Under a general partnership, each partner is considered an agent of a general pa
ID: 2387241 • Letter: U
Question
Under a general partnership, each partner is considered an agent of a general partnership and is liable for:A) The debts of the business
B) The taxes on their share of the income
C) The acts of the other partners
D) All of the above
2. As a part of the initial investment in forming a partnership, a partner contributes office equipment that had a cost of $20,000, and accumulated depreciation of $12,500. If the partners deem the market value to be $9,000, what amount should be debited to the office equipment account?
A) $7,500
B) $9,000
C) $12,500
D) $20,000
3. Lee and Stills are partners who share income in the ratio of 2:1 and who have capital balances of $65,000 and $35,000 respectively. If Mor, with the consent of Stills, acquired ½ of Lee’s interest for $40,000 for what amount would Mor’s capital account be credited?
A) $32,500
B) $40,000
C) $50,000
D) $72,500
4. Chip and Dale agree to form a partnership by verbal agreement and a hand shake. Chip is to contribute $50,000 in assets and devote ½ time in the partnership. Dale is to contribute $20,000 and devote full time to the partnership. How will Chip and Dale split the net income/loss?
A) 5:2
B) 1:2
C) 1:1
D) 2.5:1
5. Henry and Thomas share gains and losses in the ratio of 2:1. They decide to dissolve their partnership and after selling all assets for cash and paying all liabilities, the cash account has $12,000 in it. The capital accounts were as follows: Henry, $10,000; Thomas, $2,000. How much of the $12,000 cash would Henry receive?
A) $2,000
B) $8,000
C) $10,000
D) $12,000
Explanation / Answer
Features of general partnership: Partnerships have certain default characteristics relating to both (a) the relationship between the individual partners and (b) the relationship between the partnership and the outside world. The former can generally be overridden by agreement between the partners, whereas the latter generally cannot be done. The assets of the business are owned on behalf of the other partners, and they are each personally liable, jointly and severally, for business debts, taxes or tortious liability. For example, if a partnership defaults on a payment to a creditor, the partners' personal assets are subject to attachment and liquidation to pay the creditor. By default, profits are shared equally amongst the partners. However, a partnership agreement will almost invariably expressly provide for the manner in which profits and losses are to be shared. Each general partner is deemed the agent of the partnership. Therefore, if that partner is apparently carrying on partnership business, all general partners can be held liable for his dealings with third persons. By default a partnership will terminate upon the death, disability, or even withdrawal of any one partner. However, most partnership agreements provide for these types of events, with the share of the departed partner usually being purchased by the remaining partners in the partnership. By default, each general partner has an equal right to participate in the management and control of the business. Disagreements in the ordinary course of partnership business are decided by a majority of the partners, and disagreements of extraordinary matters and amendments to the partnership agreement require the consent of all partners. However, in a partnership of any size the partnership agreement will provide for certain electees to manage the partnership along the lines of a company board. Unless otherwise provided in the partnership agreement, no one can become a member of the partnership without the consent of all partners, though a partner may assign his share of the profits and losses and right to receive distributions ("transferable interest"). A partner's judgment creditor may obtain an order charging the partner's "transferable interest" to satisfy a judgment. 1 - All of above 2 - 9000 3 - 32,500 4 - 1:1 5 - 10,000
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