Maria Marrocchi

Chapter 14 Questions

1. The advantages of a partnership is the fact that you are only taxed once and it is easy to create. However there is unlimited liability incurred by each general partner that normally restricts the growth potential of most partnerships.
2. Partnership accounting differs from corporate accounting in the sense that there are various capital accounts with the partners. They is usually a different way to handle each capital account based on the contract they agreed on. Accounting procedures are standard for assets, liabilities, revenues and expenses.
3. The capital accounts convey the method and procedures in which it states the method in which profits and losses are to be allocated.
4. An S corporation will essentially be taxed the same way as a partnership. It does not face double taxation and the owners are not liable unlimitedly. A subchapter C corporation
5. A general partnership avoids double taxation and it is easy to create. However, there is an unlimited liability for the partners. An LLP is almost exactly the same as a general partnership however; the partners have a significant reduction in their liability. In an LLC, it is classified as a partnership for tax purposes but the owners bear all of the risk only on their investments.
6. Articles of partnership are a legal covenant that can be oral or written in which it forms the central governance for a partnership’s operation. The document contains the financial arrangements for the various capital transactions and provides much of the underlying basis for partnership accounting.
7. Noncash assets are recorded using the face value of the asset, or a case can be made to use the book value of the noncash asset.
8. The bonus method assumes a specialization abilities does not constitute a recordable partnership asset with a measurable cost. It recognizes