losses is to reward labor and expertise contributions. True or False?

Answer 9

False. Encourage investments

Question 10

Once the industrial partner becomes a capitalist too, he shall not absorb a share from the net losses of the partnership. True or False?

Answer 10

False. If besides his services he has contributed capital, he shall also receive a share in the profits in proportion to his capital.

Question 11

Which of the following statement is FALSE?

A. A general partner is one whose liability to third persons extends to his private property.

B. An Industrial partner is one who contributes industry, labor, skill or service.

C. A nominal partner is a partner in name only.

D. A dormant partner is one who does not participate in the management of partnership affairs.

Answer 11

D. A dormant partner is one who does not participate in the management of partnership affairs.

Question 12

A partnership in which the term or period for which the partnership is to exist is agreed upon

A. Partnership with a Fixed Term
B. Partnership at will
C. Universal partnership of all present property
D. Limited partnership

Answer 12

A. Partnership with a Fixed Term

Question 13

The advantages of the partnership do not include

A. Ease of formation
B. Unlimited liability
C. Freedom from government regulations
D. Ease of decision making

Answer 13

C. Freedom from government regulations

Question 14

A partner who is appointed to administer the realization and distribution of partnership assets
after dissolution

A. Industrial partner
B. Managing partner
C. Liquidating partner
D. Ostensible partner

Answer 14

C. Liquidating partner

Question 15

What is the basis of capital sharing if the partners do not have an agreement as to the amount of their individual capital contribution?

A. Equal share
B. Based on profit or loss agreement
C. Actual contributions of the partner
D. Service

Answer 15

C. Actual contributions of the partner

Question 16

When property other than cash is invested in a partnership, at what amount should the noncash property be credited to the contributing partner’s capital account?

A. Fair value at the date of contribution.
B. Contributing partner’s original cost.
C. Assessed valuation for property tax purposes.
D. Estimated value at the date of contribution

Answer 16

A. Fair value at the date of contribution.

Question 17

What is the entry for the acceptance of an industrial partner’s skills as his contribution?

A. General journal through a memorandum entry
B. General ledger through a debit-credit entry
C. General journal through a debit-credit entry
D. General ledger through a memorandum entry

Answer 17

A. General journal through a memorandum entry

Question 18

Under the bonus method, the capital of the partner receiving the bonus is

A. Credited at amount greater than the fair value of the asset contributed
B. Credited at an amount lesser than the fair value of the asset contributed
C. Credited at an amount equal to the fair value of the asset contributed
D. Credited at an amount greater or less than the fair value of the asset contributed

Answer 18

A. Credited at amount greater than the fair value of the asset contributed

Question 19

A partner who is given priority to get first a just and equitable share for his services rendered to the partnership

A. Industrial partner
B. Capitalist partner
C. Managing partner
D. General partner

Answer 19

A. Industrial partner

Question 20

Which of the following is not considered as legitimate expense of a partnership?

A. Interest paid to partners based on the average capital
B. Depreciation on assets contributed to the partnership
C. Salaries for management hired to run the business
D. Supplies used in the partners’ offices

Answer 20

A. Interest paid to partners based on the average capital