1. CPA QUESTION Which of the Following Is Not Necessary to Create a Partnership?

Multiple Choice Questions

1. CPA QUESTION Which of the following is not necessary to create a partnership?

(a)  Execution of a written partnership agreement

(b)  Agreement to share ownership of the partnership

(c)  Intention of conducting a business for profit

(d)  Intention of creating a relationship recognized as a partnership

Answer: A. CPA Examination, November 1990, #11.

2. If a partner dissociates, he is entitled to:

(a)  Force the termination of the partnership

(b)  Receive indemnification from liability for present partnership debt

(c)  Receive indemnification from damages he caused the partnership

(d)  Receive only his share of the value of the partnership assets when it ultimately liquidates

Answer: B.

3. CPA QUESTION Cobb, Inc., a partner in TLC Partnership, assigns its partnership interest to Bean, who is not made a partner. After the assignment, Bean asserts the right to (1) participate in the management of TLC and (2) Cobb’s share of TLC’s partnership profits. Bean is correct as to which of these rights?

(a)  1 only

(b)  2 only

(c)  1 and 2

(d)  Neither 1 nor 2

Answer: B. CPA Examination, May 1993, #15.

4. CPA QUESTION Ted Fein, a partner in the ABC Partnership, wishes to withdraw from the partnership and sell his interest to Gold. All of the other partners in ABC have agreed to admit Gold as a partner and to hold Fein harmless for the past, present, and future liabilities of ABC. A provision in the original partnership agreement states that the partnership will continue upon the death or withdrawal of one or more of the partners. As a result of Fein’s withdrawal and Gold’s admission to the partnership, Gold:

(a)  Is personally liable for partnership liabilities arising before and after his admission as a partner

(b)  Has the right to participate in the management of ABC

(c)  Acquired only the right to receive Fein’s share of the profits of ABC

(d)  Must contribute cash or property to ABC in order to be admitted with the same rights as the other partners

Answer: B. CPA Examination, May 1986, #55.

5. Blackriver Partnership is in the process of winding up. It has three partners: Jason, Keira and Lancelot. The partnership has assets of $90,000, but debts of $60,000, including $30,000 it owes to Jason. Who gets what?

(a)  Each partner receives $10,000.

(b)  Each partner receives $30,000.

(c)  Jason receives $30,000 and the other two get $10,000 each.

(d)  Jason receives $40,000 and the other two get $10,000 each.

Answer: D.