4) A bonus paid by an incoming partner to the old partners is shared:
B) by the salary method.
C) on the basis of profit and loss ratio.
D) by the interest method.
5) When recording a bonus to a new partner, the new partner will:
A) pay more than what the new partner’s account will reflect.
B) pay the same as the other partners’ capital accounts.
C) pay less than the new partner will receive in the capital account.
D) have no bonus recorded as a bonus cannot be paid to new partners.
6) A bonus is paid to the old partners when:
A) the old partner believes the business is worth less than the amounts recorded in the accounting records.
B) the equity of a partnership is worth more than what is recorded in the accounting records.
C) the company’s earnings records are less than expected.
D) None of these answers are correct.
7) When a partner withdraws from a partnership, the company can:
A) audit the accounting records and adjust assets to historical value.
B) credit the account of the partner that withdrew, debit Cash.
C) share any loss or profit from the historical value of assets.
D) None of the above answers is correct.
8) Katie withdrew from the partnership of Katie, Courtney, and Nathan, and accepted $15,000 cash. Her capital balance was $18,000 and the difference will be shared in a ratio of 2:1. The entry would be to:
A) debit Cash $15,000; credit Nathan, Capital $15,000.
B) debit Nathan, Capital $15,000; credit Cash $15,000.
C) debit Katie, Capital $18,000; credit Cash $15,000; credit Courtney, Capital $2,000; credit Nathan, Capital $1,000.
D) debit Cash $15,000; debit Nathan, Capital $1,000; debit Courtney, Capital $2,000; credit Katie, Capital $18,000.
9) An investment by a new partner was credited to existing partners’ capital balances. This error would cause:
A) the new partner’s capital account to be understated.
B) the period end owner’s equity to be understated.
C) the period end assets to be overstated.
D) None of these are correct.
10) A partnership admits a new partner. The new partner invests $50,000 in the business and receives a credit of $60,000 to his capital account. The difference of $10,000 is called a(n):
A) admission fee.
B) partnership expense.
D) illegal activity.
11) When a partner withdraws, the partnership may have an audit to adjust the assets to their:
A) historic cost.
B) depreciated value.
C) fair market value.
D) book value.
12) Cory, Brooke, and Amy share profits and losses in a 2:1:1 ratio, respectively, in their partnership. The assets are to be reduced $15,000 in value when Brooke wishes to leave the partnership. If each partner had a capital balance of $30,000 before Brooke’s notification of withdrawal, what amount should Brooke be allowed to withdraw from the partnership?
13) Tim and Bev are partners who share profits and losses in the ratio of 6:4. Their capital balances are $35,000 and $20,000, respectively. If Jenny is admitted to the partnership for $25,000 for a one-fourth interest, her capital balance will be: