Advanced Accounting Chapter 10

A partnership (Kevin, Michael, Brendan, Jonathan) is currently holding $400,000 in assets and $234,000 in liabilities. The partnership is to be liquidated, and $20,000 is the best estimation of the expenses that will be incurred during the process. The four partners share profits and losses as shown. Capital balances at the start of the liquidation follow: The partners realize that Brendan will be the first partner to start receiving cash. How much cash will Brendan receive before any of the other partners collect any cash?

$17,000

A local partnership (Bell, Hardy, Dennard, and Suddath) is considering possible liquidation because one of the partners (Bell) is insolvent. Capital balances at the current time are as follows. Profits and losses are divided on a 4:3:2:1 basis, respectively. Bell's creditors have filed a $21,000 claim against the partnership's assets. The partnership currently holds assets reported at $300,000 and liabilities of $100,000. If the assets can be sold for $190,000, what is the minimum amount that Bell's creditors would receive?

$2,000

A partnership is considering the possibility of liquidation because one of the partners, Stewart, is insolvent. Capital balances at the current time are as follows, and profits and losses are divided on a 6:3:1 basis, respectively. Stewart's creditors have filed a $60,000 claim against the partnership's assets. The partnership currently holds assets reported at $300,000 and liabilities of $100,000. If the assets can be sold for $150,000, what is the minimum amount that Stewart's creditors would receive?

$50,000

A partnership has the following capital balances: A (20%) = $100,000; B (30%) = $120,000; C (50%) = $180,000. If the partnership is to be liquidated and $30,000 becomes immediately available, who gets the money?

A - $24,000 B - $6,000 C - $0

What is a predistribution plan?

A guide for the cash distributions to partners during a liquidation.

Which one of the following statements is incorrect regarding a predistribution plan?

A predistribution plan is prepared at the end of a liquidation to confirm actual cash distributions.

In a partnership liquidation, how is the final allocation of business assets made to the partners?

According to the balances of the partners' loan and capital accounts

If a partnership is liquidated, how is the final allocation of business assets made to the partners?

According to the final capital account balances

The following condensed balance sheet is for the partnership of Andrews, Carroll, and Murray, who share profits and losses in the ratio of 6:2:2, respectively. If the other assets are sold for $100,000, how should the available cash be distributed?

Andrews - $6,250 Carroll - $3,750 Murray - $0

A local partnership (Angela, Woodrow, and Cassady) is liquidating and is currently reporting the following capital balances: Cassady has indicated that a forthcoming contribution will cover the $12,000 deficit. However, the two remaining partners have asked to receive the $25,000 in cash that is presently available. How much of this money should each of the partners be given?

Angela - $11,500 Woodrow - $13,500

A partnership (Art, Raymond, Darby) has the following balance sheet just before final liquidation is to begin: Liquidation expenses are estimated to be $12,000. The other assets are sold for $40,000. What distribution can be made to the partners before liquidation begins?

Art - $0 Raymond - $1,500 Darby - $2,500

The following condensed balance sheet is for the Ashley, Bart, and Charles partnership. The partners share profits and losses in the ratio of 5:3:2, respectively. The partners have decided to liquidate the business. Liquidation expenses are estimated to be $8,000. The other assets are sold for $180,000. What distribution can be made to the partners?

Ashley - $0 Bart - $8,200 Charles - $18,800

A partnership (Wayman, Jones, Fuller, Rogers) has gone through liquidation and now reports the following account balances: Profits and losses are allocated on the following basis: Wayman, 30%; Jones, 20%; Fuller, 30%; and Rogers, 20%. Which of the following events should occur now?

Fuller should receive $10,600 and Rogers $5,400

Which of the following statements is true concerning the accounting for a partnership going through liquidation?

Gains and losses are reported directly as increases and decreases in the appropriate capital account

The partnership of Paul, Mark, and Jo is liquidating and the ledger shows the following balances: If all available cash is distributed immediately:

Mark would receive $15,000 and Jo would receive $5,000

A partnership (Marla, Barbara, and Roberta) is in the process of liquidating and is currently reporting the following capital balances. Roberta has indicated that the $40,000 deficit will be covered by a forthcoming contribution. However, the two remaining partners have asked to receive the $140,000 in cash that is presently available. How much of this money should each partner be given?

Marla - $75,000 Barbara - $65,000

A partnership (Monica, Patricia, and Susan) has the following capital balances: If the partnership is to be liquidated and $20,000 becomes immediately available, who gets the money?

Monica - $0 Patricia - $14,000 Susan - $6,000

The following condensed balance sheet is for the partnership of Andrews, Carroll, and Murray, who share profits and losses in the ratio of 6:2:2, respectively. Which partner is most vulnerable to a loss?

Murray

The partnership of Paul, Mark, and Jo is liquidating and the ledger shows the following balances: If no distributions have been made and the inventory is sold for $80,000, cash should be distributed

Paul would receive $30,000, Mark would receive $40,000 and Jo would receive $30,000

A guideline for the cash distributions to be made to the partners during a liquidation is called:

Predistribution plan.

In accounting for the liquidation of a partnership, cash payments to partners after all creditors' claims have been satisfied, but before final cash distribution, should be according to:

Safe payment computations

Carney, Pierce, Menton, and Hoehn are partners who share profits and losses on a 4:3:2:1 basis, respectively. They are beginning to liquidate the business. At the start of this process, capital balances are as follows: Which of the following statements is true?

The first available $3,000 will go to Menton

Stanley, a partner of the Newtown partnership, made a loan to the partnership. The partnership is now in liquidation. Which one of the following statements is incorrect regarding the status of this loan during the liquidation process?

The loan must be repaid before any cash distribution is made to the other partners, even if Stanley does not have a sufficient amount of capital to absorb all possible losses.

During a liquidation, if a partner's capital account balance drops below zero, what should happen?

The partner with a deficit contributes enough assets to offset the deficit balance.

A partnership is liquidating and one of the partner's capital accounts has a deficit balance. What should happen?

The partner with the deficit should contribute enough personal assets to eliminate the deficit balance.

Protecting the interests of partnership creditors is a significant duty because:

the Uniform Partnership Act specifies that they have first priority to the assets held by the partnership at dissolution