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A partnership has an unlimited life. True False A partnership is an unincorporated association of two or more people to pursue a business for profit as co-owners. True False Mutual agency means each partner can commit or bind the partnership to any contract within the scope of the partnership business. True False Accounting procedures for all items are the same for both C corporations and S corporations in all aspects. True False Partners in a partnership are taxed on the amounts they withdraw from the partnership, not the partnership income. True False Limited liability partnerships are designed to protect innocent partners from malpractice or negligence claims resulting from the acts of another partner. True False A partnership cannot use salary allowances or interest allowances to allocate income and losses to the partners because these items are not reported on the partnership income statement. True False In a limited partnership the general partner has unlimited liability. True False Partner return on equity can be used by each partner to help decide whether additional investment or withdrawal of resources is best for that partner. True False

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10. Benson is a partner in B&D Company. Benson's share of the partnership income is $18,600 and her average partnership equity is $155,000. Her partner return on equity equals 8.33. True False 11. When partners invest in a partnership, their capital accounts are credited for the amount invested. True False 12. Partners' withdrawals are credited to their separate withdrawals accounts. True False 13. Partners can invest both assets and liabilities into a partnership. True False 14. The withdrawals account of each partner is closed to retained earnings at the end of the accounting period. True False 15. In closing the accounts at the end of a period, the partners' capital accounts are credited for their share of the partnership loss or debited for their share of the partnership net income. True False

16. In the absence of a partnership agreement, the law says that income of a partnership will be shared equally by the partners. True False 17. Salary allowances are reported as salaries expense on a partnership income statement. True False 18. The statement of changes in partners' equity shows the beginning balance in retained earnings, plus investments, less withdrawals, the income or loss and the ending balance in retained earnings. True False 19. The equity section of the balance sheet of a partnership can report the separate capital account balances of each partner. True False 20. If partners devote their time and services to their partnership, their salaries are expenses on the income statement. True False 21. If the partners agree on a formula to share income and say nothing about losses, then the losses are shared equally. True False 22. Assume that the S & B partnership agreement gave Steely 60% and Breck 40% of partnership income and losses. The partnership lost $27,000 in the current period. This implies that Steely's share of the loss equals $16,200, and Breck's share equals $10,800. True False 23. When a partner leaves a partnership, the present partnership ends. True False 24. To buy into an existing partnership, the new partner must contribute cash to the partnership. True False 25. When a partner leaves a partnership, the present partnership ends, but the business can still continue to operate. True False 26. Assets invested by a partner into a partnership remain the property of the individual partner. True False 27. Admitting a partner by accepting assets is a personal transaction between one or more current partners and the new partner. True False 28. When the current value of a partnership is greater than the recorded amounts of equity, the current partners usually require any new partner to pay a bonus for the privilege of joining. True False 29. When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated. True False 30. When a partnership is liquidated, its business is ended. True False 31. A capital deficiency exists when all partners have a credit balance in their capital accounts. True False

32. A capital deficiency can arise from liquidation losses, excessive withdrawals before liquidation, or recurring losses in prior periods. True False 33. If a partner is unable to cover a deficiency and the other partners absorb the deficiency, then the partner with the deficiency is thus relieved of all liability. True False 34. If at the time of partnership liquidation, a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency, then that partner is entitled to share in the final distribution of cash. True False