Question 1

White, Sands, and Luke has the following capital balances and profit and loss ratios:
$60,000 (30%); $100,000 (20%); and $200,000 (50%).
The partnership has received a predistribution plan.
How would $200,000 be distributed?

Accepted Answer

White: ($200,000 - $20,000 - $140,000) × 30% = $12,000Sands: $20,000 + $40,000 ($140,000 × 2/7) + $8,000 (($200,000 - $20,000 - $140,000) × 20%) = $68,000Luke: $100,000 ($140,000 × 5/7) + $20,000 (($200,000 - $20,000 - $140,000) × 50%) = $120,000

Question 2

Which one of the following statements is correct?

Accepted Answer

When a partner is unable to pay a capital account deficit during liquidation, the remaining partners must absorb the deficit in the profit and loss ratio of those partners. This is stated in the Uniform Partnership Act (UPA), which governs the dissolution and liquidation of partnerships.

Question 3

Which of the following statements is true concerning the distribution of safe payments?

Accepted Answer

The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership, ensuring that only partners with positive capital balances receive payments.

Question 4

Matching
-The schedule of liquidation
A provision for an equitable distribution of assets during liquidation.

Accepted Answer

The answer of Matching
-The schedule of liquidation
A provision for an...

Question 5

A local partnership has assets of cash of $130,000 and land recorded at $700,000. All liabilities have been paid and the partners are all personally insolvent. The partners' capital accounts are as follows Roberts, $500,000, Ferry, $300,000 and Mones, $30,000. The partners share profits and losses 5:3:2.
If the land is sold for $450,000, how much cash will Roberts receive in the final settlement?

Accepted Answer

R = $500,000; F = $300,000; M = $30,000 with Losses Shared 5:3:2First eliminate M Balance of $30,000 in $250,000 LossLosses now shared 5/8 & 3/8R = $500,000 - ($220,000 × 5/8) $137,500 = $362,500F = $300,000 - ($220,000 × 3/8) $82,500 = $217,500

Question 6

Which of the following could 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.

Accepted Answer

The answer of Which of the following could result in...

Question 7

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

Accepted Answer

According to the Uniform Partnership Act, the partner with a deficit balance must contribute personal assets to cover the deficit balance. This means that the partner must use their own personal funds or assets to cover the debts or losses of the partnership before any other partners are required to contribute. However, if the partner's personal assets do not cover the full deficit balance, then the other partners may be required to contribute their personal assets as well.

Question 8

What is the role of the accountant during the liquidation process?

Accepted Answer

The answer of What is the role of the accountant...

Question 9

Harding, Jones, and Sandy is in the process of liquidating and the partners have the following capital balances; $24,000, $24,000, and ($9,000) respectively. The partners share all profits and losses 16%, 48%, and 36%, respectively. Sandy has indicated that the ($9,000) deficit will be covered with a forthcoming contribution. The remaining partners have requested to immediately receive $20,000 in cash that is available. How should this cash be distributed?

Accepted Answer

Harding = $72,000; Jones = $32,000; Sandy = $52,000 beginning balances with Losses Shared 16:48:36First eliminate Sandy's negative capital loss to Harding & JonesLosses shared 16/64 & 48/64 or 25% & 75%Harding = $24,000 - ($9,000 × 25%) $2,250 = $21,750 - $5,750 = $16,000 + ($4,000 × 25%) $1,000 = $17,000Jones = $24,000 - ($9,000 × 75%) $6,750 = $17,250 - $17,250 = 0 + ($4,000 × 75%) $3,000 = $3,000

Question 10

Matching
-Deficit capital balances
A schedule should be produced periodically by the accountant to disclose losses and gains that have been incurred, remaining assets and liabilities, and current capital balances.

Accepted Answer

The answer of Matching
-Deficit capital balances
A schedule should be produced...

Question 11

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?

Accepted Answer

H = $40,000 - Loss on Blg ($30,000 × .40) $12,000 = $28,000

Question 12

Matching
-Predistribution plan
One or more partners may have a negative capital balance often as a result of losses incurred in disposing of assets.

Accepted Answer

The answer of Matching
-Predistribution plan
One or more partners may have...

Question 13

Which item is not shown on the schedule of partnership liquidation?

Accepted Answer

The personal assets of the partners are not typically included in the schedule of partnership liquidation. The schedule usually only includes current cash balances, property owned by the partnership, liabilities still to be paid, and the current capital balances of the partners.

Question 14

What accounting transactions are not recorded by an accountant during partnership liquidation?

Accepted Answer

The answer of What accounting transactions are not recorded by...

Question 15

White, Sands, and Luke has the following capital balances and profit and loss ratios:
$60,000 (30%); $100,000 (20%); and $200,000 (50%).
The partnership has received a predistribution plan.
How would $90,000 be distributed?

Accepted Answer

Sands: $20,000 + $20,000 ($90,000 - $20,000 = $70,000 × 2/7) = $40,000Luke: $50,000 ($90,000 - $20,000 = $70,000 × 5/7)

Question 16

Gonda, Herron, and Morse is considering possible liquidation because partner Morse is personally insolvent. The partners have the following capital balances: $60,000, $70,000, and $40,000, respectively, and share profits and losses 30%, 45%, and 25%, respectively. The partnership has $200,000 in noncash assets that can be sold for $150,000. The partnership has $10,000 cash on hand, and $40,000 in liabilities. What is the minimum that partner Morse's creditors would receive if they have filed a claim for $50,000?

Accepted Answer

M = $40,000 - Loss on Non-Cash Asset Sale ($50,000 × .25) $12,500 = $27,500

Question 17

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 Waters receive in the final settlement?

Accepted Answer

W = $15,000 - Loss on Blg ($30,000 × .20) $6,000 = $9,000

Question 18

Matching
-Safe capital balances
At the start of a liquidation, this document provides guidance for all payments made to the partners throughout the liquidation.

Accepted Answer

The answer of Matching
-Safe capital balances
At the start of a...

Question 19

A local partnership has assets of cash of $130,000 and land recorded at $700,000. All liabilities have been paid and the partners are all personally insolvent. The partners' capital accounts are as follows Roberts, $500,000, Ferry, $300,000 and Mones, $30,000. The partners share profits and losses 5:3:2.
If the land is sold for $450,000, how much cash will Mones receive in the final settlement?

Accepted Answer

R = $500,000; F = $300,000; M = $30,000 with Losses Shared 5:3:2M Share of $250,000 Loss × 20% = $50,000; Capital Balance of $30,000 is Lost; Balance = 0

Question 20

Which of the following statements is false concerning the partnership Schedule of Liquidation?

Accepted Answer

The answer of Which of the following statements is false...

Quiz 15: Partnerships: Termination and Liquidation

White, Sands, and Luke has the following capital balances and profit and loss ratios: $60,000 (30%) ; $100,000 (20%) ; and $200,000 (50%) . The partnership has received a predistribution plan. How would $200,000 be distributed?

Which one of the following statements is correct?

Which of the following statements is true concerning the distribution of safe payments?

Matching -The schedule of liquidation A provision for an equitable distribution of assets during liquidation.

Which of the following could 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.

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

What is the role of the accountant during the liquidation process?

Matching -Deficit capital balances A schedule should be produced periodically by the accountant to disclose losses and gains that have been incurred, remaining assets and liabilities, and current capital balances.

Matching -Predistribution plan One or more partners may have a negative capital balance often as a result of losses incurred in disposing of assets.

Which item is not shown on the schedule of partnership liquidation?

What accounting transactions are not recorded by an accountant during partnership liquidation?

White, Sands, and Luke has the following capital balances and profit and loss ratios: $60,000 (30%) ; $100,000 (20%) ; and $200,000 (50%) . The partnership has received a predistribution plan. How would $90,000 be distributed?

Matching -Safe capital balances At the start of a liquidation, this document provides guidance for all payments made to the partners throughout the liquidation.

Which of the following statements is false concerning the partnership Schedule of Liquidation?