Module 12 Accounting for Partnerships: Advantages and Disadvantages
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Questions and Answers

What is a key difference between a corporation and a partnership?

  • The tax implications
  • The life of the business (correct)
  • The number of owners
  • The management structure

    • How are the members of a limited liability company taxed?

  • Based on the number of owners
  • As a sole proprietor
  • Like partners in a partnership (correct)
  • Like corporate shareholders

    • What happens when one partner makes a decision in a general partnership?

  • It affects all partners equally
  • It only affects that partner
  • It has no impact on the partnership
  • It binds all other partners (correct)

    • How should assets be valued when forming a partnership if no agreed value is provided?

    <p>At their fair market value</p> Signup and view all the answers

    What type of liability do general partners have?

    <p>Unlimited liability</p> Signup and view all the answers

    What happens to liabilities attached to contributed assets in a partnership?

    <p>They are assumed by the partnership</p> Signup and view all the answers

    In the given partnership agreement, how much is the salary allowance for King?

    <p>$8,400</p> Signup and view all the answers

    What is the interest allowance rate for partners' capital balances according to the agreement?

    <p>10%</p> Signup and view all the answers

    Based on the agreement, how is the remainder of the net income distributed?

    <p>Equally</p> Signup and view all the answers

    What were the capital balances of King and Lee at the beginning of the year according to the information provided?

    <p>King: $24,000, Lee: $28,000</p> Signup and view all the answers

    What was the total net income of the partnership in 2020?

    <p>$22,000</p> Signup and view all the answers

    In the chart provided, what is the total amount mentioned under Gant, Drawings?

    <p>$48,000</p> Signup and view all the answers

    What is a major disadvantage of a regular partnership?

    <p>General partners are personally liable for business debts</p> Signup and view all the answers

    In a Limited Partnership (LP), what is a major advantage of general partners?

    <p>They can raise cash without outside investors</p> Signup and view all the answers

    What is the main reason Limited Liability Companies (LLCs) are more expensive to create than regular partnerships?

    <p>More complex structure and legal requirements</p> Signup and view all the answers

    Which characteristic is true for Limited Liability Partnerships (LLPs)?

    <p>Partners are personally liable for the malpractice of other partners</p> Signup and view all the answers

    What is a characteristic of a regular partnership that makes it simple and inexpensive to create and operate?

    <p>Equal sharing of net income by partners</p> Signup and view all the answers

    Why are Limited Liability Partnerships (LLPs) mostly of interest to partners in old-line professions such as law, medicine, and accounting?

    <p>No personal liability for the malpractice of other partners</p> Signup and view all the answers

    What should a partnership agreement specify among partners?

    <p>Partners' names and how they share net income</p> Signup and view all the answers

    Which feature makes Limited Partnerships (LP) suitable for companies investing in real estate?

    <p>Limited personal liability for business debts</p> Signup and view all the answers

    What would make a General Partnership less desirable compared to other partnership forms?

    <p>General partners personally liable for business debts</p> Signup and view all the answers

    Which characteristic makes Limited Liability Companies (LLCs) more costly to establish?

    <p>Partners participating in management without extra liability</p> Signup and view all the answers

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