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ACCTG311

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
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.
3. Refer to the above information. What is each partner's tax basis in the Jones and Smith partnership?
4. Refer to the above information. What is the balance in each partner's capital account for financial accounting
purposes?
5. 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?
6. Which of the following accounts could be found in the general ledger of a partnership?

7. 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
8. RD formed a partnership on February 10, 2009. R contributed cash of $150,000, while D contributed inventory
with a fair value of $120,000. Due to R's expertise in selling, D agreed that R should have 60 percent of the total
capital of the partnership. R and D agreed to recognize goodwill. What is the total capital of the RD partnership and
the capital balance of R after the goodwill is recognized?

9. A joint venture may be organized as a:


I. Partnership.
II. Corporation.
III. Undivided interest.

A. I only
B. II only
C. I or III only
D. I, II, or III
10. A limited liability company (LLC):
I. is governed by the laws of the state in which it is formed.
II. provides liability protection to its investors.
III. does not offer pass-through taxation benefits of partnerships.
A. Both I and III.
B. III
C. Both I and II
D. I, II, and II
Test II Comprehensive Problem
Two sole proprietors, L and M, agreed to form a partnership on January 1, 2009. The trial balance for each
proprietorship is shown below as of January 1, 2009.

The LM partnership will take over the assets and assume the liabilities of the proprietors as of January 1, 2009.
Required:
a) Prepare a balance sheet, for financial accounting purposes, for the LM partnership as of January 1, 2009. (10
points)
b) In addition, assume that M agreed to recognize the goodwill generated by L's business. Accordingly, M agreed to
recognize an amount for L's goodwill such that L's capital equalled M's capital on January 1, 2009. Given this
alternative, how does the balance sheet prepared for requirement A change? (10 points)

End of Test

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