Multiple Choice: Choose the letter of the correct answer.

1. This refers to the process of converting the non-cash assets of the partnership and distributing the total cash to the creditors and the remainder, if any, to the partners.

a. Dissolution

b. Termination

c. Liquidation

d. Operation

2. Which of the following statements is correct regarding partner's capital deficiency?

a. The partners who absorb another's capital deficiency have the legal claim against the deficient partner.

b. If contributions are not possible, the other partners with credit capital balances will be allocated a portion of the debit balance.

c. The partner should contribute to reduce the debit balance to the extent possible.

d. All of these statements are correct.

3. The final cash distribution to partners in the event of lump sum partnership liquidation is in accordance with

a. partners' profit and loss ratio

b. ending capital balances

c. capital contributions

d. none of the above

4. If a partner is solvent but has capital deficiency, his personal cash/fund shall be applied

a. to partnership creditors.

b. to partnership to remove capital deficiency.

c. to deficient partner's own creditors.

d. to partnership and partner's own creditors proportionately.

5. What is the procedure carried out in a situation where the partnership owes a partner his loan balance while the partner owes the partnership the amount of his capital deficiency?

a. Liquidation

b. Dissolution

c. Right of offset

d. Absorption of loss

6. The process of converting non-cash assets into cash:

a. Realization

b. Liquidation

c. Conversion

d. Encashment

7. A partner whose personal liabilities exceed his personal assets

a. Insolvent partner

c. Nominal partner

b. Deficient partner

d. Bankrupt partner

8. A simple partnership liquidation requires

a. periodic payments to creditors and partners as cash becomes available.

b. partnership assets to be converted into cash with full payment made to all outside creditors before remaining cash is distributed to partners in a lump sum payment.

c. only creditors to be paid in an orderly manner.

d. periodic payments to partners as cash becomes available.

9. If conditions produce a debit balance in a partner's capital account when liquidation losses are allocated

a. the partner receives further allocations of liquidation losses, but not gains.

b. the partner receives no further allocation of liquidation losses and gains.

c. the partner is no longer obligated to partnership creditors.

d. solvent partner has the obligation to contribute to the partnership additional cash equivalent to his debit capital balance.

10. Gains or losses from assets sold during liquidation of a partnership are

a. not recorded.

b. divided according to partners' profit and loss ratio.

c. divided equally among partners.

d. divided according to partner's ending capital balances.