ACFAR IFA TOPIC 10 & 11 ( T OR F)

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In the absence of a specific agreement, the law requires that partnership profits be divided equally among the partners.

F

Interest on loans from partners is recognized as partnership income.

F

It is possible to allocate profit or loss to partners based solely on interest.

F

Mutual agency means that each partner has the right to bind the partnership to contracts.

F

Partnership profits and losses are divided among partners according to their sharing agreement. If no sharing agreement exists, profits or losses are divided equally.

F

Profits or losses are divided equally among the partners unless the partnership agreement specifies to the partners.

F

The basis of valuation for non-cash investments should be fair market value always.

F

The form and content of the statement of comprehensive income of a partnership resemble those of a sole proprietorship with no exceptions.

F

The increase in equity of the partner due to distribution of profit can be attributed to a particular asset.

F

The salary allocation to partners also appears as salaries expense on the partnership's statement of comprehensive income.

F

When salary and interest allocations exceed profit, a loss has occurred.

F

it is possible to allocate profit or loss to partners solely on salaries.

F

the interest of partners' capital can be considered as expenses depending on partners' agreement.

F

A de jure partnership is one which has complied with all the legal requirements for its establishment.

T

A limited partnership must have at least one general partner.

T

A partner by estoppel is one who is actually not a partner but who represents himself as one.

T

A partnership cannot be established for religious purposes.

T

A partnership is a legal entity separate and apart from its owners.

T

A partnership must always have at least two owners.

T

As long as the action is within the scope of the partnership, any partner can bind the partnership.

T

If a partnership agreement does not specify how profits or losses are to be distributed, they should be allocated based on relative capital account balances.

T

Industrial partner is not liable for losses because he cannot withdraw the work or labor already done by him.

T

It is possible for a partner's capital account to increase as a result of the allocation of a loss.

T

It is possible to allocate profit or loss to partners based solely on average capital balances.

T

It is possible to allocate profit or loss to the partners based solely on the stated ratio.

T

The basis of valuation for non-cash investments should be at values agreed upon by the partners.

T

The equity of a partner in the net assets of the partnership is not the same as the partner's share in the profits or losses.

T

The manner in which profits are to be shared should be specified in the articles of partnership.

T

There can never be a partnership without contribution of money, property or industry to a common fund

T

When a loss is closed into the partners' capital accounts, income summary is credited.

T

When beginning capital balances are used in allocating profits, year-end investments are discouraged.

T

Bankruptcy of a partner will dissolve the partnership.

F

In general partnership, each partner's liability for losses is limited to his investment in the firm.

F

Adjustments prior to formation may be omitted since these will not affect the partner's capital credits.

F

All partnerships are subject to tax at the rate of 30% of taxable income.

F

A partner usually retains title to assets contributed to a partnership, so that certain assets may be identified as belonging to a given partner.

F

A partnership may be established for charity

F

A partnership should always be constituted in writing.

F

A partnership with a capital of less than P3,000 is valid even if it is unregistered with the Securities and Exchange Commission.

F

A stipulation that excludes one or more partners from any share in the profits or losses is valid

F


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