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501 Chapter 14 MC

Cherryhill and Hace had been partners for several years, and they decided to admit Quincy to the partnership. The accountant for the partnership believed that the dissolved partnership and the newly formed partnership were two separate entities. What method would the accountant have used for recording the admission of Quincy to the partnership?
Goodwill method
P, L, and O are partners with capital balances of $50,000, $30,000 and $20,000 and who share in the profit and loss of the PLO partnership 30%, 20%, and 50%, respectively, when they agree to admit C for a 20% interest.
If C is to contribute an amount equal to his book value share of the new partnership, how much should C contribute?
(50,000 + 30,000 + 20,000)/ 80% * 20% = $25,000
The disadvantages of the partnership form of business organization, compared to corporations, include
unlimited liability for the partners.
The advantages of the partnership form of business organization, compared to corporations, include
Single taxation
The dissolution of a partnership occurs
when there is any change in the individuals who make up the partnership.
The partnership of Clapton, Seidel, and Thomas was insolvent and will be unable to pay $30,000 in liabilities currently due. What recourse was available to the partnership’s creditors?
they may seek remuneration from any partner they choose.
Cleary, Wasser, and Nolan formed a partnership on January 1, 2010, with investments of $100,000, $150,000, and $200,000, respectively. For division of income, they agreed to (1) interest of 10% of the beginning capital balance each year, (2) annual compensation of $10,000 to Wasser, and (3) sharing the remainder of the income or loss in a ratio of 20% for Cleary, and 40% each for Wasser and Nolan. Net income was $150,000 in 2010 and $180,000 in 2011. Each partner withdrew $1,000 for personal use every month during 2010 and 2011.
What was Wasser’s total share of net income for 2010?
Interest 150,000 * 10% + compensation 10,000 + share of profit [ 150,000 – (100,000 + 150,000 + 200,000) *10% – 10,000) *40%= 63,000

Interest+Compensation+share of profits

Share of Profits= (NI-partner distributions)*P/L%

Which of the following is not a characteristic of a partnership?
A. The partnership itself pays no income taxes.
B. It is easy to form a partnership.
C. Any partner can be held personally liable for all debts of the business.
D. A partnership requires written Articles of Partnership.
E. Each partner has the power to obligate the partnership for liabilities.
D. a partnership requires written Articles of Partnership
Partnerships have alternative legal forms including all of the following except: A. General Partnership.
B. Limited Partnership.
C. Subchapter S Partnership.
D. Limited Liability Partnership. E. Limited Liability Company.
C. Subchapter S Partnership.
Which of the following statements is correct regarding the admission of a new partner?
A. A new partner must purchase a partnership interest directly from the business.
B. The right of co-ownership in the business property can be transferred to a new partner without the consent of other existing partners.
C. The right to share in profits and losses can be sold to a new partner without the consent of other existing partners.
D. The right to participate in management of the business can be conveyed without the consent of other existing partners.
E. A new partner always pays book value.
B. The right of co-ownership in the business property can be transferred to a new partner without the consent of other existing partners.
C. The right to share in profits and losses can be sold to a new partner without the consent of other existing partners.

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