1) What is the difference between capital interest and profit interest? A. Capital interest is the partner’s investment, profit interest is the share of income the partner is entitled to B. Capital interest and profit interest are always the same C. Capital interest is the partner’s share of income, profit interest is the share of retained earnings D. Capital interest and profit interest are always different2) What happens when the partnership income is insufficient to cover the partners’ agreement to allocate income? A. The partnership agreement must have an agreement about the difference B. The excess allocation can be deducted as a negative remainder C. The partners can allocate extra income in anticipation of next year’s income D. All of the above3) How are changes in partnership equity presented in the financial statements? A. As a lump sum on the balance sheet B. Just like corporate equity, except corporate stock is replaced with partnership capital C. As a separate statement of partners’ capital D. Partners’ capital isn’t listed on the financial statements4) How does a partnership liquidate? A. The business closes, the noncash assets are liquidated, the creditors are paid, and the remaining cash is distributed to the partners B. The partners take what cash there is and then declare bankruptcy C. The partners pay the bills and split up the assets D. One of the partners sells his or her share of the partnership to another partner
5) What is the UPA’s order of payment? A. To creditors other than partners, to partners in respect of capital, in respect of profits, and in respect of liabilities B. To partners in respect of profits, in respect of liabilities, in respect of capital, and to other creditors C. To creditors other than partners, and to partners in respect of liabilities, in respect of capital, and in respect of profits D. To creditors other than partners, and to partners in respect of profits, in respect of liabilities and in respect of capital6) If partners are jointly and severally liable for a partnership debt, it means the creditor A. must name all partners in a lawsuit but each partner is only liable for a proportional amount B. must name all partners in a lawsuit and each partner is liable for the entire debt C. may name any or all partners in a lawsuit but each partner is only liable for a proportional amount D. may name any or all partners in a lawsuit and each partner is liable for the entire amount7) What is the difference between simple liquidation and installment liquidation? A. Simple liquidation is when the partnership is easy to liquidate and installment liquidation is when it is difficult B. Simple liquidation is when there are only two partners; installment when there are more than two partners C. Simple liquidation waits to distribute money until all the assets are sold and liabilities are paid; installment pays money over time D. Simple liquidation pays money overtime; installment liquidation makes payments to creditors over time8) When a partnership incorporates, the partners A. must sell all the assets of the partnership B. transfer their ownership capital to stockholders’ equity C. sell the partnership to another company D. cannot keep the partnership books9) General partnerships have which of the following characteristics? A. Mutual agency B. Limited life C. Unlimited liability D. All of the above are characteristics
10) Which of the following is a characteristic of a limited partnership? A. Only limited partners have unlimited liability B. Limited partners have an active involvement in the management of the partnership C. Only general partners have unlimited liability D. All of the above are characteristics
SOLUTIONS. No. Option No. Option 1 D Capital interest and profit interest are always different 2 B The excess allocation can be deducted as a negative remainder 3 C As a separate statement of…
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