Multiple choice question
1. Cob, Inc., a partner in TLC Partnership, assigns its partnership interest to Ben, who is not made a partner. After the assignment, Ben asserts the rights to:
I. Participate in the management of TLC
II. Cob's share of TLC's partnership profits
Ben is correct as to which of these rights?
a I only
b II only
c I and II
d Neither I nor II
2. When property other than cash is invested in a partnership, at what amount should the noncash property be credited to the contributing partner's capital account?
a Fair value at the date of contribution
b Contributing partner's original cost
c Assessed valuation for property tax purposes
d Contributing partner's tax basis
3. Pla, a partner in the Bri Partnership, has a 30 percent participation in partnership profits and losses. Pla's capital account had a net decrease of $60,000 during the calendar year 2016. During 2016, Pla withdrew $130,000 (charged against his capital account) and contributed property with a fair value of $25,000 to the partnership. What was the net income of the Bri Partnership for 2016?
a $150,000
b $233,333
c $350,000
d $550,000
4. Fox, Gre, and How are partners with average capital balances during 2016 of $120,000, $60,000, and $40,000, respectively. Partners receive 10 percent interest on their average capital balances. After deducting salaries of $30,000 to Fox and $20,000 to How, the residual profit or loss is divided equally. In 2016, the partnership sustained a $33,000 loss before interest and salaries to partners. By what amount should Fox's capital account change?
a $7,000 increase
b $11,000 decrease
c $35,000 decrease
d $42,000 increase
5. Bec, an active partner in the Bec and Cri partnership, receives an annual bonus of 25 percent of partnership net income after deducting the bonus. For the year ended December 31, 2016, partnership net income before the bonus amounted to $300,000. Bec's 2016 bonus should be:
a $56,250
b $60,000
c $62,500
d $75,000