Transcribed image text: When the hybrid method is used to record the withdrawal of a partner,
the partnership Multiple Choice revalues assets and liabilities
and records goodwill to the continuing partner but not to the withdrawing partner. revalues liabilities but not assets, and no goodwill is recorded.
What is the preferred method of resolving a partners deficit balance according to the Uniform Partnership Act?
What is the preferred method of resolving a partner’s deficit balance, according to the Uniform Partnership Act?
The partner with a deficit balance must contribute personal assets to cover the deficit balance.
What method would the accountant have used for recording the admission of Quincy to the partnership?
What method would the accountant have used for recording the admission of Quincy to the partnership? A)
The bonus method
. been partners for several years, and they decided to admit Quincy to the B)
What recourse is available to the partnerships creditors?
What recourse was available to the partnership’s creditors?
they may seek remuneration from any partner they choose
.
Which of the following are characteristics of a partnership?
- Partnerships resemble sole proprietorships, except that there are two or more owners of the business. …
- Mutual Contribution. …
- Division of Profits or Losses. …
- Co-Ownership of Contributed Assets. …
- Mutual Agency. …
- Limited Life. …
- Unlimited Liability. …
- Partners’ Equity Accounts.
Why is the drawing account closed directly to capital?
It is closed at the end of the fiscal year
by transferring the balance from the drawing account to the
owners’ equity capital account. It’s useful in keeping track of distributions made to owners in a partnership business, thus helps in avoiding any dispute between partners in business.
What is the balance of May’s capital account after the new partnership is created?
May invested $100,000 cash, and no goodwill was recognized. What is the balance of May’s capital account after the new partnership is created? C
. $140,000
.
What are the general rules for dividing profits among partners for dividing?
What is the default rule for the sharing of profits and losses?
Profits are to be shared equally between the partners
. Losses follow the division of profits. If a partnership agreement provides for the division of losses but not profits, profits do not follow losses and are still divided equally.
What is the first step in the liquidation process?
The first step in the liquidation process is to:
compute any net income (loss) up to the date of dissolution.
What is safe payment in partnership?
Safe payments are
distributions that can be made to partners with assurance that the amounts distributed will not need to be returned to the partnership
at some later date to cover known liabilities or realign partner capital.
What is considered recourse liability?
There are two types of debts: recourse and nonrecourse. A
recourse debt holds the borrower personally liable
. All other debt is considered nonrecourse. In general, recourse debt (loans) allows lenders to collect what is owed for the debt even after they’ve taken collateral (home, credit cards).
Does a partner get basis for nonrecourse debt?
While the Sec. 752 rules provide that a partner’s share of partnership nonrecourse debt adds to that partner’s basis in the partnership interest, a partner’s share of nonrecourse debt
generally does not generate basis for purposes
of the Sec. 465 at-risk rules.
Does a loan from a partner increase basis?
1. A partner’s allocable share of partnership liabilities
increases outside basis
. The amount of outside basis has significant tax consequences in several situations. See Practice Unit, Partner’s Outside Basis.
What are 5 characteristics of a partnership?
- Contractual Relationship: …
- Two or More Persons: …
- Existence of Business: …
- Earning and Sharing of Profit: …
- Extent of Liability: …
- Mutual Agency: …
- Implied Authority: …
- Restriction on the Transfer of Share:
What are the disadvantages of partnership?
- Liabilities. In addition to sharing profits and assets, a partnership also entails sharing any business losses, as well as responsibility for any debts, even if they are incurred by the other partner. …
- Loss of Autonomy. …
- Emotional Issues. …
- Future Selling Complications. …
- Lack of Stability.
What are the rules of partnership?
- Define job roles for each partner. Just like your employees, the roles and responsibilities should be divided between business partners. …
- Exit strategy before you set sail. …
- Release the frustration early. …
- Utilize the strengths of each partner. …
- Support your partner’s limitations.
