When a partner's capital balance becomes a deficit, O The deficit will be considered as a partnership loss O The partner with a deficit balance should contribute additional assets to offset the deficit balance O The other partners should file a case against the partner with the deficit O The deficit will be absorbed the richest partner

When a partner's capital balance becomes a deficit, O The deficit will be considered as a partnership loss O The partner with a deficit balance should contribute additional assets to offset the deficit balance O The other partners should file a case against the partner with the deficit O The deficit will be absorbed the richest partner

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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A type of partnership where the company cannot pay its debts with business assets, the partners must use personal assets to pay the debt. O Particular partnership O Nominal partnership O General partnership O Trading partnership
In a partnership, a capital deficiency occurs for a partner when Options: • His share in the losses of the partnership is more than his capital balance • Loan payable by the partnership to him greater than his capital balance • His solvency is lesser than his capital balance • His personal assets are less than his personal liabilities
Which of the following is true regarding capital deficiencies? O a Ob Oc Od The partners do not have a legally enforceable claim against the partner with the capital deficiency. If a partner with a capital deficiency is unable to pay the amount owed to the partnership, the partners with debit balances must absorb the loss. The loss is allocated based on the profit and loss ratios between the partners whether with credit or debit balances. if the partner with the capital deficiency pays the amount owed to the partnership, the deficiency is eliminated.
Partnership accounting does not: Multiple Choice Use a capital account for each partner. Use a withdrawals account for each partner. Allocate net income to each partner according to the partnership agreement. Allocate net loss to each partner according to the partnership agreement. Tax the business entity.
True or False Instruction: Write "T" if the statement is correct and "F" if incorrect. 1. When a new partner is admitted in an existing partnership, automatically the previous partnership contract that has been executed by the existing partners is "dissolved".
Julie contributes, as part of her initial investment, accounts receivable with an allowance for doubtful accounts. Which of the following reflects a proper treatment? O The accounts receivable and allowance should not be recorded on the books of the partnership because a partner must invest cash in the business. O The balance of the accounts receivable account should be recorded on the books of the partnership at its net realizable value. O The allowance account may be set up on the books of the partnership because it relates to the existing accounts that are being contributed. O The allowance account should not be recorded in the books of the partnership.
Under the Revised Uniform Partnership Agreement, a. unsatisfied partnership creditors share pro rata with personal creditors in the assets of the partner’s estate. b. unsatisfied partnership creditors have first priority against partnership assets. c. unsatisfied personal creditors have first priority against partnership assets. d. None of the above.
is it true or false? Explain Unless stated otherwise,in the partnership contract,profits and losses are shared among the partners in the ratio of their capital equity balances.
4. How shall the profits and losses of the partnership be distributed among the partners? a. It should be divided equally. b. It should be divided according to their profits and losses sharing agreement. c. It should be divided proportionately in accordance with capital contribution. d. It should be divided according to what type of partner they are.
Which of the following is false a regarding a partner's deficit balance? Multiple Choice A partner cannot refuse to make contributions to cover their deficit balance. Deficits can occur when the partnership has incurred significant operating losses. Deficits can occur when the sale of noncash assets during the liquidation process results in material losses. The partner with a deficit balance should contribute assets to cover the deficit balance. The other partners may have to absorb the deficit balance.
If an existing partner withdraws from a partnership which is true a. his or her interest may be sold to the partnership or an individual partner. b. the consideration received for that partner's interest may suggest the existence of undervalued existing assets and/or goodwill. c. either the bonus or the goodwill method may be used to record the transaction if the partnership acquires the withdrawing partner's interest. d. all of the above
Any assets invested by a particular partner in a partnership ________.A. do not become a partnership asset but instead remain with the partnerB. can be used only by the investing partnerC. become the property of all the partnersD. are the basis for all profit sharing