A partnership business is
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 corporationâ€™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.
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 â€“ Common $2,240,000.
Debit Treasury Stock â€“
Common $1,120,000 and credit Cash $1,120,000.
Debit Common Stock – $2 Par Value $2,240,000 and credit Cash
Debit Cash $2,240,000 and credit Treasury Stock â€“ Common
On the ________, cash
dividends become a liability of a corporation.
end of the fiscal year
date of record
When a partner sells his
interest to another party, the journal entry simply credits the withdrawing
partnerâ€™s capital account and debits the new partnerâ€™s capital.
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?
5. Bradley Corporation issued 10,000 shares of common stock on
January 1, 2015. The stock has a par value of $0.01 per share and was
sold for cash at par. Which of the following is the correct journal entry
to record this transaction?
Cash debited for $100 and
Common Stock – $0.01 Par Value credited for $100
Cash credited for $10,000 and Common Stock – $0.01 Par Value
debited for $ 10,000
Paid â€“ In Capital in Excess of Par â€“ Common debited for $9,900
and Common Stock – $0.01 Value credited for $9,900
Cash debited for $10,000, Common Stock – $0.01 Par Value
credited for $100, and Paid-In Capital
in Excess of Par â€“ Common credited for $9,900.
6. The statement of retained earnings reports how the companyâ€™s
retained earnings balance changed from the beginning of the period to the end
of the period. TRUE or FALSE
7. In a partnership business, George has an ownership of 60% and
Ben has an ownership of 40%. For
developing the business, they purchased equipment for $10,000. George
contributes a sum of $7,000 and Ben makes a contribution of $3,000 on July
1. Based on the information provided, which of the following is true of
the partnership balance sheet?
George, Capital will increase by $7,000 and Ben, Capital will
increase by $3,000.
Both George, Capital and Ben, Capital will increase by $10,000.
George, Capital will increase by $10,000 and Ben, Capital will
George, Capital will
increase by $6,000 and Ben, Capital will increase by $4,000.
8. Mathew, Patrick, and Robin have capital balances of $75,000,
$120,000, and $93,000, respectively. As per the partnership agreement,
Mathew gets a profit share of 2/9; Patrick gets 4/9; and Robin gets 3/9.
Partnership agrees to pay $66,000 as final settlement to Mathew. How much
bonus will Robin receive as a result of this transaction?
9. Which of the following is a disadvantage of partnership firms?
These are taxed at
multiple levels: corporate level and individual level.
These have more difficulty in raising capital as compared to a
These have a mutual agency which creates personal obligations
for each partner.
These cannot be dissolved without permission of SEC.
11. Preferred shareholders:
have the first claim on
are guaranteed that they will not take a loss on their
have higher voting rights than common shareholders.
are sold for price lower than that of common stock.
Which of the following
explains the term â€œlack of mutual agencyâ€ of a corporation?
Shareholders are not
authorized to sign contracts or make business commitments on behalf of the
Corporations pay income tax on corporate earnings, and
shareholders pay personal income tax on corporate dividends and gains from sale
The liabilities of the corporation cannot be extended to the
personal assets of the shareholders.
Shares of stock can be readily bought and sold by investors on
the open market.
Capital deficiency occurs when a partnerâ€™s capital account has a
True or False
Shaun and Rick are partners. Shaun has a capital balance of
$0,000 and Rick has a capital balance of $8,000. Edwin invests a building
with a current market value of $6,000 to acquire an interest in the new
partnership. Which of the following is true of the effect of the
transaction on the balance sheet? (Assume no bonus to any partner.)
Both assets and equity will decrease by $6,000.
Both assets and equity
will increase by $6,000.
Both assets and liabilities will decrease by $6,000.
Both assets and liabilities will increase by $6,000.
15. Alex, Brad, and Carl are
partners. The profit and rule sharing rule between them is 4:3:3 in the
alphabetical order. The partnership incurs a net loss of $100,000.
Before preparing the closing journal entry the:
Alex, Capital account will have a credit balance of $40,000.
Carl, Capital account will have a debit balance of $30,000.
Alex, Capital account will have a debit balance of $40,000.
Income Summary account
will have a debit balance of $100,000.