Question

QUESTION 6 Which of the following statements is true in regards to partnerships? Partners are easily able to limit their liability • Partners cannot normally be involved in the management of the partnership Net assets contributed by partners are recorded at their current market value Partnerships are subject to the same tax rate as companies or trusts QUESTION 7 A partnership capital account is opened for each partner to: Keep track of the partners share of profits Keep track of the partners original and subsequent contributions Keep track of the partners drawing from the partnership All of the options avialable QUESTION 8 Trumming and Nancy are successful partners. They share profits and losses equally. Their current capital account balances are $20 and $10 respectively. They decide to admit Tyler to the partnership. Tyler pays $70 for 25% of the partnership. Which is the correct bonus? No bonus to any partners as Tyler is investing new resources to the extant partnership $27.50 bonus to both existing partners $35 to Trumming and $25 to Nancy $22.50 bonus to both existing partners

Answer 1

Question- 6 :

Answer is

C. Net Assets contributed by partners are recorded at their current market value

Reason : These are not right options because,

Option a :  It is not right answer because the liability of partnership is unlimited. The partners are personally liable for any liabilIty the partnership can not settle. Hence partners can not limit their liability

Option B: The partners and management are not different . The partners together take decision of management or regarding business.

Option D: The tax charged on trust, company and partnership are not the same.

Right answer Option B : When a partner invests any asset being tangible or intangible in a partnership, the transaction is valued at the fair market value of the contributed asset. the asset was recorded, and a debit to "asset" and credit to  the "partner's capital" account.

Question 7 :

Answer is

D. All the options available

Reason : The partners capital account is opened to keep all transaction by partnership with partner are recorded. The transactions which affect the Capital are; Interest on Capital, Interest on Drawings, Salaries to the Partners, Commission for the Partners, etc.

The transactions are recorded to keep track of share of profits, if not kept will lead to disputes among partners. The contributions to and drawing from partnership account can be tracked with the help of 'partners capital account', so that the balance left in partners account can be determined to calculate interest on capital, Interest on Drawings etc to partners.

Hence all the above options available in the question. Thus 'Option D', 'All the option available' is correct