Mutual agency implies that each partner in a partnership is a fully authorized agent of the partnership. Which of the following statements is correct regarding the authority of a partner to bind the partnership in dealings with third parties?

Mutual agency implies that each partner in a partnership is a fully authorized agent of the partnership. Which of the following statements is correct regarding the authority of a partner to bind the partnership in dealings with third parties?

The partner's authority must be derived from the partnership agreement.

The partner's authority may be effectively limited by a formal resolution of the other partners, even if third parties are not aware of that limitation.

Only a partner with a majority interest in a partnership has the authority to represent the partnership to third parties.

A partner has authority to deal with third parties on the behalf of the other partners only if he has written permission to do so.

A partner may be able to legally bind the partnership to actions even if the other partners are unaware of his actions.

Pat and Nicole formed Here & There as a limited liability company. Unless the member owners elect to be treated otherwise, the Internal Revenue Service will tax the LLC as:

An S corporation.

A C corporation.

A non-taxable entity.

A joint venture.

A partnership.

Partners' withdrawals of assets are:

Credited to their withdrawals accounts.

Debited to their withdrawals accounts.

Credited to their retained earnings.

Debited to their retained earnings.

Debited to their asset accounts.

The withdrawals account of each partner is:

Closed to that partner's capital account with a credit.

Closed to that partner's capital account with a debit.

A permanent account that is not closed.

Credited with that partner's share of net income.

Debited with that partner's share of net loss.

R. Stetson contributed $14,000 in cash plus office equipment valued at $7,000 to the SJ Partnership. The journal entry to record the transaction for the partnership is:

Debit Cash $14,000; debit Office Equipment $7,000; credit R Stetson, Capital $21,000.

Debit Cash $14,000; debit Office Equipment $7,000; credit SJ Partnership, Capital $21,000.

Debit SJ Partnership $21,000; credit R. Stetson, Capital $21,000.

Debit R. Stetson, Capital $21,000; credit SJ Partnership, Capital $21,000.

Debit Cash $14,000; debit Office Equipment $7,000; credit Common Stock $21,000.

T. Andrews contributed $14,000 in to the T & B Partnership. The journal entry to record the transaction for the partnership is:

Debit Cash $14,000; credit T & B Partnership, Capital $14,000.

Debit Cash $14,000; credit T. Andrews, Capital $14,000.

Debit T & B Partnership $14,000; credit T. Andrews, Capital $14,000.

Debit T. Andrews, Capital $14,000; credit T & B Partnership, Capital $14,000.

Debit Cash $14,000; credit Common Stock $14,000.

Maxwell and Smart are forming a partnership. Maxwell is investing a building that has a market value of $180,000. However, the building carries a $56,000 mortgage that will be assumed by the partnership. Smart is investing $120,000 cash. The balance of Maxwell's Capital account will be:

$180,000.

$124,000.

$56,000.

$64,000.

$60,000.

In a partnership agreement, if the partners agreed to an interest allowance of 10% annually on each partner's investment, the interest allowance:

Is ignored when earnings are not sufficient to pay interest.

Can make up for unequal capital contributions.

Is an expense of the business.

Must be paid because the partnership contract has unlimited life.

Legally becomes a liability of the general partner.

Wheadon, Davis, and Singer formed a partnership with Wheadon contributing $60,000, Davis contributing $50,000 and Singer contributing $40,000. Their partnership agreement called for the income (loss) division to be based on the ratio of capital investments. If the partnership had income of $75,000 for its first year of operation, what amount of income (rounded to the nearest thousand) would be credited to Singer's capital account?

$20,000.

$25,000.

$30,000.

$40,000.

$75,000.

Farmer and Taylor formed a partnership with capital contributions of $200,000 and $250,000, respectively. Their partnership agreement calls for Farmer to receive a $70,000 per year salary. The remaining income or loss is to be divided equally. If the net income for the current year is $135,000, then Farmer and Taylor's respective shares are:

$67,500; $67,500.

$130,000; $5,000.

$106,140; $28,860.

$90,000; $45,000.

$102,500; $32,500.

Brown invested $200,000 and Freeman invested $150,000 in a partnership. They agreed to an interest allowance on the partners' beginning-year capital investments at 10%, with the balance to be shared equally. Under this agreement, the shares of the partners when the partnership earns $205,000 in income are:

$102,500 to Brown; $102,500 to Freeman.

$117,143 to Brown; $87,857 to Freeman.

$122,500 to Brown; $82,500 to Freeman.

$105,000 to Brown; $100,000 to Freeman.

$112,750 to Brown; $92,250 to Freeman.

A bonus may be paid in all of the following situations except:

By a new partner when the current value of a partnership is greater than the recorded amounts of equity.

By a withdrawing partner to remaining partners if the recorded value of the equity is overstated.

To a new partner with exceptional talents.

By remaining partners to a withdrawing partner if the recorded equity is understated.

By an existing partner to him or herself when in need of personal cash flow.

A partnership recorded the following journal entry:

Cash	60,000
B. Founder, Capital	10,000
R. Aqui, Capital	10,000
H. Joiner, Capital		80,000

This entry reflects:

Acceptance of a new partner who invests $60,000 and receives a $20,000 bonus.

Withdrawal of a partner who pays a $10,000 bonus to each of the other partners.

Addition of a partner who pays a bonus to each of the other partners.

Additional investment into the partnership by Founder and Aqui.

Withdrawal of $10,000 each by Founder and Aqui upon the admission of a new partner.

Wright, Bell, and Edison are partners and share income in a 2:5:3 ratio. The partnership's capital balances are as follows: Wright, $33,000, Bell $27,000 and Edison $40,000. Edison decides to withdraw from the partnership, and the partners agree not to revalue the assets upon Edison's retirement. The journal entry to record Edison's June 1 withdrawal from the partnership if Edison is paid $40,000 for his equity is:

Debit Edison, Capital $40,000; credit Cash $40,000.

Debit Wright, Capital $20,000; Debit Bell, Capital $20,000; credit Cash $40,000.

Debit Wright, Capital $20,000; Debit Bell, Capital $20,000; credit Edison, Capital $40,000.

Debit Edison, Capital $40,000; credit Wright, Capital $20,000; credit Bell, Capital $20,000.

Debit Cash $40,000; credit Edison, Capital $40,000.

Masters, Hardy, and Rowen are dissolving their partnership. Their partnership agreement allocates income and losses equally among the partners. The current period's ending capital account balances are Masters, $15,000; Hardy, $15,000; Rowen, $30,000. After all the assets are sold and liabilities are paid, but before any contributions to cover any deficiencies, there is $54,000 in cash to be distributed. The general journal entry to record the final distribution would be:

rev: 08_03_2017_QC_CS-94921

Debit Masters, Capital $18,000; debit Hardy, Capital $18,000; debit Rowen, Capital $18,000; credit Cash $54,000.

Debit Masters, Capital $13,000; debit Hardy, Capital $13,000; debit Rowen, Capital $28,000; credit Cash $54,000.

Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; debit Rowen, Capital $30,000; credit Gain from Liquidation $6,000; credit Cash $54,000.

Debit Cash $54,000; credit Rowen, Capital $13,500; credit Masters, Capital $13,500; credit Hardy, Capital $27,000.

Debit Masters, Capital $15,000; debit Hardy, Capital $15,000; debit Rowen, Capital $30,000; credit Retained Earnings $6000; credit Cash $54,000.

When a partner is unable to pay a capital deficiency:

The partner must take out a loan to cover the deficient balance.

The deficiency is absorbed by the remaining partners before distribution of cash.

The partnership ends before distribution of cash.

The deficient partner is relieved of the liability.

The remaining partners must wait for the deficiency to be paid before cash is distributed.

Henry, Luther, and Gage are dissolving their partnership. Their partnership agreement allocates each partner 1/3 of all income and losses. The current period's ending capital account balances are Henry, $45,000; Luther, $37,000; and Gage, $(5,000). After all assets are sold and liabilities are paid, there is $77,000 in cash to be distributed. Gage is unable to pay the deficiency. What amount of cash will Gage receive upon liquidation?

$25,667.

$20,667.

$30,667.

Gage will be invoiced for $5,000.

$0.

Fontaine and Monroe are forming a partnership. Fontaine invests a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000. For the partnership, the amounts recorded for the building and for Fontaine's Capital account are:

Building $250,000; Fontaine, Capital $250,000.

Building $175,000; Fontaine, Capital $175,000.

Building $250,000; Fontaine, Capital $75,000.

Building $250,000; Fontaine, Capital $175,000.

Building $175,000; Fontaine, Capital $75,000.

Fontaine and Monroe are forming a partnership. Fontaine invests in a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000. For the partnership, the amounts recorded for Fontaine's Capital account and for Monroe's Capital account are:

rev: 02_18_2016_QC_CS-42356

Fontaine, Capital $175; Monroe, Capital $45,000.

Fontaine, Capital $0; Monroe, Capital $100,000.

Fontaine, Capital $250,000; Monroe, Capital $100,000.

Fontaine, Capital $250,000; Monroe, Capital $155,000.

Fontaine, Capital $175,000; Monroe, Capital $155,000.

Fontaine and Monroe are forming a partnership. Fontaine invests in a building that has a market value of $250,000; the partnership assumes responsibility for a $75,000 note secured by a mortgage on the property. Monroe invests $100,000 in cash and equipment that has a market value of $55,000. For the partnership, the amounts recorded for total assets and for total capital account are:

rev: 02_16_2016_QC_CS-42356

Total assets $405,000; total capital $330,000.

Total assets $350,000; total capital $350,000.

Total assets $350,000; total capital $275,000.

Total assets $305,000; total capital $230,000.

Total assets $405,000; total capital $305,000.

Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $150,000 for its first year, what amount of income is credited to Cox's capital account?

$50,000.

$64,286.

$45,000.

$36,000.

$60,000.

Cox, North, and Lee form a partnership. Cox contributes $180,000, North contributes $150,000, and Lee contributes $270,000. Their partnership agreement calls for the income or loss division to be based on the ratio of capital invested. If the partnership reports income of $150,000 for its first year, what amount of income is credited to Lee's capital account?

$50,000.

$67,500.

$45,000.

$54,000.

$60,000.

Barber and Atkins are partners in an accounting firm and share net income and loss equally. Barber's beginning partnership capital balance for the current year is $285,000, and Atkins' beginning partnership capital balance for the current year is $370,000. The partnership had net income of $250,000 for the year. Barber withdrew $90,000 during the year and Atkins withdrew $100,000. What is Barber's ending equity?

$357,500

$362,500

$445,000

$320,000

$195,000

If a company wants to protect its three investors against personal liability risk, which of the following business forms would not be a suitable option?

C Corporation

S Corporation

Limited liability partnership

Partnership

Limited liability company

Reno contributed $104,000 in cash plus equipment valued at $27,000 to the RD Partnership. The journal entry to record the transaction for the partnership is:

Debit Cash $104,000; debit Equipment $27,000; credit RD Partnership, Capital $131,000.

Debit Cash $104,000; debit Equipment $27,000; credit Common Stock $131,000.

Debit Cash $104,000; debit Equipment $27,000; credit Reno, Capital $131,000.

Debit Reno, Capital $131,000; credit RD Partnership, Capital $131,000.

Debit RD Partnership, Capital $131,000; credit Reno, Capital $131,000.

Bloom and Plant organize a partnership on January 1. Bloom's initial investment consists of $800 cash, $1,700 equipment and a $500 note payable reflecting a bank loan for the new business. Plant's initial investment is cash of $2,000. These amounts are the values agreed on by both partners. The journal entry to record Plant's investment is:

Debit Cash $1,500; debit Note Payable $500; credit Plant, Capital $2,000.

Debit Cash $2,000; credit Note Payable $500, credit Plant, Capital $1,500.

Debit Bloom, Capital $2,000; credit Cash $2,000.

Debit Cash $2,500; credit Note Payable $500; credit Plant, Capital $2,500.

Debit Cash $2,000; credit Plant, Capital $2,000.

Wallace and Simpson formed a partnership with Wallace contributing $60,000 and Simpson contributing $40,000. Their partnership agreement calls for the income (loss) division to be based on the ratio of capital investments. The partnership had income of $150,000 for its first year of operation. When the Income Summary is closed, the journal entry to allocate partner income is:

Debit Income Summary $150,000; credit Wallace, Capital $75,000; credit Simpson, Capital $75,000.

Debit Wallace, Capital $75,000; debit Simpson, Capital $75,000; credit Income Summary $150,000.

Debit Income Summary $150,000; credit Wallace, Capital $90,000; credit Simpson, Capital $60,000.

Debit Cash $150,000; credit Wallace, Capital $90,000; credit Simpson, Capital $60,000.

Debit Wallace, Capital $90,000; debit Simpson, Capital $60,000; credit Cash $150,000.