Chapter 15 - Book

A partnership 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 this process. The four partners share profits and losses as shown. Capital balances at the start of the liquidation follow: Kevin, capital (40%) 59000 Michael, capital (30%) 39000 Brendan, capital (10%) 34000 Jonathan, capital (20%) 34000 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? A. 12250 B. 14750 C. 17000 D. 19500

17000

A partnership is considering possible liquidation because one of the partners (Bell) is personally insolvent. Profits and losses are divided on a 4:3:2:1 basis, respectively. Capital balances at the current time are Bell, capital 50000 Hardy, capital 56000 Dennard, capital 14000 Suddath, capital 80000 Bell's creditors have filed a $21,000 claim against the partnership's assets. The partnership currently holds assets of $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? A. -0- B. 2000 C. 2800 D. 6000

2000

What is a predistribution plan? A. A list of the procedures to be performed during a liquidation. B. A guide for the cash distributions to partners during a liquidation. C. A determination of the final cash distribution to the partners on the settlement date. D. A detailed list of the transactions that will transpire in the reorganization of a partnership.

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

Which of the following statements is true concerning the accounting for a partnership going through liquidation? A. Gains and losses are reported directly as increases and decreases in the appropriate capital account. B. A separate income statement is created to measure only the profit or loss generated during liquidation. C. Because gains and losses rarely occur during liquidation, no special accounting treatment is warranted. D. Within a liquidation, all gains and losses are divided equally among the partners.

A separate income statement is created to measure only the profit or loss generated during liquidation.

If a partnership is liquidated, how is the final allocation of business assets made to the partners? A. Equally. B. According to the profit and loss ratio. C. According to the final capital account balances. D. According to the initial investment made by each of the partners.

According to the final capital account balances.

A partnership has the following capital balances: X (50 percent of profits and losses) = $150,000; Y (30 percent of profits and losses) = $120,000; Z (20 percent of profits and losses) = $80,000. If the partnership is to be liquidated and $30,000 becomes immediately available, who gets that money? A. $0 to X, $18,000 to Y, $12,000 to Z. B. $15,000 to X, $9,000 to Y, $6,000 to Z. C. $12,800 to X, $8,600 to Y, $8,600 to Z. D. $24,000 to X, $6,000 to Y, $0 to Z.

$0 to X, $18,000 to Y, $12,000 to Z.

A local partnership is liquidating and is currently reporting the following capital balances: Barley, capital (50% share of all profits and losses) 44000 Carter, capital (30%) 32000 Desai, capital (20%) -24000 Desai has indicated that a forthcoming contribution will cover the $24,000 deficit. However, the two remaining partners have asked to receive the $52,000 in cash that is currently available. How much of this money should each of the partners receive? A. Barley, $22,000; Carter, $30,000. B. Barley, $32,000; Carter, $20,000. C. Barley, $29,000; Carter, $23,000. D. Barley, $32,500; Carter, $19,500.

Barley, $29,000; Carter, $23,000.

During a liquidation, if a partner's capital account balance drops below zero, what should happen? A. The other partners file a legal suit against the partner with the deficit balance. B. The partner with the highest capital balance contributes sufficient assets to eliminate the deficit. C. The deficit balance is removed from the accounting records with only the remaining partners sharing in future gains and losses. D. The partner with a deficit contributes enough assets to offset the deficit balance.

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

A partnership has gone through liquidation and now reports the following account balances: Cash 16000 Loan from Jones 3000 Wayman, capital (2,000) (deficit) Jones, capital (5,000) (deficit) Fuller, capital 13000 Rogers, capital 7000 Profits and losses are allocated on the following basis: Wayman, 30 percent; Jones, 20 percent; Fuller, 30 percent; and Rogers, 20 percent. Which of the following events should occur now? A. Jones should receive $3,000 cash because of the loan balance. B. Fuller should receive $11,800 and Rogers $4,200. C. Fuller should receive $10,600 and Rogers $5,400. D. Jones should receive $3,000, Fuller $8,800, and Rogers $4,200.

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

A partnership has the following balance sheet prior to liquidation (partners' profit and loss ratios are in parentheses): Cash 33000 Liabilities 50000 Other assets 100000 Playa, capital (40%) 24000 Bahia, capital (30%) 29000 Arco, capital (30%) 30000 Total 133000 Total 133000 During liquidation, other assets are sold for $80,000, liabilities are paid in full, and $15,000 in liquidation expenses are paid. What amount of cash does each partner receive as a result of this liquidation? A. Playa, $6,000; Bahia, $4,500; Arco, $4,500. B. Playa, $10,000; Bahia, $18,500; Arco, $19,500. C. Playa, $16,000; Bahia, $23,000; Arco, $24,000. D. Playa, $19,200; Bahia, $14,400; Arco, $14,400.

Playa, $10,000; Bahia, $18,500; Arco, $19,500.

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 Carney, capital 60000 Pierce, capital 27000 Menton, capital 43000 Hoehn, capital 20000 Which of the following statements is true? A. The first available $2,000 will go to Hoehn. B. Carney will be the last partner to receive any available cash. C. The first available $3,000 will go to Menton. D. Carney will collect a portion of any available cash before Hoehn receives money.

The first available $3,000 will go to Menton.