501 Chapter 15 MC

Which of the following can result in the termination and liquidation of a partnership? 1) Partners are incompatible and choose to cease operations. 2) There are excessive losses that are expected to continue. 3) Retirement of a partner.

1 2 and 3

What accounting transactions are not recorded by an accountant during partnership liquidation? A. The conversion of partnership assets into cash. B. The allocation of gains and losses from sales of assets. C. The payment of liabilities and expenses. D. The initiation of legal action by creditors of the partnership. E. Writeoff of remaining unpaid debts.

D. The initiation of legal action by creditors of the partnership.

What is the preferred method of resolving a partner's deficit balance, according to the Uniform Partnership Act?

The partner with a deficit balance must contribute personal assets to cover the deficit balance.

When a partnership is insolvent and a partner has a deficit capital balance, that partner is legally required to:

contribute cash to the partnership.

Which one of the following statements is correct? A. If a partner of a liquidating partnership is unable to pay a capital account deficit, the deficit is absorbed by the other partners in the profit and loss ratio of those partners. B. Gains and losses from the sale of noncash assets are divided in the ratio of the partners' capital account balances if there is no income-sharing plan in the partnership contract. C. A loan receivable from a partner is added to the partner's capital account balance in the preparation of a cash distribution plan. D. Partners may not receive any cash before partnership creditors receive cash when liquidating a partnership. E. All cash payments to partners are made using their profit and loss ratio when liquidating the partnership.

A. If a partner of a liquidating partnership is unable to pay a capital account deficit, the deficit is absorbed by the other partners in the profit and loss ratio of those partners.

Which of the following statements is true concerning the distribution of safe payments? A. The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership. B. Safe payments are equal to the recorded capital balances of partners with positive capital balances. C. The distribution of safe payments may only be made after all liabilities have been paid. D. In computing safe payments, partners with positive capital balances are assumed to absorb an equal share of any deficit balance(s). E. There are no safe payments until the liquidation is complete.

A. The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership.

Which of the following statements is false concerning the partnership Schedule of Liquidation? A. Liquidations may take a considerable length of time to complete. B. Frequent reporting by the accountant is rarely necessary. C. The Schedule of Liquidation provides a listing of transactions to date, current cash, and capital balances. D. The Schedule of Liquidation provides a listing of property still held by the partnership as well as liabilities remaining unpaid. E. The Schedule of Liquidation keeps creditors and partners apprised of the results of the process of dissolution.

B. Frequent reporting by the accountant is rarely necessary.

Which item is not shown on the schedule of partnership liquidation? A. Current cash balances. B. Property owned by the partnership. C. Liabilities still to be paid. D. Personal assets of the partners. E. Current capital balances of the partners.

D. Personal assets of the partners.

A local partnership has assets of cash of $5,000 and a building recorded at $80,000. All liabilities have been paid. The partners capital accounts are as follows Harry $40,000, Landers $30,000 and Waters 15,000. The partners share profits and losses 4:4:2. If the building is sold for $50,000, how much cash will Harry receive in the final settlement?

Loss on sale of building 50,000-80,000 = 30,000-> share of loss: Harry $12,000, Landers $12,000 and Waters 6,000-> So the remaining credit balance: Harry 40,000-12,000=28,000, Landers 30,000-12,000=18,000 and Waters 15,000- 6,000=9,000. So Harry will receive 28,000.