1.

When a partnership is liquidated, the assets are sold and the cash realized is applied first to the

partner with the largest investment in the partnership.

claims of creditors.

partners' equity accounts.

partners according to their ownership interest as indicated by their capital account.

2.

The allocation of net income and its impact on partner's equity balances should be disclosed in

statement of partner's equity

work sheet

balance sheet

income statement

3.

Which of the following is not a step in the liquidation of a partnership?

allocate gains or losses to partners

sell the assets

close all accounts payable

pay any liabilities

4.

Delissa invests office equipment with a fair market value of $70,000, delivery equipment with a fair market value of $89,000, and cash of $54,000. She owes $68,000, represented by a note on the delivery equipment. If Delisa's office equipment cost $80,000 and has accumulated depreciation of $30,000, the amount at which the asset should be entered on the books of the new partnership would be

$80,000

$89,000

$50,000

$70,000

5.

After closing the temporary owners' equity accounts into Income Summary, and after allocating the net income and closing the partners' drawing accounts, assume the partners' capital accounts had credit balances as follows: Rhodes, $40,000; Serrata, $60,000; Shepard, $75,000. Partners share profits and losses as follows: Rhodes, 20%; Serrata, 30%; and Shepard, 50%. If Shepard retired and withdrew $85,000 in settlement of his equity and settlements are allocated according to capital interests, the amount entered in Rhodes' capital account would be a

$4,000 debit

$6,000 debit.

$4,000 credit.

$6,000 credit.

6.

"Limited Life" means

a partnership is limited to the amount of revenue it can earn.

a partnership may be dissolved as the result of any change in the ownership.

a partnership is limited in the amount of debt it is liable for in the course of the business.

a partnership may be dissolved if the location of the business is changed.

7.

A disadvantage that is NOT peculiar to the partnership form of organization includes

each partner is individually liable for all of the debts of the partnership.

the interest of a partner in the partnership cannot be transferred without the consent of the other partners.

termination of the partnership agreement, bankruptcy of the firm, or death of one of the partners dissolves the partnership.

the partners do not make the decisions that run the business.

8.

When a new partner is admitted,

the old partnership is dissolved and a new form of ownership must be chosen.

the old partnership continues to exist and the name of the new partner is added.

the old partnership is dissolved and a new one is created.

the old partnership continues to exist and the new partner invests in the existing business.

9.

J.O'Keefe and J. Kisha combined for a 50/50 partnership in 1980 and continued to do business successfully for many years. In January 2011, J. Kimley offered to contribute a sizable amount of working capital and was accepted as a partner in the business. J. O'Keefe and J. Kisha each own 40% of the business and J. Kimley 20% of the business partnership. Profits and losses are to be shared according to these percentages. Due to the lagging economy and a sudden loss of profits, all three agree to liquidate the business and enjoy a gain on the sale of their major asset, which was purchased in 1981. This should be distributed

40% to J. O'Keefe; 40% to J. Kisha; 20% to J. Kimley.

100% into the partnership dissolution revenue account.

50% to J. O'Keefe; 50% to J. Kisha.

equally among the three partners at the time of the sale.

10

. The basis on which profits and losses are to be shared between partners is

always equal between all partners

a matter of agreement between partners

the same as their withdrawal ratio

the same as their investment ratio