Chapter 23 Multiple Choice

One advantage of a partnership is

• (A) ease of formation.

• (B) limited liability.

• (C) unlimited life of the partnership.

• (D) limited vision and skills.

When a partner invests in office equipment, the entry includes a

• (A) debit to the partner’s capital account.

• (B) debit to Office Equipment.

• (C) credit to Cash.

• (D) credit to Office Equipment.

When a partner withdraws supplies from the partnership, the entry includes a

• (A) a debit to the partner’s capital account.

• (B) a debit to the partner’s drawing account.

• (C) a debit to Supplies.

• (D) a credit to the partner’s drawing account.

Partnership earnings are divided

• (A) equally.

• (B) according to how long the partner has been in the business.

• (C) according to the age of each partner.

• (D) according to the partnership agreement.

The last step in liquidating a partnership is

• (A) to quit selling products and services.

• (B) selling all noncash assets.

• (C) distributing remaining cash to the partners.

• (D) liquidating liabilities.

A partner’s drawing account

• (A) has a normal debit balance.

• (B) has a normal credit balance.

• (C) can have a normal balance of either a debit or a credit.

• (D) increases on the credit side.

A disadvantage of a partnership over other forms of business ownership is

• (A) being liable for your partner’s actions.

• (B) simple tax structure.

• (C) having more capital available.

• (D) sharing work.

When noncash assets are liquidated and the amount received is less than the book value of the asset liquidated, there is a

• (A) net income.

• (B) net loss.

• (C) gain on the realization.

• (D) loss on the realization.

A partnership distribution of net income or net loss is usually shown on

• (A) the trial balance.

• (B) the balance sheet.

• (C) the statement of cash flows.

• (D) none of these.