kindly answer question 6,7 and 8 from the attachment. please provide the workings.

Chapter 16 - Partnerships: Liquidation Chapter 16 Partnerships: Liquidation Multiple Choice Questions 1. The CRT partnership has decided to terminate operations and to liquidate the partnership assets. There are no partner loans, and all partners have positive capital balances. Gains and losses on liquidation and cash distributions to partners should be allocated as follows: A. Option A B. Option B C. Option C D. Option D Answer: A LO: 16-01 Topic: Winding Up and Liquidation Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 2. According to UPA 1997, during partnership liquidation, loans the partners have made to the partnership have the same status as loans from third-party creditors. As a practical matter, most loans from partners: A. are subordinated to third-party creditors. B. have the same status as loans from third-party creditors. C. are paid prior to third-party creditors. D. None of the above. Answer: A LO: 16-01 Topic: Loans to or from Partners Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 16-1 Chapter 16 - Partnerships: Liquidation 3. In order to avoid inequalities in the liquidation process the legal doctrine of setoff effectively treats loans from partners to the partnership as: A. outside debt that can offset a deficit capital account balance B. inside debt that can offset a deficit capital account balance. C. additional capital investments that can offset a deficit capital account balance. D. additional capital investments that can offset a partnership loss. Answer: C LO: 16-01 Topic: Deficits in Partners' Capital Accounts Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 4. When is a partnership considered to be insolvent? I. When the total of all partners' capital accounts results in a debit balance. II. When at least one of the partners is personally insolvent. A. I only B. II only C. Both I and II D. Neither I nor II 16-2 Chapter 16 - Partnerships: Liquidation Answer: A LO: 16-02 Topic: Partnership Is Insolvent and Deficit Created in Partner's Capital Account Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 5. The balance sheet given below is presented for the partnership of Janet, Anton, and Millet: The partners share profits and losses in the ratio of 5:3:2, respectively. The partners agreed to dissolve the partnership after selling the other assets for $50,000. On dissolution of the partnership, Janet should receive: A. $0. B. $80,000. C. $10,000. D. $30,000. Answer: D LO: 16-02 Topic: Partnership Solvent and Deficit Created in Partner's Capital Account Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium The following data applies to Questions 6 - 8: 16-3 Chapter 16 - Partnerships: Liquidation Bill, Page, Larry, and Scott have decided to terminate their partnership. The partnership's balance sheet at the time they decide to wind up is as follows: During the winding up of the partnership, the other assets are sold for $150,000 and the accounts payable are paid. Page and Larry are personally solvent, but Bill and Scott are personally insolvent. The partners share profits and losses in the ratio of 4:2:1:3. 6. Based on the preceding information, what amount will be paid out to Bill upon liquidation of the partnership? A. $0 B. $25,000 C. $11,667 D. $2,500 Answer: A LO: 16-02 Topic: Partnership Solvent and Deficit Created in Partner's Capital Account Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 7. Based on the preceding information, what amount will be paid out to Scott upon liquidation of the partnership? A. $0 B. $2,500 C. $25,000 D. $65,000 Answer: B LO: 16-02 Topic: Partnership Solvent and Deficit Created in Partner's Capital Account Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 16-4 Chapter 16 - Partnerships: Liquidation 8. Based on the preceding information, what amount will be distributed to Page and Larry upon liquidation of the partnership? A. Option A B. Option B C. Option C D. Option D Answer: C LO: 16-02 Topic: Partnership Solvent and Deficit Created in Partner's Capital Account Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium The following data applies to Questions 9 - 11: 16-5 Chapter 16 - Partnerships: Liquidation Bill, Page, Larry, and Scott have decided to terminate their partnership. The partnership's balance sheet at the time they decide to wind up is as follows: During the winding up of the partnership, the other assets are sold for $150,000 and the accounts payable are paid. Page and Larry are personally solvent, but Bill and Scott are personally insolvent. The partners share profits and losses in the ratio of 3:2:1:4. 9. Based on the preceding information, what amount will be paid out to Bill upon liquidation of the partnership? A. $0 B. $5,000 C. $25,000 D. $2,500 Answer: A LO: 16-02 Topic: Partnership Solvent and Deficit Created in Partner's Capital Account Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 10. Based on the preceding information, what amount will be paid out to Scott upon liquidation of the partnership? A. $0 B. $2,500 C. $5,000 D. $6,429 Answer: A LO: 16-02 Topic: Partnership Solvent and Deficit Created in Partner's Capital Account Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 16-6 Chapter 16 - Partnerships: Liquidation 11. Based on the preceding information, what amounts will be distributed to Page and Larry upon liquidation of the partnership? A. Option A B. Option B C. Option C D. Option D Answer: D LO: 16-02 Topic: Partnership Solvent and Deficit Created in Partner's Capital Account Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium The following data applies to Questions 12 - 13: The following condensed balance sheet is presented for the partnership of D, E, and F who share profits and losses in the ratio of 5:3:2, respectively: The partners agreed to liquidate the partnership after selling the other assets. 16-7 Chapter 16 - Partnerships: Liquidation 12. Refer to the above information. If the other assets are sold for $280,000, how much should F receive upon liquidation? A. $44,000 B. $50,000 C. $76,000 D. $90,000 Answer: B LO: 16-02 Topic: Partnership Solvent and No Deficits in Partners' Capital Accounts Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 13. Refer to the above information. If the other assets are sold for $80,000, and all partners are personally insolvent, how much should E receive upon liquidation? A. $0 B. $6,000 C. $10,000 D. $20,000 Answer: C LO: 16-02 Topic: Partnership Solvent and Deficit Created in Partner's Capital Account Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium The following data applies to Questions 14 - 15: The following condensed balance sheet is presented for the partnership of H, I, and J who share profits and losses in the ration of 4:3:3, respectively: Cash $50,000 Other Assets 300,000 Total $350,000 Liabilities H, Capital I, Capital J, Capital Total $80,000 150,000 70,000 50,000 $350,000 The partners agree to liquidate the partnership after selling the other assets. 16-8 Chapter 16 - Partnerships: Liquidation 14. Refer to the above information. If the other assets are sold for $200,000, how much should J receive upon liquidation? A. $50,000 B. $30,000 C. $20,000 D. $15,000 Answer: C LO: 16-02 Topic: Partnership Solvent and No Deficits in Partners' Capital Accounts Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 15. Refer to the above information. If the other assets are sold for $140,000 and all partners are personally insolvent, how much should I receive upon liquidation? A. $0 B. $2,000 C. $6,600 D. $22,000 Answer: D LO: 16-02 Topic: Partnership Solvent and Deficit Created in Partner's Capital Account Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium (Note: Question 16 is a Kaplan CPA Review Question) 16. The following condensed balance sheet is presented for the partnership of Cooke, Dorry, and Evans who share profits and losses in the ratio of 4:3:3, respectively: Cash Other assets Cooke, loan Accounts payable Evans, loan $ 90,000 820,000 30,000 $940,000 $210,000 40,000 16-9 Chapter 16 - Partnerships: Liquidation Cooke, capital Dorry, capital Evans, capital 300,000 200,000 190,000 $940,000 Assume that the partners decide to liquidate the partnership. If the other assets are sold for $600,000, how much of the available cash should be distributed to Cooke? A. $212,000 B. $170,000 C. $182,000 D. $300,000 Answer: C LO: 16-02 Topic: Partnership Solvent and No Deficits in Partners' Capital Accounts Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 17. The following condensed balance sheet is presented for the partnership of Finn, Gary, and Eugene who share profits and losses in the ratio of 2:4:4, respectively: Cash Other assets Finn, loan Accounts payable Eugene, loan Finn, Capital Gary, Capital Eugene, Capital $70,000 730,000 20,000 $820,000 $250,000 30,000 110,000 230,000 200,000 $820,000 Assume that the partners decide to liquidate the partnership. If the other assets are sold for $600,000, how much of the available cash should be distributed to Finn? A. $64,000 B. $84,000 C. $90,000 D. $110,000 Answer: A LO: 16-02 Topic: Partnership Solvent and No Deficits in Partners' Capital Accounts Blooms: Apply 16-10 Chapter 16 - Partnerships: Liquidation AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 16-11 Chapter 16 - Partnerships: Liquidation (Note: Question 18 is a Kaplan CPA Review Question) 18. The following condensed balance sheet is presented for the partnership of Fisher, Taylor and Simon who share profits and losses in the ratio of 6:2:2, respectively: Cash Other assets Liabilities Fisher, Capital Taylor, Capital Simon, Capital $ 40,000 140,000 $ 180,000 $ 70,000 50,000 50,000 10,000 $ 180,000 The assets and liabilities are fairly valued on the above balance sheet, and it was agreed to by all the partners that the partnership would be liquidated after selling the other assets. What would each of the partners receive at this time if the other assets are sold for $80,000? A. B. C. D. Fisher $12,500 $13,000 $14,000 $50,000 Taylor $37,500 $37,000 $38,000 $50,000 Simon $0 $0 $2,000 $10,000 Answer: A LO: 16-02 Topic: Partnership Solvent and No Deficits in Partners' Capital Accounts Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 19. The following condensed balance sheet is presented for the partnership of Dunn, Lott, and Tyler who share profits and losses in the ratio of 7:2:1, respectively. Cash Other assets Liabilities Dunn, Capital Lott, Capital Tyler, Capital $30,000 150,000 $180,000 $60,000 50,000 40,000 30,000 $180,000 16-12 Chapter 16 - Partnerships: Liquidation The partners agreed that the partnership would be liquidated after selling the other assets. All partners are personally insolvent. What would each of the partners receive if the other assets are sold for $70,000? Dunn Lott Tyler A. $6,000 $24,000 $22,000 B. $0 $21,000 $19,000 C. $50,000 $40,000 $30,000 D. $0 $20,000 $20,000 Answer: D LO: 16-02 Topic: Partnership Solvent and No Deficits in Partners' Capital Accounts Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 16-13 Chapter 16 - Partnerships: Liquidation The following data applies to Questions 20 - 23: The trial balance of WM Partnership is as follows: Wilfred and Mike decide to incorporate their partnership. The partnership's books will be closed, and new books will be used for W & M Corporation. The following additional information is available: 1. The estimated fair values of the assets follow: 2. All assets and liabilities are transferred to the corporation. 3. The common stock is $10 par. Wilfred and Mike receive a total of 10,000 shares. 4. The partners share profits and losses in the ratio 7:3. 20. Based on the preceding information, the journal entry on the partnership's books to record the Investment in W&M Corporation Stock will be debited for: A. $181,000 B. $131,000 C. $200,000 D. $150,000 16-14 Chapter 16 - Partnerships: Liquidation Answer: B LO: 16-03 Topic: Additional Considerations: Incorporation of a Partnership Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 16-15 Chapter 16 - Partnerships: Liquidation 21. Based on the preceding information, the journal entry on the partnership's books to record distribution of stock to prior partners will include a debit to Wilfred, Capital for: A. $140,000. B. $91,700. C. $86,700. D. $126,700. Answer: C LO: 16-03 Topic: Additional Considerations: Incorporation of a Partnership Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 22. Based on the preceding information, the journal entry on the partnership's books to record distribution of stock to prior partners will include a debit to Mike, Capital for: A. $38,010. B. $31,500. C. $42,000. D. $44,300. Answer: D LO: 16-03 Topic: Additional Considerations: Incorporation of a Partnership Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 23. Based on the preceding information, the journal entry on W & M Corporation's books to record the assets and the issuance of the common stock will include a credit to Additional Paid-In Capital for: A. $0. B. $81,000. C. $31,000. D. $50,000. Answer: C LO: 16-03 16-16 Chapter 16 - Partnerships: Liquidation Topic: Additional Considerations: Incorporation of a Partnership Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 24. The capital balances, prior to the liquidation of the XYZ partnership, were as follows: X, Y, and Z share profits and losses in the ratio of 5:3:2. As a result of a loan, the partnership owes Y $80,000. Using the information above, which partner has the highest Loss Absorption Power (LAP) prior to liquidation? A. X B. Y C. Z D. Both X and Y Answer: B LO: 16-03 Topic: Cash Distribution Plan Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 16-17 Chapter 16 - Partnerships: Liquidation 25. On December 1, 20X9, the partners of Tim, Williams, and Levin, who share profits and losses in the ratio of 4:4:2, decided to liquidate their partnership. On this date the partnership condensed balance sheet was as follows: On December 11, 20X9, the first cash sale of other assets with a carrying amount of $200,000 realized $140,000. Safe installment payments to the partners were made on the same date. How much cash should be distributed to each partner? A. Option A B. Option B C. Option C D. Option D Answer: C LO: 16-03 Topic: Installment Liquidations Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 16-18 Chapter 16 - Partnerships: Liquidation 16-19 Chapter 16 - Partnerships: Liquidation The following data applies to Questions 26 - 28: Tom, Dick, and Harry are partners in an equipment leasing business that has not been able to generate the type of revenue expected by the partners. They share profits and losses in a ratio of 5:3:2. They have decided to liquidate the business and have sold all the assets except for one piece of heavy machinery. All partnership liabilities have been settled and all the partners are personally insolvent. The machinery has a book value of $85,000, and the partners have capital account balances as follows: Each of the following are independent cases. 26. Refer to the information given above. What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for 65,000 dollars? A. Option A B. Option B C. Option C D. Option D Answer: B LO: 16-03 Topic: Installment Liquidations Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 16-20 Chapter 16 - Partnerships: Liquidation 27. Refer to the information given above. What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for 33,000 dollars? A. Option A B. Option B C. Option C D. Option D Answer: C LO: 16-03 Topic: Installment Liquidations Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 28. Refer to the information given above. What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for 21,100 dollars? A. Option A B. Option B C. Option C D. Option D Answer: A LO: 16-03 Topic: Installment Liquidations Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 16-21 Chapter 16 - Partnerships: Liquidation The following data applies to Questions 29 - 31: Siera, Lani, and Cecilia are partners in an equipment leasing business that has not been able to generate the type of revenue expected by the partners. They share profits and losses in a ratio of 5:3:2, respectively. They have decided to liquidate the business and have sold all the assets except for one piece of heavy machinery. All the partners are personally insolvent. The machinery has a book value of $120,000, and the partners have capital balances as follows: Siera, Capita Lani, Capital Cecilia, Capital $40,000 $20,000 $30,000 Each of the following is an independent case. 29. Refer to the information given above. What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for $90,000? Siera Lani Cecilia A. $25,000 $11,000 $24,000 B. $30,000 $10,000 $20,000 C. $40,000 $20,000 $30,000 D. $55,000 $29,000 $36,000 Answer: A LO: 16-03 Topic: Installment Liquidations Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 30. Refer to the information given above. What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for $51,000? Siera Lani Cecilia A. $5,000 $0 $16,000 B. $5,000 $700 $16,000 C. $5,500 $0 $16,200 D. $5,500 $700 $16,200 Answer: A LO: 16-03 Topic: Installment Liquidations Blooms: Understand AACSB: Analytic AICPA: FN Measurement 16-22 Chapter 16 - Partnerships: Liquidation Difficulty: 2 Medium 31. Refer to the information given above. What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for $44,000? Siera Lani Cecilia A. $2,000 $2,800 $14,800 B. $2,000 $0 $14,000 C. $0 $0 $14,000 D. $0 $0 $16,000 Answer: C LO: 16-03 Topic: Installment Liquidations Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 16-23 Chapter 16 - Partnerships: Liquidation The following data applies to Questions 32 - 36: Partners Dennis and Lilly have decided to liquidate their business. The following information is available: Dennis and Lilly share profits and losses in a 3:2 ratio. During the first month of liquidation, half the inventory is sold for $60,000, and $60,000 of the accounts payable is paid. During the second month, the rest of the inventory is sold for $45,000, and the remaining accounts payable are paid. Cash is distributed at the end of each month, and the liquidation is completed at the end of the second month. 32. Refer to the information provided above. Using a safe payments schedule, how much cash will be distributed to Dennis at the end of the first month? A. $64,000 B. $60,000 C. $24,000 D. $36,000 Answer: D LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 33. Refer to the information provided above. Using a safe payments schedule, how much cash will be distributed to Lilly at the end of the first month? A. $24,000 B. $40,000 C. $16,000 D. $64,000 16-24 Chapter 16 - Partnerships: Liquidation Answer: A LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 34. Refer to the information provided above. Using a safe payments schedule, how much cash will be distributed to Dennis at the end of the second month? A. $18,000 B. $27,000 C. $36,000 D. $60,000 Answer: B LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 35. Refer to the information provided above. Using a safe payments schedule, how much cash will be distributed to Lilly at the end of the second month? A. $27,000 B. $36,000 C. $18,000 D. $0 Answer: C LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 16-25 Chapter 16 - Partnerships: Liquidation 36. Refer to the information provided. Assume instead that the remaining inventory was sold for $10,000 in the second month. What payments will be made to Dennis and Lilly at the end of the second month? A. Option A B. Option B C. Option C D. Option D Answer: D LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium The following data applies to Questions 37 - 31: Partners David and Goliath have decided to liquidate their business. The following information is available: Cash Inventory Accounts Payable David, Capital Goliath, Capital $100,000 $200,000 $300,000 $80,000 $140,000 $80,000 $300,000 David and Goliath share profits and losses in a 3:1 ratio, respectively. During the first month of liquidation, half the inventory is sold for $70,000, and $50,000 of the accounts payable are paid. During the second month, the rest of the inventory is sold for $55,000, and the remaining accounts payable are paid. Cash is distributed at the end of each month, and the liquidation is completed at the end of the second month. 37. Refer to the information provided above. Using a safe payment schedule, how much cash will be distributed to David at the end of the first month? A. $22,500 B. $42,500 C. $75,000 16-26 Chapter 16 - Partnerships: Liquidation D. $117,500 Answer: B LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 38. Refer to the information provided above. Using a safe payment schedule, how much cash will be distributed to Goliath at the end of the first month? A. $7,500 B. $25,000 C. $47,500 D. $72,500 Answer: C LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 39. Refer to the information provided above. How much cash will be distributed to David at the end of the second month? A. $75,000 B. $60,000 C. $41,250 D. $33,750 Answer: C LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 40. Refer to the information provided above. How much cash will be distributed to Goliath at the end of the second month? A. $11,250 B. $13,750 16-27 Chapter 16 - Partnerships: Liquidation C. $20,000 D. $25,000 Answer: B LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 41. Refer to the information provided above. Assume instead that the remaining inventory was sold for $20,000 in the second month. What payments will be made to David and Goliath at the end of the second month? David Goliath A. $0 $0 B. $10,000 $10,000 C. $15,000 $5,000 D. $20,000 $0 Answer: C LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 42. In the computation of a partner's Loss Absorption Power (LAP), the individual partner's capital balance and profit-and-loss percentage are used in which of the following ways? A. Option A B. Option B C. Option C D. Option D 16-28 Chapter 16 - Partnerships: Liquidation Answer: C LO: 16-03 Topic: Cash Distribution Plan Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 43. During the liquidation of the FGH partnership, a cash distribution was made to all the partners, who share profits and losses 60 percent, 20 percent, and 20 percent, respectively. Assuming that the cash distribution referred to was made properly, how much would G receive if an additional $60,000 was distributed? A. $60,000 B. $20,000 C. $17,000 D. $12,000 Answer: D LO: 16-03 Topic: Cash Distribution Plan Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 44. Which of the following items are important in the determination of safe installment payments to partners? I. Deficits created in capital accounts are distributed to the remaining partners. II. All unsold noncash assets are assumed to be worthless. A. I only B. II only C. Both I and II D. Neither I nor II Answer: C LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 16-29 Chapter 16 - Partnerships: Liquidation 45. In the computation of a partner's Loss Absorption Power (LAP), which of the following statements is incorrect? I. The computation of LAPs for all partners allows cash to be distributed before all partnership assets have been sold and all creditors have been paid. II. The computation of LAPs for all partners indicates the relative strength of each partner's net capital position so that available cash is distributed in respective loss-sharing ratios. A. I B. II C. Both I and II D. Neither I nor II Answer: D LO: 16-03 Topic: Cash Distribution Plan Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 16-30 Chapter 16 - Partnerships: Liquidation 46. The BIG Partnership has decided to liquidate at December 31, 20X8. The capital and loan balances of the partners at December 31, 20X8, are provided below: If you were to calculate the Loss Absorption Power for each partner, how would the partners rank (from highest to lowest LAP)? A. B, I, G B. I, B, G C. B, G, I D. G, I, B Answer: B LO: 16-03 Topic: Cash Distribution Plan Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 47. Partner A has a smaller capital balance than Partner L. Partner A, however, has a higher profit-and-loss-sharing percentage than Partner L. The LA partnership has decided to liquidate. As a result of the information given, A. Partner L will have a smaller loss absorption power than A. B. Partner L will receive cash only after A has received cash. C. Partner A will have a smaller loss absorption power than L. D. Partner A will never receive any cash from partnership liquidation. Answer: C LO: 16-03 Topic: Cash Distribution Plan Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 16-31 Chapter 16 - Partnerships: Liquidation 48. Which of the following statements is (are) true? I. In the calculation of the loss absorption power for a partner, a partner's loan balance (an amount that is owed by the partnership) should be added to the partner's capital balance. II. In liquidation, a partner's loan balance (an amount that is owed by the partnership) should be paid to the partner as a creditor of the partnership after the outside creditors. A. I only B. II only C. Both I and II D. Neither I nor II Answer: C LO: 16-03 Topic: Cash Distribution Plan Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 49. When a partnership is liquidated on a piecemeal basis and cash has been distributed properly to all partners as noncash assets have been turned into cash, all future cash distributions should be made: I. In the profit and loss ratio. II. According to the balances in the partners' capital accounts. A. I only B. II only C. Both I and II D. Neither I nor II Answer: A LO: 16-03 Topic: Installment Liquidations Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 16-32 Chapter 16 - Partnerships: Liquidation 50. The computation of a safe installment payment for the XYZ partnership resulted in only partner Z receiving cash. Which of the following statements is correct? I. Partner Z lent the partnership cash, and the partnership had to pay back the loan to Z before distributing cash to X and Y. II. After assuming all noncash assets were potentially worthless and that assumed capital deficits created in X's and Y's capital balances were losses to be allocated to Z; Z's capital balance was the only capital balance left with a credit. A. I only B. II only C. Either I or II D. Neither I nor II Answer: B LO: 16-03 Topic: Schedule of Safe Payments to Partners Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 51. The JKL partnership liquidated its business in 20X9. Due to an expected long liquidation period, a cash distribution plan was developed. The initial sale and realization of cash from noncash assets resulted in partner K properly getting $24,000. No other partners received cash along with K. Based upon this information, which of the following statements is correct? I. K's loss absorption power (LAP) was higher than J's LAP and L's LAP. II. K's capital balance was substantially larger than the balances of J and L. A. I only B. II only C. Either I or II D. Neither I nor II Answer: A LO: 16-03 Topic: Cash Distribution Plan Blooms: Understand AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 2 Medium 16-33 Chapter 16 - Partnerships: Liquidation (Note: Question 52 is a Kaplan CPA Review Question) 52. The following balance sheet is for the partnership of Able, Bayer, and Cain which shares profits and losses in the ratio of 4:4:2, respectively. Assets Cash Other Assets Liabilities and Capital Liabilities Able, Capital Bayer, Capital Cain, Capital $ 20,000 180,000 $ 200,000 $ 50,000 37,000 65,000 48,000 $ 200,000 The original partnership was dissolved when its assets, liabilities, and capital were as shown on the above balance sheet and liquidated by selling assets in installments. The first sale of noncash assets having a book value of $90,000 realized $50,000, and all cash available after settlement with creditors was distributed. How much cash should the respective partners receive (to the nearest dollar)? A) Able $0; Bayer $3,000; Cain $17,000. B) Able $8,000; Bayer $8,000; Cain $4,000. C) Able $6,667; Bayer $6,667; Cain $6,666. D) Able $0; Bayer $13,333; Cain $6,667. Answer: A LO: 16-03 Topic: Installment Liquidations Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard (Note: Question 53 is a Kaplan CPA Review Question) 16-34 Chapter 16 - Partnerships: Liquidation 53. The condensed balance sheet of Adams & Gray, a partnership, at December 31, 20X1, follows: Current Assets Equipment (net) Total Assets $ 250,000 30,000 $ 280,000 Liabilities Adams, capital Gray, capital Total liabilities and capital $ 20,000 160,000 100,000 $ 280,000 On December 31, 20X1, the fair values of the assets and liabilities were appraised at $240,000 and $20,000, respectively, by an independent appraiser. On January 2, 20X2, the partnership was incorporated and 1,000 shares of $5 par value common stock were issued. Immediately after the incorporation, what amount should the new corporation report as additional paid-in capital? A. $275,000 B. $215,000 C. $260,000 D. $0 Answer: B LO: 16-03 Topic: Additional Considerations: Incorporation of a Partnership Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 16-35 Chapter 16 - Partnerships: Liquidation (Note: Question 54 is a Kaplan CPA Review Question) 54. Jay & Kay partnership's balance sheet at December 31, 20X1, reported the following: Total assets Total liabilities Jay, capital Kay, capital $100,000 20,000 40,000 40,000 On January 2, 20X2, Jay and Kay dissolved their partnership and transferred all assets and liabilities to a newly-formed corporation. At the date of incorporation, the fair value of the net assets was $12,000 more than the carrying amount on the partnership's books, of which $7,000 was assigned to tangible assets and $5,000 was assigned to goodwill. Jay and Kay were each issued 5,000 shares of the corporation's $1 par value common stock. Immediately following incorporation, additional paid-in capital in excess of par should be credited for A. $77,000 B. $68,000 C. $70,000 D. $82,000 Answer: D LO: 16-03 Topic: Additional Considerations: Incorporation of a Partnership Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 55. On a partner's personal statement of financial condition, how should liabilities be valued? I. Present value II. Lower of present value or cash settlement amount A. I B. II C. Both I and II D. Neither I nor II Answer: B LO: Appendix 16A Topic: Partners' Personal Financial Statements Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 16-36 Chapter 16 - Partnerships: Liquidation 56. On a partner's personal statement of financial condition, assets and liabilities are presented: I. As current and noncurrent. II. In order of liquidity and maturity. A. I B. II C. Both I and II D. Neither I nor II Answer: B LO: Appendix 16A Topic: Partners' Personal Financial Statements Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 57. The personal financial statements of a partner include which of the following? I. Statement of financial condition. II. Statement of changes in net worth. III. Statement of cash flows. A. I and II B. I and III C. II and III D. I, II, and III Answer: A LO: Appendix 16A Topic: Partners' Personal Financial Statements Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 58. On a partner's personal statement of financial condition, how are assets valued? A. Historical cost B. Book value C. Discounted value D. Estimated current value Answer: D LO: Appendix 16A Topic: Partners' Personal Financial Statements Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 16-37 Chapter 16 - Partnerships: Liquidation 59. On a partner's personal statement of changes in net worth, what type(s) of income is (are) recognized? I. Realized II. Unrealized A. I only B. II only C. Both I and II D. Neither I nor II Answer: C LO: Appendix 16A Topic: Partners' Personal Financial Statements Blooms: Remember AACSB: Reflective Thinking AICPA: FN Decision Making Difficulty: 1 Easy 60. On December 31, 20X8, Mr. and Mrs. Williams owned a parcel of land held as an investment. The land was purchased for $40,000 in 20X6, and was encumbered by a mortgage with a principal balance of $30,000 at December 31, 20X8. On this date the fair value of the land was $75,000. In the Williams' December 31, 20X8, personal statement of financial condition, at what amount should the land investment and mortgage payable be reported? A. Option A B. Option B C. Option C D. Option D Answer: B LO: Appendix 16A Topic: Partners' Personal Financial Statements Blooms: Understand AACSB: Analytic AICPA: FN Measurement Difficulty: 2 Medium 16-38 Chapter 16 - Partnerships: Liquidation Essay Questions 61. A partnership may be involved in \"Dissociation\" or \"Dissolution.\" Required: Describe \"Dissociation\" and \"Dissolution.\" Answer: Dissociation is the legal description of the withdrawal of a partner including the following: i. Partner's death. ii. Partner's voluntary withdrawal, i.e. retirement. iii. Judicial determination. Not all dissociations result in a partnership's liquidation. Many partner dissociations involve only a buyout of the withdrawing partner's interest rather than a winding up and liquidation of the partnership's business. Dissolution involves dissolving of the partnership and winding up of the partnership business. Dissolutions can occur: i. In a partnership at will. A partnership agreement can avoid this situation. ii. In a partnership for a definite term or specific undertaking. iii. By an event that makes it unlawful to carry on the partnership business. iv. By a judicial determination. A \"Dissociation\" that results in liquidation has the same end result as \"Dissolution.\" LO: 16-01 Topic: Dissociation Topic: Dissolution Blooms: Remember AACSB: Communication AICPA: FN Decision Making Difficulty: 2 Medium 16-39 Chapter 16 - Partnerships: Liquidation 62. When Disney and Charles decided to incorporate their partnership, the trial balance was as follows: The partnership's books will be closed, and new books will be used for D & C Corporation. The following additional information is available: 1. The estimated fair values of the assets follow: 2. All assets and liabilities are transferred to the corporation. 3. The common stock is $5 par. Alice and Betty receive a total of 24,000 shares. 4. Disney and Charles share profits and losses in the ratio 6:4. Required: a. Prepare the entries on the partnership's books to record (1) the revaluation of assets, (2) the transfer of the assets to the D & C Corporation and the receipt of the common stock, and (3) the closing of the books. b. Prepare the entries on D & C Corporation's books to record the assets and the issuance of the common stock. 16-40 Chapter 16 - Partnerships: Liquidation Problem 62 (continued): Answer: a) b) LO: 16-03 Topic: Additional Considerations: Incorporation of a Partnership Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 16-41 Chapter 16 - Partnerships: Liquidation 63. Listen and Hear are thinking of dissolving their partnership. Listen has a friend who told him to complete a \"lump-sum\" liquidation. Hear wants to complete an \"installment\" liquidation. They have come to you for advice. What do you recommend and Why? Answer: \"Lump-sum\" liquidation and \"Installment\" liquidation does not represent a choice in procedures. They represent different points in time. A \"Lump-Sum\" liquidation takes place when all of the affairs of the partnership can be ended at the same time and all of the resulting cash can be distributed to the partners at that time. \"Installment\" liquidation is what normally occurs because the partners want access to some cash as soon as possible, and all of the partnership assets have to be sold and liabilities paid. The preparation of a \"Safe-Payments Schedule\" can allow this to happen in an orderly manner. LO: 16-03 LO: 16-02 Topic: Installment Liquidations Topic: Lump-Sum Liquidations Blooms: Understand AACSB: Communication AICPA: BB Critical Thinking Difficulty: 2 Medium 16-42 Chapter 16 - Partnerships: Liquidation 64. On March 1, 20X9, the ABC partnership decides to complete a lump-sum liquidation as soon as possible. The partnership balance sheet prepared on March 1 appears below: Cash Accounts Receivable Inventory Investments Plant and Equipment--Net Total Assets ABC Partnership Balance Sheet March 1, 20X9 $ 50,000 Accounts Payable 60,000 Due to Partner A 100,000 A, Capital (30%) 40,000 B, Capital (40%) 650,000 C, Capital (30%) $900,00 0 Total Liability and Capital $200,00 0 30,000 350,000 80,000 240,000 $900,00 0 The partners share profits and losses in the ratio of 3:4:3. Partner B is personally insolvent, but partners A and C have sufficient personal assets to satisfy any capital deficits. On March 15, 20X9, the non-cash assets are sold for $550,000. Lump sum payments are made to the partners on March 16, immediately after the creditors have been paid. Required: Prepare a statement of partnership realization and liquidation. 16-43 Chapter 16 - Partnerships: Liquidation Problem 64 (continued): Answer: LO: 16-03 Topic: Installment Liquidations Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 16-44 Chapter 16 - Partnerships: Liquidation 65. The partnership of Rachel, Adams, and Nixon has the following trial balance on September 30, 20X9: The partners share profits and losses as follows: Rachel, 50 percent; Adams, 30 percent; and Nixon, 20 percent. The partners are considering an offer of $180,000 for the accounts receivable, inventory, and plant and equipment as of September 30. The $180,000 will be paid to creditors and the partners in installments, the number and amounts of which are to be negotiated. Required: Prepare a cash distribution plan as of September 30, 20X9, showing how much cash each partner will receive if the offer to sell the assets is accepted. 16-45 Chapter 16 - Partnerships: Liquidation Problem 65 (continued): Answer: 16-46 Chapter 16 - Partnerships: Liquidation 16-47 Chapter 16 - Partnerships: Liquidation Problem 65 (continued): LO: 16-03 Topic: Cash Distribution Plan Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 66. The partnership of Rachel, Adams, and Nixon has the following trial balance on September 30, 20X9: The partners share profits and losses as follows: Rachel, 50 percent; Adams, 30 percent; and Nixon, 20 percent. The partners are considering an offer of $180,000 for the accounts receivable, inventory, and plant and equipment as of September 30. The $180,000 will be paid to creditors and the partners in installments, the number and amounts of which are to be negotiated. The partners have decided to liquidate their partnership by installments instead of accepting the offer of $180,000. Cash is distributed to the partners at the end of each month. A summary of the liquidation transactions follows: October 1. $25,000 is collected on accounts receivable; balance is uncollectible. 2. $20,000 received for the entire inventory. 3. $1,500 liquidation expense paid. 4. $40,000 paid to creditors. 5. $10,000 cash retained in the business at the end of the month. November 6. $2,000 in liquidation expenses paid. 16-48 Chapter 16 - Partnerships: Liquidation 7. As part payment of his capital, Nixon accepted an item of special equipment that he developed, which had a book value of $8,000. The partners agreed that a value of $12,000 should be placed on this item for liquidation purposes. 8. $4,000 cash retained in the business at the end of the month. December 9. $150,000 received on sale of remaining plant and equipment. 10. $1,000 liquidation expenses paid. No cash retained in the business. Required: Prepare a statement of partnership realization and liquidation with supporting schedules of safe payments to partners. 16-49 Chapter 16 - Partnerships: Liquidation Problem 66 (continued): Answer: 16-50 Chapter 16 - Partnerships: Liquidation Problem 66 (continued): LO: 16-03 Topic: Installment Liquidations Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 16-51 Chapter 16 - Partnerships: Liquidation 67. A personal statement of financial condition dated December 31, 20X8, is to be prepared for Wilhelm Holz. He provides the following information for your use in preparing the statements. All amounts are as of December 31, 20X8. 1) Cash on hand and in bank is $4,000. 2) Investments costing $30,000 have a market value of $78,000. 3) His personal residence cost $150,000 ten years ago, and is currently worth $320,000. 4) The payoff balance of his home mortgage is $80,000. 5) The fair value of his 401(k) retirement account is $700,000. All withdrawals from the account will be fully taxable. 6) Amounts due on credit card debt total $5,000. 7) Estimated income taxes on his calendar 20X8 earnings amount to $15,000. Taxes withheld in 20X8 were $14,000. 8) Assume an income tax rate of 30 percent. Required: Prepare a statement of financial condition for Mr. Holz as of December 31, 20X8. Assume any gain on subsequent sale of the residence will not be tax-exempt. 16-52 Chapter 16 - Partnerships: Liquidation Problem 67 (continued): Answer: LO: Appendix 16A Topic: Partners' Personal Financial Statements Blooms: Apply AACSB: Analytic AICPA: FN Measurement Difficulty: 3 Hard 16-53