Chapter 14 Review Questions Use the following information for the next FOU ms ABC partnership is being liquidated. Partners share profits and losses equally. Beginning balances were as illustrated in the table below. Assume all non-cash assets were sold for $75,000. Partnership liabilities were settled. Partners with deficit capital balances were not able to contribute any cash to settle their deficits. Cash Non-Cash Liabilities | A'sCapital | B'sCapital | C's Capital Assets Beginning S0 $90,000 $55,000 $32,000 $(15,000) $18,000 balances 10. Which type of liquidation did the partners follow? a. Immediate liquidation b. Lump sum liquidation ANSWER: B . Instantaneous liquidation d. Instaliment liquidation 11. What is the change in Partner C's capital as a result of the sale of assets? a. Increase $15,000 b. Decrease $15,000 . Increase $5,000 d. Decrease $5,000 ANSWER: D 12. What is Partner B's capital balance after the sale of assets and settlement of liabilities? a. $(15,000) deficit b. $(20,000) deficit ~ANSWER: B c. $(10,000) deficit d. $(30,000) deficit 13, How much cash does each partner receive at the end of the liquidation? a. A:$27,000, B: $20,000, C: $13,000. b. A:$27,000, B: $ $0, C: $13,000. . A:510,000, B: $0, C: $10,000. ANSWER: D d. None of these. Chapter 14 Review Questions 14. The doctrine of right to offset refers to a. Combining a partner's loan with the partner's capital balance when determining the amounts that should be paid to / received from the partner upon liguidation of the partnership. Combining a partner's drawings with the partner's capital account at the end of the period to determine the partner's ending capital balance. Combining a partner's debit capital balance with other partners' credit capital balances to absorb deficits in capital upon liquidation of the partnership. None of these. ANSWER: A 15. Which of the following is true about unsatisfied partnership creditors? o o They can attempt to collect their money from the general partners' personal assets. They have first priority against the partnership assets while a partner's personal creditors have first priority against the partner's personal assets. Both of these statements are true. None of these statements is true. ANSWER: A 16. Which of the following is true about the bonus method of accounting for admission of a partner? b. n Consistent with Generally Accepted Accounting Principles (GAAP), only increases (but not decreases) in the value of the existing partnership's assets are recognized when a new partner is admitted. The total capital of the new partnership is equal to the book value of the old partnership, less any write-down in the value of the old partnership's assets, plus the fair value of the assets transferred by the new partner to the partnership. Both of these statements are correct. ~ ANSWER:B None of these statements is correct. 17. When, upon the liquidation of the partnership, a partner has a debit capital balance a. The partner is required to contribute personal assets to the partnership to settle the debit capital balance. If the partner is insolvent, his/her debit capital balance can be allocated to the rest of the partners who have credit capital balances. Both of these statements are true. ANSWER: None of these statements is true