College Accounting, Chapters 1-27
23rd Edition
ISBN: 9781337794756
Author: HEINTZ, James A.
Publisher: Cengage Learning,
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Chapter 19, Problem 3MC
To determine
Identify the option that is correct if the
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is it true or false? Explain
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Unless stated otherwise,in the partnership contract,profits and losses are shared among the partners in the ratio of their capital equity balances.
If the partnership agreement only includes a provision on how to distribute profits, any partnership losses are:
Divided based on the ratio of original capital account balances
Divided using the same. manner of profit distribution
Divided equally among the partners
Not distributed among the
partners
Which statement is incorrect? *
-The accrual basis of accounting is used to account for partnership operation.
-When expenses exceed revenues, the income summary account will be debited when closing it to the partners’ capital accounts.
-In the absence of any agreement, profits and losses shall be divided based on original capital
-Salaries and interest on capital given to partners are not considered as partnership expenses but rather as only a means of distributing partnership net income.
-none of the above
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Which statement(s) is incorrect? *
-Income summary account is closed directly to capital account if the intention of the partners is to make profit or loss part of permanent capital.
-Beginning capital refers to the initial investment of a partner upon formation of the partnership.
-A capitalist-industrial partner shares on the partnership profits as well as on partnership losses.
-The salary to partners and/or…
Chapter 19 Solutions
College Accounting, Chapters 1-27
Ch. 19 - Prob. 1TFCh. 19 - Prob. 2TFCh. 19 - Prob. 3TFCh. 19 - Prob. 4TFCh. 19 - Prob. 5TFCh. 19 - Prob. 1MCCh. 19 - Prob. 2MCCh. 19 - Prob. 3MCCh. 19 - Prob. 4MCCh. 19 - Prob. 5MC
Ch. 19 - Prob. 1CECh. 19 - Prob. 2CECh. 19 - Prob. 3CECh. 19 - Prob. 4CECh. 19 - Prob. 5CECh. 19 - Prob. 1RQCh. 19 - Prob. 2RQCh. 19 - Prob. 3RQCh. 19 - Prob. 4RQCh. 19 - Prob. 5RQCh. 19 - Prob. 6RQCh. 19 - Prob. 7RQCh. 19 - Prob. 8RQCh. 19 - Prob. 9RQCh. 19 - Prob. 1SEACh. 19 - Prob. 2SEACh. 19 - Prob. 3SEACh. 19 - Prob. 4SEACh. 19 - ENTRIES: PARTNERSHIP LIQUIDATION On liquidation of...Ch. 19 - Prob. 6SPACh. 19 - Prob. 7SPACh. 19 - Prob. 8SPACh. 19 - Prob. 9SPACh. 19 - STATEMENT OF PARTNER SHIP LIQUIDATION WITH LOSS...Ch. 19 - Prob. 1SEBCh. 19 - Prob. 2SEBCh. 19 - Prob. 3SEBCh. 19 - Prob. 4SEBCh. 19 - Prob. 5SEBCh. 19 - Prob. 6SPBCh. 19 - Prob. 7SPBCh. 19 - ENTRIES FOR DISSOLUTION OF PARTNERSHIP Cummings...Ch. 19 - Prob. 9SPBCh. 19 - STATEMENT OF PARTNER SHIP LIQUIDATION WITH LOSS...Ch. 19 - Prob. 1MYWCh. 19 - Prob. 1ECCh. 19 - Prob. 1MPCh. 19 - Prob. 1CPCh. 19 - Prob. 1COP
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Similar questions
- When a partnership is liquidated, any gains or losses realized by the sale of noncash assets are allocated to the partners based on their income sharing ratio. Why?arrow_forwardWhich one of the following would not be considered in the development of a partnership agreement? A. profit and loss levels B. processing disputes C. stock options D. asset contributionsarrow_forwardWhich of the following is a disadvantage of the partnership form of organization? A. limited life B. no taxation at the partnership level C. flexibility in business operations D. combining of financial resourcesarrow_forward
- Any assets invested by a particular partner in a partnership ________. A. do not become a partnership asset but instead remain with the partner B. can be used only by the investing partner C. become the property of all the partners D. are the basis for all profit sharingarrow_forwardWhen a partnership dissolves, the first step in the dissolution process is to ________. A. allocate the gain or loss on sale based on income sharing ratio B. pay off liabilities C. sell noncash assets D. divide the remaining cash among the partnersarrow_forwardWhich of the following case would allow the capitalization of Interest Expense  -No Case allows this transaction -Provided the interest is immaterial -Only if Management Allows -Borrowing Cost    If the partnership operations result to net loss, which of the following distribution schemes is correct?   -Allocate the salaries and interest but not the bonus -Allocate the salaries, interest and bonus as per partnership agreement -Agreement as to salaries, interest and bonus are disregarded, distribute only the loss -Allocate the salaries only but not interest and bonus  PFRS 5 defines a "disposal group" (i.e., that will be disposed through sale) to include:  -non-current assets and some directly associated liabilities -current assets, non-current assets and some directly associated liabilities -non-current assets only -current and non-current assetsarrow_forward
- What is the purpose of a partnership appropriation account? A to avoid disagreements between the partners B to calculate residual profits for division between partners C to calculate the profit sharing ratio D to determine the amount of partners’ salariesarrow_forwardIf the partnership operations result to net loss, which of the following distribution schemes is correct?   -Allocate the salaries and interest but not the bonus -Allocate the salaries, interest and bonus as per partnership agreement -Agreement as to salaries, interest and bonus are disregarded, distribute only the loss -Allocate the salaries only but not interest and bonus  PFRS 5 defines a "disposal group" (i.e., that will be disposed through sale) to include:  -non-current assets and some directly associated liabilities -current assets, non-current assets and some directly associated liabilities -non-current assets only -current and non-current assetsarrow_forwardWhich of the following transactions shall not affect the capital balance of a partner? Share of a partner in the partnership’s net loss. Receipt of bonus by a partner from another partner based on agreement. Advances made by the partnership to a partner. Additional investment by a partner to the partnership.arrow_forward
- Which of the following items decreases a partner's at-risk basis? (a) A borrowed amount, secured by property used outside the activity, contributed to the partnership by a partner. (b) Cash contributed to the partnership by the partner. (c) Cash distributed to the partner by the partnership. (d) The partner's distributive share of net gains from the partnership.arrow_forwardWhich of the following statements regarding limited partnerships is true? A) There is no limit on a limited partner's liability. B) A limited partner's liability is limited by the amount of their investment. C) A limited partner is not liable until all the assets of the general partners have been exhausted. D) A general partner's liability is limited by the amount of their investment.arrow_forwardIn participation/partnership based contracts, __ is always subject to the ratio of investment while ___ distribution is based on pre-agreed ratio. Profit, Loss Loss, Loss Loss, Profit Profit, Profit A Mudaraba is a non-binding contract. It means that Rab-ul-Maal or Mudarib, cannot terminate the partnership. True False In Mudaraba profit is shared according to the pre-agreed proportion, while the loss has to be borne exclusively by the: Rabbul Maal Either Rabb ul Maal or Mudharib As per the agreed ratio between Rabbul Maal and Mudharib Mudharibarrow_forward
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