29 Jun Question 1. A partnership business is
Question
1. A partnership business is a:
· private firm in which all owners have equal ownership and limited liabilities in the event of a bankruptcy.
· corporation in which the owners have limited liability for the corporation’s liabilities.
· firm listed in a stock exchange, in which no owner owns a majority of equity to control the firm.
· business with two or more owners that is not organized as a corporation.
2. Rick Co. purchases 7,000 shares of its own $2 par value common stock for $160 per share. Which of the following is the correct journal entry to record this transaction?
· Debit Cash $2,240,000, and credit Paid-In Capital in Excess of Par – Common $2,240,000.
· Debit Treasury Stock – Common $1,120,000 and credit Cash $1,120,000.
· Debit Common Stock – $2 Par Value $2,240,000 and credit Cash $2,240,000.
· Debit Cash $2,240,000 and credit Treasury Stock – Common $2,240,000.
3. On the ________, cash dividends become a liability of a corporation.
· end of the fiscal year
· declaration date
· payment date
· date of record
· When a partner sells his interest to another party, the journal entry simply credits the withdrawing partner’s capital account and debits the new partner’s capital.
· True
· False
4. Aries and Eros start a partnership firm with capital contributions of $40,000 and $60,000, respectively. In the course of the year, Aries withdraws $5,000 from the business in order to meet his personal expenses. Which of the following is the correct journal entry to close the relevant Withdrawals account at the end of the year?
Aries, Withdrawals $5,000
Eros, Capital $5,000
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