QUESTION 21

White, Sands, and Luke has the following capital account 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?

White Sands Luke A) $ 15,000 $ 25,000 $ 50,000 B) $ 0 $ 18,947 $ 71,053 C) $ 0 $ 40,000 $ 50,000 D) $ 0 $ 10,588 $ 79,412 E) $ 27,000 $ 18,000 $ 45,000 Option C.

Option B.

Option E.

Option D.

Option A.

QUESTION 22

The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:

Cash $ 90,000 Liabilities $ 60,000 Noncash assets 300,000 Henry,capital 80,000 Isaac, capital 110,000 Jacobs, capital 140,000 Total $ 390,000 Total $ 390,000 Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4.

What amount of cash was available for safe payments, based on the above information?

$40,000.

$30,000.

$85,000.

$35,000.

$25,000.

QUESTION 23

A local partnership was considering the possibility of liquidation. Capital account balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.

Ding, capital $ 60,000 Laurel, capital 67,000 Ezzard, capital 17,000 Tillman, capital 96,000 At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time.

If the assets could be sold for $228,000 and there are no liquidation expenses, what is the amount that Tillman would receive from the liquidation?

$38,250.

$67,250.

$0.

$36,000.

$2,500.

QUESTION 24

When a partnership is insolvent and a partner has a deficit capital account balance, that partner should:

Contribute enough cash to the partnership to offset their deficit.

None of these answer choices are correct. The partner has no legal responsibility to cover the capital deficit balance.

Declare personal bankruptcy.

Initiate legal proceedings against the partnership.

Deliver a note payable to the partnership with specific payment terms.

QUESTION 25

Which of the following is false a regarding a partner's deficit balance?

The partner with a deficit balance should contribute assets to cover the deficit balance.

Deficits can occur when the sale of noncash assets during the liquidation process results in material losses.

Deficits can occur when the partnership has incurred significant operating losses.

The other partners may have to absorb the deficit balance.

A partner cannot refuse to make contributions to cover their deficit balance.

QUESTION 26

The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:

Cash $ 90,000 Liabilities $ 60,000 Noncash assets 300,000 Henry,capital 80,000 Isaac, capital 110,000 Jacobs, capital 140,000 Total $ 390,000 Total $ 390,000 Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4.

Before liquidating any assets, the partners determined the amount of cash available for safe payments. How should the amount of safe cash payments be distributed?

In a ratio of 1:2 between Henry and Jacobs.

$15,000 to Henry and $10,000 to Jacobs.

$18,333 to Henry and $16,667 to Jacobs.

In a ratio of 2:4:4 among all the partners.

$21,667 to Henry and $3,333 to Jacobs.

QUESTION 27

Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start of the process, Capital account balances were as follows:

Dancey, capital $ 72,000 Reese, capital 32,000 Newman, capital 52,000 Jahn, capital 24,000 Which one of the following statements is true for a predistribution plan?

The first available $8,000 would go to Newman.

The first available $20,000 would go to Dancey.

The first available $8,000 would go to Jahn.

The first available $4,000 would go to Jahn.

The first available $16,000 would go to Newman.

QUESTION 28

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

There are no safe payments until the liquidation is complete.

The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership.

Safe payments are equal to the recorded capital account balances of those partners with capital account balances in excess of $0.

In computing safe payments, partners with positive capital account balances are assumed to absorb an equal share of any deficit balance(s).

The distribution of safe payments may only be made after all liabilities have been paid.

QUESTION 29

A partnership has assets of cash of $10,000 and equipment with a book value of $160,000. All liabilities have been paid. The partners' capital accounts are as follows Michael $80,000, Gregory $60,000 and Phillips $30,000. The partners share profits and losses on a 4:3:3 basis. If the equipment is sold for $100,000 and there are no liquidation expenses what amount should Phillips receive in the final settlement?

$20,000.

$12,000.

$36,000.

$6,000.

$42,000.

QUESTION 30

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 and there are no liquidation expenses what amount should Harry receive in the final settlement?

$9,000.

$28,000.

$55,000.

$5,000.

$18,000.

QUESTION 31

Hanson, James, and Smith, a partnership, is in the process of liquidating. The partners have the following capital account balances; $48,000, $48,000, and ($18,000) respectively. The partners share all profits and losses 16%, 48%, and 36%, respectively. Smith has indicated that the ($18,000) deficit will be covered with a forthcoming contribution. The remaining partners have requested an immediate distribution of $40,000 in cash that is available. How should this cash be distributed?

Hanson $34,000; James $6,000.

Hanson $22,308; James $17,692.

Hanson $25,000; James $15,000.

Hanson $10,000; James $30,000.

Hanson $28,594; James $11,406.

QUESTION 32

The Allen, Bevell, and Carter partnership began the process of liquidation with the following balance sheet:

Cash $ 25,000 Liabilities $ 175,000 Noncash assets 500,000 Allen, capital 90,000 Bevell, capital 100,000 Carter, capital 160,000 Total $ 525,000 Total $ 525,000 Allen, Bevell, and Carter share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $14,000.

Assuming that, after the payment of liquidation expenses in the amount of $14,000 was made and the noncash assets were sold, if Carter has a deficit of $10,000, for what amount would the noncash assets have been sold?

$146,000.

$160,000.

$174,000.

$185,000.

$188,000.

QUESTION 33

The Allen, Bevell, and Carter partnership began the process of liquidation with the following balance sheet:

Cash $ 25,000 Liabilities $ 175,000 Noncash assets 500,000 Allen, capital 90,000 Bevell, capital 100,000 Carter, capital 160,000 Total $ 525,000 Total $ 525,000 Allen, Bevell, and Carter share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $14,000.

If the noncash assets were sold for $275,000, what amount of the loss would have been allocated to Bevell with respect to the noncash assets?

$45,000.

$46,800.

$55,000.

$42,400.

$50,000.

QUESTION 34

The Allen, Bevell, and Carter partnership began the process of liquidation with the following balance sheet:

Cash $ 25,000 Liabilities $ 175,000 Noncash assets 500,000 Allen, capital 90,000 Bevell, capital 100,000 Carter, capital 160,000 Total $ 525,000 Total $ 525,000 Allen, Bevell, and Carter share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $14,000.

Assuming that the noncash assets were sold for $150,000, which partner(s) would have been required to contribute assets to the partnership to cover a deficit in his or her capital account, prior to considering the liquidation expenses incurred?

Allen.

Allen and Carter.

Carter.

Allen and Bevell.

Bevell.

QUESTION 35

During a partnership liquidation, how are gains and losses recorded?

Directly to the partners' capital accounts, allocated on the partners' profit and loss ratio.

Directly to Retained Earnings.

Accrued in a Liquidation Gain/Loss account.

Accrued in Other Comprehensive Income.

Directly to the partners' capital accounts, allocated equally.

QUESTION 36

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, what amount should Waters receive in the final settlement?

$9,000.

$28,000.

$18,000.

$55,000.

$5,000.

QUESTION 37

A proposed schedule of liquidation is developed

on the first day of each month as required by the Uniform Partnership Act.

based on the underlying assumption that all future events will result in total gains.

based on the underlying assumption that all partners will remain solvent throughout liquidation.

based on the underlying assumption that all future events will result in total losses.

on a weekly basis as required by the Uniform Partnership Act.

QUESTION 38

Which one of the following statements is correct?

If a partner of a liquidating partnership is unable to pay a capital account deficit, the deficit is absorbed by the other partners in the profit and loss ratio of those partners.

A loan receivable from a partner is added to the partner's capital account balance in the preparation of a cash distribution plan.

All cash payments to partners are made using their profit and loss ratio when liquidating the partnership.

Partners may not receive any cash before partnership creditors receive cash when liquidating a partnership.

Gains and losses from the sale of noncash assets are divided in the ratio of the partners' capital account balances absent an alternate income-sharing plan stated in the partnership agreement.

QUESTION 39

A local partnership was considering the possibility of liquidation. Capital account balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.

Ding, capital $ 60,000 Laurel, capital 67,000 Ezzard, capital 17,000 Tillman, capital 96,000 At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time.

If the assets could be sold for $228,000 and there are no liquidation expenses, what is the minimum amount that Ezzard would receive from the liquidation?

$67,250.

$0.

$38,250.

$2,500.

$36,000.

QUESTION 40

A partnership has assets of cash of $10,000 and equipment with a book value of $160,000. All liabilities have been paid. The partners' capital accounts are as follows Michael $80,000, Gregory $60,000 and Phillips $30,000. The partners share profits and losses on a 4:3:3 basis. If the equipment is sold for $100,000 and there are no liquidation expenses what amount should Michael receive in the final settlement?

$20,000.

$10,000.

$18,000.

$62,000.

$56,000.