1. Which of the following statements concerning partnership is true? a. A partnership is a legal entity separate and distinct from the individual partners. b. Individual partners are jointly liable for the debts and obligation of a partnership. c. Income tax is levied on the individual partners’ shares of net income of a partnership and is reported in their personal tax returns. d. All of the above is true.
1. Which of the following statements concerning partnership is true? a. A partnership is a legal entity separate and distinct from the individual partners. b. Individual partners are jointly liable for the debts and obligation of a partnership. c. Income tax is levied on the individual partners’ shares of net income of a partnership and is reported in their personal tax returns. d. All of the above is true.
Chapter21: Partnerships
Section: Chapter Questions
Problem 6BCRQ
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1. Which of the following statements concerning partnership is true?
a. A partnership is a legal entity separate and distinct from the individual partners.
b. Individual partners are jointly liable for the debts and obligation of a partnership.
c. Income tax is levied on the individual partners’ shares of net income of a partnership and is reported in their personal tax returns.
d. All of the above is true.
2. Under what circumstances can the closing of the income summary account result in a debit to one partners’ capital account and credits to the other partners’ capital accounts?
a. The results of operations are divided in a profit and loss ratio and the partnership sustained a loss for the period.
b. The results of operations are allocated in a profit and loss ratio and the partnership’s net income was very low.
c. The results of operations are divided in the average capital ratio and one partner had a low capital balance.
d. The partnership agreement provides for interest on capital and salary allowances and net income is less than the sum of the interest and salary allowances.
3. If a new partner acquires partnership interest directly from the partners rather than from the partnership,
a. no entry is required.
b. the existing partnership is liquidated.
c. the partnership assets should not be revalued because this type of transaction does not result to partnership dissolution.
d. the existing partners’ capital accounts are reduced and the new partner’s capital account is increased.
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