402 Chapter 14 Smartbook

Partners A and B allocate annual partnership income as follows. Each partner receives 20% of their beginning capital balances. Each partner also receives a $10,000 salary. Remaining income is distributed 60% to partner A and 40% to partner B. If current year net income is $48,000 and beginning capital balance for A and B are $90,000 and $75,000, respectively, how much net income is allocated to partner A? Multiple choice question. $28,000 $23,000 $25,000 $31,000

$25,000

Partners A and B allocate annual partnership income as follows. Each partner receives 20% of their beginning capital balances. Each partner also receives a $10,000 salary. Remaining income is distributed 60% to partner A and 40% to partner B. If current year net income is $58,000 and beginning capital balance for A and B are $90,000 and $75,000, respectively, how much net income is allocated to partner B? Multiple choice question. $23,000 $25,000 $27,000 $31,000

$27,000

Accounting techniques for recognizing a partner's contribution of a special valuable talent to a partnership include Multiple select question. the equal capital method. the bonus method. the mutual agency method. the goodwill method.Any change in the set of specific individuals that comprise a partnership automatically leads to a legal .

the bonus method. the goodwill method.

True or false: An advantage of a limited liability company (LLC) is that the number of owners is not restricted.

True

Ways in which an individual can gain admission into a partnership include Multiple select question. contributing tangible assets directly to the partnership. purchasing common stock ownership shares in the stock market. contributing intangible assets directly to the partnership. buying an ownership interest directly from one or more existing partners.

contributing tangible assets directly to the partnership. contributing intangible assets directly to the partnership. buying an ownership interest directly from one or more existing partners.

A limited liability partnership (LLP) Blank______. Multiple select question. does not limit individual partner's liability arising from contractual obligations of the partnership limits a partner's legal liability to the amount of the partner's investment in the partnership is a popular organizational form for major public accounting firms limits the partners' individual liabilities resulting from damages awarded by a court

does not limit individual partner's liability arising from contractual obligations of the partnership is a popular organizational form for major public accounting firms limits the partners' individual liabilities resulting from damages awarded by a court

Compared to a corporation's balance sheet, the owners' equity section of a partnership Multiple select question. does not usually distinguish between contributed and earned capital. shows separate balances for invested capital and retained earnings. typically provides a much more limited range of information. typically consists of solely partner's capital accounts.

does not usually distinguish between contributed and earned capital. typically provides a much more limited range of information. typically consists of solely partner's capital accounts.

Corporations pay income taxes. Additionally their owners also often pay taxes when the corporation's income is paid as dividends. In contrast, because partnership income is passed though to the individual partners tax returns, the partnership is said to avoid __________ taxation of the profit earned by the business.

double

Included in the advantages of the partnership form of business organization are Multiple select question. ease of formation. the ability to make any arrangement desired among the partners for income distribution and control of business decision making. the requirement of a written agreement that legally binds the partners. a lower cost of formation compared to the corporate form.

ease of formation. the ability to make any arrangement desired among the partners for income distribution and control of business decision making. a lower cost of formation compared to the corporate form.

Similar to initial partner contributions to begin a partnership, subsequent partner contributions to support ongoing operations or expansion should be credited to the contributing partner's capital account at ___________ value.

fair

Traditionally, the contribution of property by a partner to a partnership is recorded at __________ value.

fair

A partner brings valuable website design talent to a partnership. The partnership records goodwill to recognize this talent, and the contributing partner receives an additional capital credit. To account for the contribution of talent, the partnership has employed the ____________ method.

goodwill

Under the hybrid method of recording the admission of a new partner, identifiable partnership assets are revalued to fair value, but no ____________ is recorded.

goodwill

Among common methods to account for the withdrawal of a partner from a partnership include the Multiple select question. goodwill method. hybrid (revaluation/bonus) method. bonus method. original cost method.

goodwill method. hybrid (revaluation/bonus) method. bonus method.

The Uniform Partnership Act has been adopted by all states in some form. establishes uniform standards for many partnership characteristics. provides a legal definition of a partnership. carries no legal weight in court decisions.

has been adopted by all states in some form. establishes uniform standards for many partnership characteristics. provides a legal definition of a partnership.

The articles of partnership document Multiple select question. largely determines the accounting procedures followed for the partnership. is a negotiated agreement created by the partners. represents a legal agreement that governs the operation of the partnership. provides guidance to the partnership but is not legally binding.

largely determines the accounting procedures followed for the partnership. is a negotiated agreement created by the partners. represents a legal agreement that governs the operation of the partnership.

The emergence of several alternative partnership forms derives from the desire to avoid double taxation and Multiple choice question. maintain the personal liability exposure of individual partners. increase the risk and rewards to individual partners. limit the amount of capital raised by partnerships. limit the personal liability exposure of individual partners.

limit the personal liability exposure of individual partners.

The legal term stating that each partner possesses the right to incur liabilities on behalf of the partnership in the normal course of business is ___________ ___________ .

mutual agency

The statement of partners' capital effectively replaces the statement of ___________ ____________for a corporation

retained earnings

Accounting methods for formally recording the admission of a new partner include Multiple select question. revaluing existing partnership assets to fair value without recognizing goodwill. creating an Additional Paid-in Capital account for the new partner's contribution to achieve entry into the partnership. revaluing existing partnership assets to fair value and recognizing goodwill. retaining the partnership book value through the bonus method.

revaluing existing partnership assets to fair value without recognizing goodwill. revaluing existing partnership assets to fair value and recognizing goodwill. retaining the partnership book value through the bonus method.

Included in rights that a partner can convey in a transfer of ownership are Multiple select question. the rights to share in the profits and losses of the partnership. the unconditional right to participate in the management of the business. the right of co-ownership of the partnership business property. the right to participate in the management of the business if agreed upon by by all other partners.

the rights to share in the profits and losses of the partnership. the right of co-ownership of the partnership business property. the right to participate in the management of the business if agreed upon by by all other partners.

When a withdrawing partner's profit and loss ratio differs from her partnership capital percentage, which of the following can be utilized to determine the total fair value of the partnership at the time withdrawal? Multiple choice question. by an implied value based on the negotiated payment to Windsor. through an appraisal of partnership net assets including goodwill. by the sum of the book values of the partners' capital accounts. through an appraisal of partnership net assets excluding goodwill.

through an appraisal of partnership net assets including goodwill.

What are some partnership activities that are considered capital transactions? Multiple select question. Admission of a new partner. Allocation of partnership profits and losses. The partnership acquisition of a building in exchange for partnership cash. Retirement of a partner.

Admission of a new partner. Allocation of partnership profits and losses. Retirement of a partner.

Which of the following is not a reason for forming a partnership as opposed to a corporation for a new business?

Partnership income typically flows tax-free to the partners. Partnerships can result in double-taxation.

A partner contributes a building to her partnership that has appreciated in value. The partnership's valuation basis for the building should be Multiple choice question. fair value. the contributing partner's book value. the contributing partner's previously recorded value. original cost to the contributing partner.

fair value.

A limited partnership (LP) Multiple select question. has general partners who are designated to assume responsibility for all partnership debts. often has investors that are not allowed to participate in the management of the partnership. does not convey the tax benefits that accompany a regular partnership. has investors whose liability may be limited to the amount they have invested in the partnership.

has general partners who are designated to assume responsibility for all partnership debts. often has investors that are not allowed to participate in the management of the partnership. has investors whose liability may be limited to the amount they have invested in the partnership.

Typically included in an articles of partnership agreement are Multiple select question. how to distribute the profits and losses of the partnership. the rights and responsibilities of each partner. the procedures for admitting a new partner. the number of common shares of stock to be issued to each of the partners.

how to distribute the profits and losses of the partnership. the rights and responsibilities of each partner. the procedures for admitting a new partner.

Assume the articles of partnership specify that profits are to be allocated 60% to partner A and 40% to partner B. If, however the articles of partnership are silent concerning the allocation of a partnership loss, then any loss is allocated Multiple choice question. in the same manner as partnership profits. equally among all partners. according to each partner's relative capital balance. no allocation is made until the partner's agree on a loss distribution method.

in the same manner as partnership profits.

Assume the articles of partnership specify that profits are to be allocated 60% to partner A and 40% to partner B. If, however the articles of partnership are silent concerning the allocation of a partnership loss, then any loss is allocated Multiple choice question. no allocation is made until the partner's agree on a loss distribution method. in the same manner as partnership profits. equally among all partners. according to each partner's relative capital balance.

in the same manner as partnership profits.

A limited liability company (LLC) Blank______. Multiple select question. is classified as a partnership for tax purposes and court purposes in many states limits an owner's risk to his or her own investments with respect to restriction on the number of owners is similar to a Subchapter S corporation with respect to partner liability is similar to a Subchapter S entity

is classified as a partnership for tax purposes and court purposes in many states limits an owner's risk to his or her own investments with respect to partner liability is similar to a Subchapter S entity

At year end, a partner's drawing account Multiple choice question. is closed to a partnership salaries account. is closed to the partnership's retained earnings account. remains open to accumulate partner withdrawal throughout the life of the partnership. is closed to the partner's capital account.

is closed to the partner's capital account.

The emergence of several alternative partnership forms derives from the desire to avoid double taxation and Multiple choice question. limit the personal liability exposure of individual partners. increase the risk and rewards to individual partners. limit the amount of capital raised by partnerships. maintain the personal liability exposure of individual partners.

limit the personal liability exposure of individual partners.

A Subchapter S Corporation Multiple select question. must have only one class of stock. is taxed in the same way as a partnership. can have an unlimited number of stockholders. provides limited liability to its owners.

must have only one class of stock. is taxed in the same way as a partnership. provides limited liability to its owners.

Under the bonus method for recognizing a partner's intangible contribution Multiple choice question. the partners' capital account balances will correspond to their initial tangible asset contributions to the partnership. the partner contributing the intangible property provides a bonus to the other partners. the partners' capital accounts are unaffected. no asset is recorded; only partners' capital accounts are affected.

no asset is recorded; only partners' capital accounts are affected.

A new partner exchanges a $20,000 cash payment to the partnership business for a 10% partnership ownership interest. Under the bonus method Multiple select question. no revaluation of existing partnership assets takes place. the capital balance of the new partner will equal 10% of partnership net assets excluding the $20,000 cash payment. the capital balance of the new partner will equal 10% of partnership net assets including the $20,000 cash payment. goodwill will be recognized upon the admission of the new partner.

no revaluation of existing partnership assets takes place. the capital balance of the new partner will equal 10% of partnership net assets including the $20,000 cash payment.

If Partner B's profit and loss ratio is different than her percentage of partnership capital, then the amount paid to Partner B upon withdrawal does not determine the implied value of the entire ___________.

partnership

If the articles of partnership are silent with regard to partnership income distribution to the individual partners, then Multiple choice question. partnership income is allocated according to each partner's relative capital balance. partnership income is allocated equally among all partners. no allocation is made until the partner's agree on an income distribution method. partnership income is allocated according to the amount of revenue generated by each individual partner.

partnership income is allocated equally among all partners.

Partnerships often serve as a preferred organization form for businesses compared to the corporate form because Multiple select question. partnerships are easier and less costly to form than corporations. tax benefits exist for partnerships relative to corporations. some state regulations prevent doctors and attorneys from forming corporations. partnerships can usually raise more capital than corporations.

partnerships are easier and less costly to form than corporations. tax benefits exist for partnerships relative to corporations. some state regulations prevent doctors and attorneys from forming corporations.

Despite the notion that a partnership is an extension of its individual partners, a noncash asset contributed to the partnership should be recorded at its contribution-date _________ value.

fair

A partner contributes a building to her partnership that has appreciated in value. The partnership's valuation basis for the building should be Multiple choice question. the contributing partner's previously recorded value. fair value. the contributing partner's book value. original cost to the contributing partner.

fair value

A limited partnership helps the individual partners protect their personal financial position through the avoidance of unlimited __________ from the partnership.

Liability

A partner receives an amount in excess of his/her capital balance upon withdrawing from the partnership. A possible reason for the excess payment is that the partnership agreement calls for a revaluation of the partnership to its _________ __________.

fair value

In accounting for a partner withdrawal from a partnership, the goodwill (revaluation method) credits Multiple select question. only the remaining partners' capital accounts for their proportionate share of recognized goodwill. only the remaining partners' capital accounts for their proportionate share of asset revaluations. each partners' capital account for their share of recognized goodwill. each partners' capital account for their share of asset revaluations.

each partners' capital account for their share of recognized goodwill. each partners' capital account for their share of asset revaluations.

Partners X and Y comprise the XY partnership and each have $75,000 capital balances. Partners X and Y share profits and losses 30% and 70%, respectively. Partner Z is admitted with a 25% ownership interest for a $90,000 contribution to the partnership business. If the goodwill method is employed to record partner Z's admission, partner X's capital balance will be Multiple choice question. $39,000 $111,000 $159,000 $75,000

$111,000 $90,000/.25 = $360,000 implied partnership value. $360,000 - ($75,000 + $75,000 + $90,000) = $120,000 GW. $75,000 + (30% x $120,000 GW) = $111,000

The Tax Cuts and Jobs Act implications allow eligible taxpayers, including those with partnership income, to deduct up to ___________ percent of qualified income from domestic "pass-through" businesses.

20

In the Goldman, King, and Wilson textbook example where Goldman is admitted to the partnership with a 20% interest in exchange for a $20,000 cash investment in the partnership, under the bonus method Multiple choice question. Goldman receives a bonus from King and Wilson. No partner receives a bonus. All partners (Goldman, King, and Wilson) receive a bonus. Goldman pays a bonus to King and Wilson.

Goldman receives a bonus from King and Wilson.

Any change in the set of specific individuals that comprise a partnership automatically leads to a legal ___________.

dissolution

According to the Uniform Partnership Act, an obligation of a limited liability partnership arising from a contract is solely the obligation of the _______________.

partnership

Partners X and Y comprise the XY partnership and each have $75,000 capital balances. Partners X and Y share profits and losses 30% and 70%, respectively and the carrying amounts of the partnership net assets equal current fair values. Partner Z is admitted with a 25% ownership interest for a $90,000 contribution to the partnership business. If the goodwill method is employed to record partner Z's admission, goodwill will be recorded for Multiple choice question. $210,000 $120,000 $0 $90,000

$120,000 $90,000/.25 = $360,000 implied partnership value. $360,000 - ($75,000 + $75,000 + $90,000) = $120,000

Partners A and B comprise the AB partnership and each has $90,000 capital balances. The existing partnership's assets are stated at fair value, and partners A and B share profits and losses of 40% and 60%, respectively. Partner C is admitted with a 20% ownership interest for a $40,000 direct cash payment to the current partners. If the goodwill method is employed to record partner C's admission, goodwill is: Multiple choice question. $40,000. $20,000. $0. $200,000.

$20,000 ($40,000/0.2) − ($90,000 × 2) = $20,000.

Partners P and Q comprise the PQ partnership and each have a $72,000 capital balance. Partners P and Q share profits and losses 60% and 40%, respectively. Partner R is admitted with a 25% ownership interest for a $32,000 contribution to the partnership business. If the bonus method is employed to record partner R's admission, R's capital credit will be Multiple choice question. $44,000 $32,000 $16,000 $58,667

$44,000 25% x ($72,000 + $72,000 + $32,000) = $44,000

Partners P and Q comprise the PQ partnership and each have $72,000 capital balances. The partnership net assets have carrying amounts that equal current fair values and partners P and Q share profits and losses 60% and 40%, respectively. Partner R is admitted with a 25% ownership interest for a $32,000 contribution to the partnership business. If the goodwill method is employed to record partner R's admission, R's capital credit will be Multiple choice question. $32,000 $44,000 $40,000 $48,000

$48,000 GW = ([$144,000 x 25%] + [$32,000 x 25%] - $32,000)/(1 - 25%) = $16,000. R's capital credit = 25% x ($144,000 + $32,000 + $16,000) = $48,000

Partners X and Y comprise the XY partnership and each have $75,000 capital balances. Partners X and Y share profits and losses 30% and 70%, respectively. Partner Z is admitted with a 25% ownership interest for a $90,000 contribution to the partnership business. If the bonus method is employed to record partner Z's admission, Z's capital credit will be Multiple choice question. $90,000 $37,500 $41,250 $60,000

$60,000 ($150,000 + $90,000) x 25% = $60,000

Partners A and B comprise the AB partnership and each has a $90,000 capital balance. The existing partnership's assets are stated at fair value, and partners A and B share profits and losses of 40% and 60%, respectively. Partner C is admitted with a 20% ownership interest for a $40,000 direct cash payment to the current partners. If the goodwill method is employed to record partner C's admission, Partner A's capital balance after C's admission will be: Multiple choice question. $98,000. $78,400. $80,000. $70,400.

$78,400 GW = ($40,000/0.2) − ($90,000 × 2) = $20,000. A's share of GW = 40% × 20,000 = $8,000. A's capital balance = $90,000 + $8,000 − ($90,000 + $8,000) × 20% = $78,400.

ABC partnership shares profits and losses 20% to A, 30% to B, and 50% to C. If C retires from the partnership and receives a $10,000 bonus, the bonus reduces the capital balances of A and B by Multiple choice question. 40% to A and 60% to B. 20% to A and 30% to B. 50% to A and 50% to B. 60% to A and 40% to B.

40% to A and 60% to B.

Often a partner may sell his partnership interest to another individual. Why must all partners agree to allow this new partner the right to participate in the management of the partnership? Multiple select question. Current partners may be reluctant to yield management decision making that is essential to the well-being of the partnership. No rights, including the right to participate in management, can be sold by any of the partners to an outside party. To protect the current partners from unwanted intrusion by the new partner.

Current partners may be reluctant to yield management decision making that is essential to the well-being of the partnership. To protect the current partners from unwanted intrusion by the new partner.

Individual C is admitted with a 30% interest to the AB partnership in exchange for $50,000 cash paid to partners A and B. Why might C receive a capital credit for less that the $50,000 cash payment? Multiple select question. Because only $50,000 was directly contributed to the partnership entity. The $50,000 was paid to the current partners, not the partnership. The ownership transfer was recorded by reclassifying partial capital balances to A without any asset revaluation. The partnership employed a book value approach where each partner transferred 30% of their interest to C.

The $50,000 was paid to the current partners, not the partnership. The ownership transfer was recorded by reclassifying partial capital balances to A without any asset revaluation. The partnership employed a book value approach where each partner transferred 30% of their interest to C.

True or false: The Uniform Partnership Act was created in part to provide consistent standards and application of partnership law across state lines.

True

True or false: Upon a partner's withdrawal from a partnership, the resulting distribution will unlikely equal the balance in the partner's capital account. True false question.TrueFalse

True

True or false: When an individual is admitted to a partnership and receives a partnership capital percentage in exchange for a contribution that includes goodwill, the amount of goodwill recognized is determined algebraically.

True

Zoe is admitted to the Xavier-Yang partnership in exchange for a cash investment. Zoe's initial capital credit is greater that her cash contribution. Under the goodwill method of recording the new partner's investment, Multiple choice question. No partner's contribution to goodwill is recognized. Xavier's and Yang's contributions to goodwill are recognized. Xavier, Yang, and Zoe are viewed as contributing goodwill. Zoe's contribution of goodwill is recognized.

Zoe's contribution of goodwill is recognized.

Under the hybrid method of recording a new partner's admission to a partnership, Multiple select question. a bonus may be recorded to align partners' capital accounts. goodwill is recognized and allocated to the original partners. identifiable assets are revalued to fair value. asset revaluations are credited to the original partners.

a bonus may be recorded to align partners' capital accounts. identifiable assets are revalued to fair value. asset revaluations are credited to the original partners.

When a new partner is formally admitted to a partnership Multiple select question. the partnership must terminate all business activities. a new partnership is formed. the previous partnership will legally continue in the same manner as before the partner withdrew. a legal dissolution of the previous partnership occurs.

a new partnership is formed. a legal dissolution of the previous partnership occurs.

According to the Internal Revenue Code, partnership income a. flows through to the individual tax returns of the individual partners. b. is taxed at both the partnership and individual partner level. c. is subject to income taxes paid at the partnership entity level.

a. flows through to the individual tax returns of the individual partners.

Under the goodwill method to record a new partner's admission to a partnership, recognition of goodwill to the original partners is equitably allocated: Multiple choice question. according to the profit and loss percentages. equally across the current partners. according to the capital ratios.

according to the profit and loss percentages.

Upon a partner's withdrawal from a partnership, the goodwill method will credit each partner's capital account for their share of goodwill Multiple choice question. according to their profit and loss sharing ratios. according to their capital ratios. equally across all remaining partners.

according to their profit and loss sharing ratios.

If an individual partner's allocation of annual partnership profits exceeds his or her annual partnership withdrawals, what net effect should be reflected in the that partner's capital account? Multiple choice question. No effect. A decrease. An increase.

an increase

In addition to tangible asset contributions, a new partner may bring other intangible value to a partnership including Multiple select question. an ongoing set of business clients. real estate property. a special talent or skill set. professional reputation.

an ongoing set of business clients. a special talent or skill set. professional reputation.

A partner's capital account represents a claim on the partnership business as a whole, but not a specific claim on any individual ___________

asset or property

The basic format of a statement of partners' capital is Multiple choice question. beginning capital balances + income allocations + drawings = ending capital balances beginning capital balances - income allocations + drawings = ending capital balances beginning capital balances + income allocations - drawings = ending capital balances beginning capital balances - income allocations - drawings = ending capital balances

beginning capital balances + income allocations - drawings = ending capital balances

A partner brings valuable expertise to a partnership. The partnership records no asset for this expertise, but the contributing partner nonetheless receives an additional capital credit. By crediting this partners capital account, the partnership has employed the ___________ method.

bonus

The hybrid method gets its name from the fact that it contains elements of both the goodwill (revaluation) method and the _________ method.

bonus

Common approaches to recognizing intangible factors that a new partner may bring to a partnership include the ___________ and ____________ methods.

bonus, goodwill

In determining the amount to pay a partner upon withdrawal, the partnership employs current assessments for both land and goodwill, This payment therefore Multiple choice question. can be accounted for using either the goodwill, bonus, or hybrid method. requires a bonus from the continuing partners to Windsor. requires a land revaluation on the partnership books. requires that goodwill be recognized on the partnership books.

can be accounted for using either the goodwill, bonus, or hybrid method.

When partners make cash contributions to a partnership, a credit to each individual partner's ____________ account records the contribution.

capital

Potential future effects of the valuation of property contributed to a partnership include Multiple select question. capital account balances often affect partnership profit and loss distribution. settlement of a partner's interest upon partner retirement. depreciation of the contributed property can affect cash flows to the partnership. settlement of a partner's interest upon partnership liquidation.

capital account balances often affect partnership profit and loss distribution. settlement of a partner's interest upon partner retirement. settlement of a partner's interest upon partnership liquidation.

Partnership capital contributions often include Multiple select question. cash. tangible asset contributions. intangible asset contributions. loans to the partnership.

cash. tangible asset contributions. intangible asset contributions.

Assume all periodic partnership revenues and expenses have been closed to an Income Summary account. Final closing entries are then needed to Multiple select question. close the Income Summary account by distributing the total profit or loss to the individual partners' capital accounts. close the partners' drawing accounts to their individual capital accounts. close the partners' drawing accounts to the retained earnings of the partnership. close the Income Summary account to the retained earnings of the partnership.

close the Income Summary account by distributing the total profit or loss to the individual partners' capital accounts. close the partners' drawing accounts to their individual capital accounts.

Accounting for a partnership's owners' equity tends to be much less complex than for a corporation because Multiple select question. partnerships tend to have more owners than corporations. partnerships tend to be smaller and have less complex equity transactions than corporations. government regulations require greater disclosures for corporations to protect the investing public and others absentee ownership tends to characterize partnerships more than corporations.

partnerships tend to be smaller and have less complex equity transactions than corporations. government regulations require greater disclosures for corporations to protect the investing public and others

The Tax Cuts and Jobs Act implications allow eligible taxpayers, including those with partnership income, to deduct up to 20 percent of qualified income from domestic "_________-__________" businesses.

pass-through

Under the bonus method any excess payment to a withdrawing partner beyond his/her capital balance Multiple choice question. reduces the capital balances of the remaining partners. increases the capital balances of the remaining partners. does not affect the capital balances of the remaining partners.

reduces the capital balances of the remaining partners.

Alternative legal forms of partnerships have been provided in many state laws that both limit the liability of individual partners while maintaining the ___________ benefits of the partnership form of business organization.

tax

If an individual partner contributes property to a partnership Multiple choice question. that partner no longer has an individual claim to the property. the partnership may not dispose of the property without the express permission of the partner who contributed the property. that partner retains a priority claim to the contributed property upon partnership liquidation.

that partner no longer has an individual claim to the property.

A tax advantage of partnerships over the corporate business organizational form is Multiple select question. partnership income is only taxed when it is distributed in cash to the individual partners. the avoidance of double taxation. a partner's share of partnership operating losses can be used to offset income on the partner's individual tax return. tax rates for partnership entities are lower than for corporations.

the avoidance of double taxation. a partner's share of partnership operating losses can be used to offset income on the partner's individual tax return.

When a new partner is admitted to a partnership as a result of a cash transaction between individual parties, Multiple select question. a revaluation of existing partnership assets is required. the new partner's admission has no impact on partnership tangible assets and liabilities. the cash payment made by the new partner to existing partners must form the basis for the new partnership valuation. the transfer of ownership may be recorded by a capital reclassification from the current partners to the new partner.

the new partner's admission has no impact on partnership tangible assets and liabilities. the transfer of ownership may be recorded by a capital reclassification from the current partners to the new partner.

Under the goodwill method for recognizing a partner's intangible contribution Multiple select question. no asset is recorded; only partners' capital accounts are affected. the partner deemed to be contributing goodwill is given a capital credit to recognize the asset brought to the partnership. the partner contributing the intangible property provides a bonus to the other partners. goodwill is recognized as an asset of the partnership to reflect the intangible contribution.

the partner deemed to be contributing goodwill is given a capital credit to recognize the asset brought to the partnership. goodwill is recognized as an asset of the partnership to reflect the intangible contribution.

Included in rights that a partner can convey in a transfer of ownership are Multiple select question. the right to participate in the management of the business if agreed upon by by all other partners. the rights to share in the profits and losses of the partnership. the right of co-ownership of the partnership business property. the unconditional right to participate in the management of the business.

the right to participate in the management of the business if agreed upon by by all other partners. the rights to share in the profits and losses of the partnership. the right of co-ownership of the partnership business property.

As compared to corporations, disadvantages of the partnership business form include Multiple select question. mutual agency that limits the risk of the individual partners for overall partnership debts. unlimited personal liability of the individual partners for all partnership debts. unlimited personal liability of the individual partners for their proportional share of partnership debts. mutual agency where individual partners can incur liabilities in the name of the partnership in the normal course of business.

unlimited personal liability of the individual partners for all partnership debts. mutual agency where individual partners can incur liabilities in the name of the partnership in the normal course of business.