Partnership Liquidation (Theories)
In a partnership liquidation, the assets of the partnership shall be applied lastly to
those owing to the partners with respect to their capital contributions.
Which of the following is not correct with respect to an installment liquidation of a partnership?
All remaining liquidation expenses are anticipated.
A liquidation differs from a dissolution in that in a liquidation
THE BUSINESS WILL NOT CONTINUE
A partnership is said to be dissolved when the business is terminated. T/F
TRUE
Cash payments may be made in the profit and loss ratio only when installment payments have caused the ratio of the partners' capital account balances to be the same as the profit and loss ratio. T/F
TRUE
In partnership liquidation, one partner may have to make up for the deficit in another partner's account. T/F
TRUE
Restricted interests are provided for assumed non-sale of remaining non-cash assets and for assumed insolvency of deficient partners. T/F
TRUE
The loss absorption balances represent the maximum loss that the partners could absorb without reducing their equity below zero. T/F
TRUE
The right of offset is the legal right of a partner to apply part or all of his loan account balance against a capital deficiency resulting from losses in the realization of the partnership assets. T/F
TRUE
The use of the safe payment schedule and cash priority program are alternatives which will yield the same ultimate cash distributions to the partners. T/F
TRUE
Claims against partners' personal assets by creditors if the partnership can't pay its debts refers to
UNLIMITED LIABILITY
In a partnership liquidation, the final cash distribution to the partners should be made in accordance with the
balances of partners' capital accounts.
A partner's inability to meet his obligations at the time of liquidation relieves that individual of his liabilities to the other partners. T/F
FALSE
A partner's interest can be obtained by simply adding the partner's capital account, loans to and from the partnership. T/F
FALSE
Gains and losses on the sale of the assets in liquidation are divided equally among partners. T/F
FALSE
In liquidation, partners are given back the assets that they originally invested. T/F
FALSE
Partnership creditors will be prioritized next to the inside creditors as to partnership assets in case of liquidation. T/F
FALSE
The cash settlement of all liabilities is referred to as realization. T/F
FALSE
The creditors of the partnership are preferred with respect to the separate or personal properties of the partners. T/F
FALSE
The following is the priority sequence in which liquidation proceeds will be distributed for a partnership:
Partnership liabilities, partnership loans and partnership capital balances.
