Question 1. A partnership is a(n): I. accounting entity.

1. A partnership is a(n):
I. accounting entity.
II. taxable entity.
A. I only
B. II only
C. Neither I nor II
D. Both I and II

2. A partner’s tax basis in a partnership is comprised of which of the following items?
I. The partner’s tax basis of assets contributed to the partnership.
II. The amount of the partner’s liabilities assumed by the other partners.
III. The partner’s share of other partners’ liabilities assumed by the partnership.
A. I plus II minus III
B. I plus II plus III
C. I minus II plus III
D. I minus II minus III

In the ABC partnership (to which Daniel seeks admittance), the capital balances of Albert, Bert, and Connell, who share income in the ratio of 5:3:2 are:

3. Based on the preceding information, if no goodwill or bonus is recorded, how much should Daniel invest for a 20 percent interest?
A. $400,000
B. $200,000
C. $300,000
D. $250,000

4. Based on the preceding information, what amount of goodwill will be recorded if Daniel invests $450,000 for a one-third interest?
A. $0
B. $10,000
C. $50,000
D. $100,000

Jones and Smith formed a partnership with each partner contributing the following items:

Assume that for tax purposes Jones and Smith agree to share equally in the liabilities assumed by the Jones and Smith partnership.

5. Refer to the above information. What is each partner’s tax basis in the Jones and Smith partnership?

A. Option A
B. Option B
C. Option C
D. Option D

6. Refer to the above information. What is the balance in each partner’s capital account for financial accounting purposes?

A. Option A
B. Option B
C. Option C
D. Option D

7. Griffin and Rhodes formed a partnership on January 1, 2009. Griffin contributed cash of $120,000 and Rhodes contributed land with a fair value of $160,000. The partnership assumed the mortgage on the land which amounted to $40,000 on January 1. Rhodes originally paid $90,000 for the land. On July 31, 2009, the partnership sold the land for $190,000. Assuming Griffin and Rhodes share profits and losses equally, how much of the gain from sale of land should be credited to Griffin for financial accounting purposes?
A. $0
B. $15,000
C. $35,000
D. $45,000

8. Which of the following accounts could be found in the general ledger of a partnership?

A. Option A
B. Option B
C. Option C
D. Option D

9. Which of the following accounts could be found in the PQ partnership’s general ledger?
I. Due from P
II. P, Drawing
III. Loan Payable to Q
A. I, II
B. I, III
C. II, III
D. I, II, and III

10. The DEF partnership reported net income of $130,000 for the year ended December 31, 2008. According to the partnership agreement, partnership profits and losses are to be distributed as follows:

How should partnership net income for 2008 be allocated to D, E, and F?

A. Option A
B. Option B
C. Option C
D. Option D