Question

Which of the following is false regarding the measurement of partnership income? A. Partnerships do not...

Which of the following is false regarding the measurement of partnership income?

A.

Partnerships do not report income tax expense.

B.

Interest allocated to partners is not deducted as an expense in measuring partnership income.

C.

Partnerships must use the cash basis of accounting rather than the accrual basis.

D.

Salaries to partners are treated as distributions of partnership income.

Homework Answers

Answer #1

Answer:

the partnership is an agreement between two or a person to carry the business & share the profit in their agreed ratio, in the absence of written agreement they shared the profit equally. a partnership firm may follow a cash basis or accrual basis at the option of firm for the measuring income, however it is consistently applied.

In partnership do not report the income tax expenses, also  Interest allocated to partners is not deducted as an expense in measuring partnership income & Salaries to partners are treated as distributions of partnership income while measuring the income of partnership firm.

However, it is not mandatory for the partnerships to use the cash basis of accounting rather than the accrual basis in the measurement of income of the partnership firm.

Accordingly, option (C) is the correct answer.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
1. Which of the following is not a correct statement regarding the advantage of the partnership...
1. Which of the following is not a correct statement regarding the advantage of the partnership entity form over the C corporation form? a. Partnership income is subject to a single level of taxation; corporate income is double taxed. b. Partners in a general partnership have less personal liability for entity claims than shareholders of a C corporation. c. A partnership typically has easier administrative and filing requirements than does a C corporation. d. Partnerships may specially allocate income and...
Answer the following true or false for each: 1. Partnerships file Federal partnership tax returns and...
Answer the following true or false for each: 1. Partnerships file Federal partnership tax returns and pay federal income taxes. 2. General partners have limited liability. That is, they can only lose their investment in the partnership and are not personally liable for partnership debts. 3. Limited partners can participate in management of the partnership. 4. Limited liability corporations may be treated as either a partnership or a corporation depending on what election is made, 5. Professionals such as accountants,...
Partnerships                                   Determine whether the following statements are True...
Partnerships                                   Determine whether the following statements are True or False:                           TRUE       FALSE                                    1. Guaranteed payments to partners do not reduce the ordinary income of the partnership.    2. Non recourse borrowing of a partnership increases threat risk basis of each partner in interest in the partnership.    3. Tax exempt interest income decreases the basis of...
Which of the following statements is always true regarding accounting methods available to a partnership? a.        ...
Which of the following statements is always true regarding accounting methods available to a partnership? a.         If a partnership is a tax shelter, it cannot use the cash method of accounting. b.         If a non-tax-shelter partnership had “average annual gross receipts” of less than $26 million in the three years immediately preceding its calendar 2018 taxable year, it can use the cash method in 2018. c.         If a partnership has a partner that is a personal service corporation, it cannot...
How does a partnership report its income for tax purposes? Who makes most elections related to...
How does a partnership report its income for tax purposes? Who makes most elections related to partnership income and deductions? In keeping with the (aggregate/ entity/ consolidated) concept, a partnership must file (a tax reporting/ an informational) return, Form (1120/ 1041/ 1040/ 1065) . On this return, (each partner/ the partnership) makes most elections regarding the treatment of partnership items and no tax is calculated. Compare the treatment of the business interest expense limitation versus the qualified business income deduction....
Accounting and Financial Reporting II A partnership comprised of two partners has the following information regarding...
Accounting and Financial Reporting II A partnership comprised of two partners has the following information regarding income and loss allocation: Partner #1                             Partner #2 Initial investment                                        30,000                                   40,000 Salary allowance                                         25,000                                   20,000 Interest allowance in initial investment   10%                                        10% Remainder                                                    50%                                        50% In its first year of business, the partnership generates an income of 80,000. Prepare a schedule showing how much income should be allocated to each partner.
reat West Boating Ventures is a limited partnership formed to purchase and operate a fishing boat....
reat West Boating Ventures is a limited partnership formed to purchase and operate a fishing boat. The partnership was formed by two partners, I and L, who each contributed $150,000 cash to form the partnership. The partnership then borrowed $800,000 on a nonrecourse loan from an unrelated bank, and purchased a boat. The two partners share all items of partnership income, gain, loss and deduction equally. a. Over the partnership’s first 3 years of operations, it reported net losses of...
The partner (rather than the partnership) will make which of the following elections? a.To claim a...
The partner (rather than the partnership) will make which of the following elections? a.To claim a credit or deduction for foreign taxes paid. b.To claim a low-income housing credit. c.To claim a § 179 deduction for certain property placed in service during the year. d.To claim straight-line depreciation. e.All of these elections are correct. At the beginning of the tax year, Barnaby's basis in the BBB Partnership was $160,600, including his $16,060 share of partnership debt. At the end of...
Which of the following statements is false regarding Form 8949 - Sales and Other Dispositions of...
Which of the following statements is false regarding Form 8949 - Sales and Other Dispositions of Capital Assets? A. The taxpayer uses Form 8949 to report sales and exchanges of capital assets B. Form 8949 allows the taxpayer and the IRS to reconcile amounts that were reported to him or her and the IRS on Form 1099-B or 1099-S (or substitute statement) with the amounts he or she reports on his or her income tax return C. If all Forms...
Most guaranteed payments from partnerships and wages from S Corporations are subject to the full 15.3%...
Most guaranteed payments from partnerships and wages from S Corporations are subject to the full 15.3% FICA tax. Flow-through income from partnerships is sometimes subject to FICA tax while S corp flow-through income is not subject to FICA tax. Cash distributions are not subject to tax, nor are they a deductible expense. Services contributed to a partnership are often compensated through guaranteed payments from the partnership. These are treated as salary payments on which the partner receiving them must pay...