Free CPA-Business Exam Braindumps (page: 7)

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Gillie, Taft, and Dall are partners in an architectural firm. The partnership agreement is silent about the payment of salaries and the division of profits and losses. Gillie works full-time in the firm, and Taft and Dall each work half time. Taft invested $120,000 in the firm, and Gillie and Dall invested $60,000 each. Dall is responsible for bringing in 50% of the business, and Gillie and Taft 25% each. How should profits of $120,000 for the year be divided?

  1. Gillie $60,000, Taft $30,000, Dall $30,000.
  2. Gillie $40,000, Taft $40,000, Dall $40,000.
  3. Gillie $30,000, Taft $60,000, Dall $30,000.
  4. Gillie $30,000, Taft $30,000, Dall $60,000.

Answer(s): B

Explanation:

Choice "b" is correct. $40,000 − $40,000 − $40,000 (equally).
Rule: In the absence of an agreement to the contrary, the profits will be shared equally regardless of investment of money or time.
Choices "a", "c", and "d" are incorrect, per the above rule.



With respect to the following matters, which is correct if a general partnership agreement is silent?

  1. A partnership will continue indefinitely unless a majority of the partners votes to dissolve the partnership.
  2. Partnership losses are allocated in the same proportion as partnership profits.
  3. A partner may assign his interest in the partnership but only with the consent of the other partners.
  4. A partner may sell the goodwill of the partnership without the consent of the other partners when the sale is in the best interest of the partnership.

Answer(s): B

Explanation:

Choice "b" is correct. As a general principle of partnership law, as well as under the Revised Uniform Partnership Act, in the absence of an agreement otherwise partnership losses are allocated among partners in the same proportion as partnership profits.
Choice "a" is incorrect. A partnership will dissolve on the death, bankruptcy, incapacity, or other withdrawal of a partner, unless the partners vote to continue.
Choice "c" is incorrect. A partner may assign his interest in the partnership at any time without consent of the partners since such an assignment does not make the assignee a partner; instead it merely gives the assignee the assignor's rights to distributions from the partnership.
Choice "d" is incorrect. A sale of partnership good will is an extraordinary transaction that requires consent of the partners. A single partner has no authority to make such a sale on his own accord.



Which of the following statements is correct concerning liability when a partner in a general partnership commits a tort while engaged in partnership business?

  1. The partner committing the tort is the only party liable.
  2. The partnership is the only party liable.
  3. Each partner is jointly and severally liable.
  4. Each partner is liable to pay an equal share of any judgment.

Answer(s): C

Explanation:

Choice "c" is correct. Each partner is jointly and severally liable for torts committed by any partner while in the course of partnership business.
Choice "a" is incorrect. All partners may be held liable for a tort committed by a partner in the course of partnership business.
Choice "b" is incorrect. Each partner is liable for torts committed by any partner while in the course of partnership business.
Choice "d" is incorrect. Each partner is liable for the full amount of damages incurred as a result of a partner's tort; the partners are not liable only for their pro rata share.



Lark, a partner in DSJ, a general partnership, wishes to withdraw from the partnership and sell Lark's interest to Ward. All of the other partners in DSJ have agreed to admit Ward as a partner and to hold Lark harmless for the past, present, and future liabilities of DSJ. As a result of Lark's withdrawal and Ward's admission to the partnership, Ward:

  1. Acquired only the right to receive Ward's share of DSJ profits.
  2. Has the right to participate in DSJ's management.
  3. Is personally liable for partnership liabilities arising before and after being admitted as a partner.
  4. Must contribute cash or property to DSJ to be admitted with the same rights as the other partners.

Answer(s): B

Explanation:

Choice "b" is correct. The general rule is that the mere assignment of a partner's interest does not make the assignee a partner. One may become a partner only with the consent of all other partners. Here, all other partner's consented to Ward's becoming a partner. Thus, Ward is a partner with full rights to participate in management.
Choice "a" is incorrect. The general rule is that the mere assignment of a partner's interest does not make the assignee a partner. One may become a partner only with the consent of all other partners.
Here, all other partner's consented to Ward's becoming a partner. Thus, Ward is a partner with full partner rights.
Choice "c" is incorrect. An incoming partner is not liable for debts that the partnership incurred before admission beyond the incoming partner's contribution, but is fully liable for debts incurred after becoming a partner.
Choice "d" is incorrect. A partnership is a consensual relationship; there is no requirement of a contribution to become a partner.



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