CHAPTER 3 & 4

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Admission of a new partner by investment under the bonus method will result to a condition where the total contributed capital is more than the total agreed capital.

FALSE

Edward Santos directly purchased Ferdinand Romero's 250,000 partnership interest for 300,000. The entry to record the transaction is for 300,000.

FALSE

Gains and losses on the sale of assets in liquidation are divided equally among partners.

FALSE

Goodwill is the amount of capital or equity transferred by one partner to another partner.

FALSE

If a partner withdraws by selling his equity interest to the partnership in exchange for an amount greater than the balance in his capital account, the excess payment will be treated as a bonus to the continuing partner.

FALSE

In admission by investment, bonus method is used when the total agreed capital is more than the total contributed capital.

FALSE

Partnership creditors shall have priority in payments than those of the partners' separate creditors as regards the separate properties of the partners.

FALSE

Partnership creditors will be prioritized next to the inside creditors as to partnership assets in case of liquidation.

FALSE

Partnership dissolution is always followed by partnership liquidation.

FALSE

When a newly admitted partner gives a bonus to the existing partners, the old partner's capital account is debited to record such bonus.

FALSE

When a partnership goes out of business, all the remaining non-cash assets will be declared as a total loss. This loss on liquidation shall be divided among the partners in their profit and loss ratio.

FALSE

When cash is insufficient to fully satisfy the cash requirements in a particular priority, then the available cash will be distributed using the Profit and loss ratio.

FALSE

A partnership may be dissolved without being liquidated but liquidation is always preceded by dissolution.

TRUE

A person is admitted as a partner into an existing partnership is liable for obligations of the partnership contracted before his admission.

TRUE

Admission of a new partner will not have an effect on total partnership capital if the new partner pays the old partner directly for his interest.

TRUE

Bankruptcy of a partner will dissolve the partnership.

TRUE

In admission by purchase, payment is personally made to the partner from whom the interest is obtained resulting to mere transfers among capital accounts.

TRUE

It is possible to invest cash and non-cash assets into a partnership yet be given a zero starting capital balance.

TRUE

It is possible to invest no tangible assets into a partnership, yet be given a positive opening capital balance.

TRUE

Joel Wanagen purchased directly from Vangie Buenaventora her 30,000 partnership interest for 50,000. The entry to record the transaction is for 30,000.

TRUE

Liquidation of a partnership is the process of ending the business.

TRUE

Liquidation of a partnership is the winding up of its business activities characterized by sale of all non-cash assets, settlement of all liabilities and distribution of the remaining cash to the partners.

TRUE

On dissolution, the partnership is not terminated but continues until winding up of partnership affairs is completed.

TRUE

Partnership liquidation is always preceded by partnership dissolution.

TRUE

Restricted interests are provided for assumed non-sale of remaining noncash assets and for assumed insolvency of deficient partners

TRUE

The admission of a new partner brings about a new association of persons even if the partnership is not liquidated.

TRUE

The admission of a new partner in an existing partnership dissolves it.

TRUE

The assets invested into the partnership and not directly paid to the individual partners increase the total assets of the partnership.

TRUE

The creditors of the partnership shall have priority in payments over those of the partners' separate creditors as regards the partnership properties

TRUE

The loss absorption balances represent the maximum loss that the partners could absorb without reducing their equity below zero

TRUE

The partnership is said to be dissolved when business is terminated.

TRUE

The retirement of a partner by payment from partnership assets may cause the other partner's capital accounts to decrease.

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.

TRUE

The use of safe payments schedule and cash priority program are alternatives which will yield the same ultimate cash distributions to the partners

TRUE

The use of schedule of safe payments and cash priority program are methods that will yield at the same amount of distributed cash to the partners.

TRUE

Under the installment method of partnership liquidation, realization of noncash assets is accomplished over an extended period of time. When cash is available, creditors may be partially or fully paid. Any excess may be distributed to the partners in accordance with a program of safe payments or a cash priority program. This process persists until all the non-cash assets are sold

TRUE

When a bonus is allowed to a new partner, part of the entry to record his admission to a business reduces the capital accounts of the old partners.

TRUE

Perez and Daganta are partners who share profits and losses in a ratio of 2:1 and have capital balances of 750,000 and 1,500,000 respectively. The partners agreed to admit Barros to the partnership. Barros invested 750,000 for a 35% interest in the partnership. The new total capital balance after admitting Barros is 3,000,000. Daganta's capital balance after Barros is admitted is A. 1,600,000 B. 1,500,000 C. 1,400,000 D. 1,350,000

C. 1,400,000

If a bonus is traceable to the old partners rather than to a new partner, it is allocated among the partners according to the A. capital ratio of the old partners B. capital ratio of the new partnership C. profit and loss ratio of the old partnership D. profit and loss ratio of the new partnership

C. profit and loss ratio of the old partnership

A partner who withdraws from a partnership is always entitled to the balance in his capital account.

FALSE

There will be no impact on the partnership's balance sheet when a partner withdraws from the business.

FALSE

When a newly admitted partner gives a bonus to the existing partners, the old partner's capital account is debited.

FALSE

When a partner withdraws assets greater than his capital balance, the excess is treated as a bonus to the remaining partners.

FALSE

When a partner withdraws assets larger than his capital balancer the excess is treated as a bonus to the remaining partners.

FALSE

When a partner withdraws from a partnership, there is no need for asset reappraisal.

FALSE

A new partner must have the consent of all partners before-being admitted into the partnership

TRUE

Bonus to a new partner is always given by the old partners.

TRUE

If liquidation of a partnership results in a negative balance in a partner's account, the partner must pay into the partnership the amount of the negative balance.

TRUE

The withdrawal of a partner from a partnership is a type of dissolution.

TRUE

There will be no impact on the partnership's income statement if the partners withdraw from the business.

TRUE

When a partner leaves a partnership, it is possible that total assets will be unaffected.

TRUE

When the existing partners pay a bonus to a newly admitted partner, the existing partner's accounts are debited.

TRUE

Total contributed capital, which is the sum of the capital balances of the old partners and the actual investment of the new partner, should always be equal to the new partnership capital

FALSE

When Ted purchases Barney's P48,000 capital interest for P48,000, the resulting entry would be a debit to Cash for P48,000.

FALSE

When Yolanda Garcesa purchase Esperanza Nolasco's 200,000 capital interest for 200,000, the ensuing entry on the books of the partnership would contain a debit to cash for 200,000.

FALSE

When a new partner invests more than the proportionate share he receives in the partnership, a bonus is recorded to his capital account.

FALSE

When a new partner is given 25% ownership in a partnership, he will receive 25% of all future profits and losses.

FALSE

When a new partner is given 30% interest in a partnership, he will receive 30% of all future profits and losses.

FALSE

When a partner withdraws from a partnership and the value of the assets paid to the partner by the partnership is greater than the balance in his capital account, the partnership is, in effect, paying the withdrawing partner a bonus.

TRUE

When a partner withdraws from a partnership, an appraisal of all partnership assets needs to be made.

TRUE

When new partners invest more than the equity interest they are to receive in the net assets of an existing partnership, part of the entry to record the new partners' investments is an increase in the capital accounts of the old partners.

TRUE

When the capital of a retiring partner is to be bought by the partnership, this will result to a decrease in the total partnership's asset even if his interest is to be retired at an amount lower than its book value.

TRUE

When the old partners give a bonus to a newly admitted partner, the existing partner's accounts are debited.

TRUE

Death of a partnership creditor dissolves a partnership.

TRUE

If the partnership is dissolved because of insolvency, all the general partners must contribute the additional amount to fully pay the third party creditors.

TRUE

If the partnership is dissolved with the death of one of the partners, the remaining partners may continue the partnership under a new partnership name.

TRUE

In admission by investment, the bonus method is used when the total agreed capital is more than the total contributed capital.

TRUE

In admission by purchase, payment is personally made to the partner from whom the interest is obtained.

TRUE

In partnership liquidation, one partner may have to make up for the deficit in another partner's account.

TRUE

It is possible to invest assets into a partnership and be given a zero capital balance.

TRUE

The partnership may be dissolved by mere agreement among partners.

TRUE

The personal creditors of the general partner have a better claim to the partner's personal assets than the creditors of the partnership.

TRUE

Ownership can be easily transferred in a partnership

FALSE

Partner Y purchases Partner Z's P 180,000 interest from Partner Z for P300,000, The entry to record the transaction would use P300,000

FALSE

Partnership liquidation is the same as partnership dissolution.

FALSE

The admission of new partner either by purchase of existing partner's interest or by investment of new assets in the partnership will result to an increase in the total partnership's assets.

FALSE

The cash settlement of all liabilities is referred to as realization.

FALSE

The creditors of each partner shall be preferred to those of the partnership as regards the partnership property.

FALSE

The creditors of the partnership are preferred with respect to the separate or personal properties of the partners.

FALSE

The dissolution of a partnership is the same as its liquidation.

FALSE

The dissolution of a partnership is the same as the liquidation of a partnership.

FALSE

The entry to record the exercise of offset will debit the Partner's loan account and credit cash.

FALSE

A partner's inability to meet his obligations at the time of liquidation relieves that individual of his liabilities to the other partners.

FALSE

A partner's interest can be obtained by simply adding the partner's capital account, loans to and from the partnership.

FALSE

A partner's unrestricted interest represents the portion of a partner's interest which should remain available to absorb possible future losses.

FALSE

In liquidation, partners are given back the assets that they originally invested.

FALSE

Liquidation expenses which are incurred in the realization of non-cash assets affect cash but not partners' capital.

FALSE

Tolentino invested 400,000 for a 20% interest in a partnership that has capital totaling 150,000 after admitting Tolentino. Which of the following is true? A. Tolentino's capital is 400,000 B. Tolentino received a bonus of 100,000 C. The original partners received bonus of 100,000 D. The original partners' capital in the business was 1,200,000 before admitting Tolentino

C. The original partners received bonus of 100,000

During partnership dissolution, the partnership is not terminated but continues until the winding up of partnership affairs is completed.

TRUE

If the agreed capital exceeded the total contributed capital, the difference may be attributed to a positive asset revaluation.

TRUE

A partnership dissolution will not always lead to a partnership liquidation.

TRUE

A partnership has a limited life. Any change in the relationship of the partners dissolves it.

TRUE

A partnership is both easy to form and dissolve.

TRUE

A partnership is dissolved when a new partner is admitted to the partnership.

TRUE

A partnership is said to be dissolved when the business is terminated.

TRUE

A partnership may be dissolved at any time by any of the partners.

TRUE

Capital credit is the equity of a partner in the new partnership and can be computed by multiplying the total agreed capitalization by the corresponding percentage interest of the partner.

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

TRUE

Marasigan, Cabance, and Tan are in a partnership. Tan decides she wants to withdraw from the partnership by selling her interest to Blanche. Marasigan and Cabance agree to this. Marasigan's and Cabance's capital accounts a. will not be affected when Blanche is admitted b. cannot be determined from the information given c. will increase when Blanche is admitted d. will decrease when Blanche is admitted

a. will not be affected when Blanche is admitted

Which of the following will not result in dissolution of a partnership? a. incapacity of a partner b. negative capital balance of a partner c. bankruptcy of a partner d. admission of a new partner

b. negative capital balance of a partner


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