ACCT 403 2nd exam
When other partners are unable to recover any part of an insolvent partner's deficit capital balance, the insolvent partner's capital account should be closed and the other partners' capital accounts should be:
debited for each partner's share of the deficit.
The earliest date at which some partnership cash can be distributed to partners is: the first date at which partnership noncash assets are sold.
the date of termination.
In addition to accounting for the transactions that occur during a partnership liquidation, the partnership's accountant should work to ensure the _____________treatment of all parties involved in the liquidation.
equitable
At year end, a partner's drawing account
is closed to the partner's capital account.
Distributing cash to partners over time during the liquidation process is referred to as a:
liquidation made in installments
Only those partners with a capital balance that is large enough to absorb all possible future ________________ will receive cash in a preliminary distribution of partnership assets.
losses or deficits
The amount of cash that can be safely distributed to partners at the beginning of liquidation is determined by assuming that:
no cash will be received from selling noncash assets. partners are personally insolvent.
Gains on sales of partnership assets are allocated to individual partners' capital accounts based on:
partners' relative profit and loss ratios.
Included in the advantages of the partnership form of business organization are
a lower cost of formation compared to the corporate form. ease of formation. the ability to make any arrangement desired among the partners for income distribution and control of business decision making.
Potential future effects of the valuation of property contributed to a partnership include
settlement of a partner's interest upon partnership liquidation. capital account balances often affect partnership profit and loss distribution. settlement of a partner's interest upon partner retirement.
At the beginning of a liquidation, a loan made by the partnership to an individual partner would be:
subtracted from that partner's capital account.
Partners might decide to terminate their partnership because they:
believe profits have become inadequate to justify their continued investment. no longer wish to work together.
The parties most interested in the financial information produced during a partnership liquidation are the partnership's:
creditors. partners.
The emergence of several alternative partnership forms derives from the desire to avoid double taxation and
limit the personal liability exposure of individual partners.
A statement of partnership liquidation discloses:
liquidation transactions still expected to be carried out.
Dividing a partner's capital balance by their profit and loss allocation determines that partner's_________ loss can be absorbed.
max
In addition to accounting for the transactions that transpire during a partnership liquidation, the partnership's accountant:
might be asked to make recommendations regarding the distribution of partnership funds. should work to make sure that all parties involved in the liquidation are treated equitably.
The legal term stating that each partner possesses the right to incur liabilities on behalf of the partnership in the normal course of business is_______________
mutual agency
Under the bonus method for recognizing a partner's intangible contribution
no asset is recorded; only partners' capital accounts are affected.
The ending balances in individual partners' capital accounts is the basis for allocating:
partnership cash that remains after payment of partnership liabilities
A statement of partnership liquidation discloses:
partnership liabilities remaining to be paid. current capital balances. assets still held by the partnership.
A single plan drawn up at the beginning of a liquidation that serves as a guide to all future distributions of cash to partners is known as a __________________ plan.
predistribution
Alternative legal forms of partnerships have been provided in many state laws that both limit the liability of individual partners while maintaining the ______________________benefits of the partnership form of business organization.
tax
Under the goodwill method for recognizing a partner's intangible contribution
the partner deemed to be contributing goodwill is given a capital credit to recognize the asset brought to the partnership. goodwill is recognized as an asset of the partnership to reflect the intangible contribution.
In preparing a proposed schedule of liquidation,
the results of transactions that have already occurred should be recorded before recording the simulated results from assumed future losses.
Compared to a corporation's balance sheet, the owners' equity section of a partnership
typically provides a much more limited range of information. typically consists of solely partner's capital accounts. does not usually distinguish between contributed and earned capital.
The legal term stating that each partner possesses the right to incur liabilities on behalf of the partnership in the normal course of business is_________________ _________________________.
mutual agency
As compared to corporations, disadvantages of the partnership business form include
mutual agency where individual partners can incur liabilities in the name of the partnership in the normal course of business. unlimited personal liability of the individual partners for all partnership debts.
A tax advantage of partnerships over the corporate business organizational form is
the avoidance of double taxation. a partner's share of partnership operating losses can be used to offset income on the partner's individual tax return.
A Preliminary distribution of cash can be safely made to partners at the beginning of a partnership liquidation by assuming that all partners are personally _______________.
insolvent
A limited liability company (LLC)
in many states limits a partner's risk to the amount he or she has invested in the partnership. is classified as a partnership for tax purposes. with respect to partner liability is similar to a Subchapter S corporation.
The articles of partnership document
largely determines the accounting procedures followed for the partnership. is a negotiated agreement created by the partners. represents a legal agreement that governs the operation of the partnership.
True or false: In preparing a proposed schedule of liquidation assumed losses should be recorded before actual transactions.
False
Accounting for a partnership's owners' equity tends to be much less complex than for a corporation because
government regulations require greater disclosures for corporations to protect the investing public and others partnerships tend to be smaller and have less complex equity transactions than corporations.
In preparing a proposed schedule of liquidation, the deficit in a partner's capital account resulting from simulated losses should be allocated to the other partners' capital accounts:
based on their relative profit and loss ratios.
At the beginning of a liquidation, a loan made by an individual partner to the partnership would be:
added to that partner's capital account.
A partnership has four partners, two of whom have negative capital balances and one of these is personally insolvent. When the personally insolvent partner's deficit capital balance is written off:
all of the other partners absorb the loss.
A statement of partnership liquidation reports updated balances in the partnership's assets, liabilities, and capital accounts:
at periodic intervals
A partner brings valuable expertise to a partnership. The partnership records no asset for this expertise, but the contributing partner nonetheless receives an additional capital credit. By crediting this partners capital account, the partnership has employed the____________ method.
bonus
Traditionally, the contribution of property by a partner to a partnership is recorded at_______________
fair
Similar to initial partner contributions to begin a partnership, subsequent partner contributions to support ongoing operations or expansion should be credited to the contributing partner's capital account at _________________value.
fair or current
When other partners are unable to recover any part of an insolvent partner's deficit capital balance, the insolvent partner's capital account should be closed by making
a credit to his/her capital account. debited for each partner's share of the deficit.
