The admission of a new partner

a. does not have an effect on the capital balances of the original partners

b. will decrease the capital balances of the original partners.

c. will increase the capital balances of the original partners,

d. Any of the above

Liquidation differs from dissolution in that in liquidation

a. the business will no longer continues

b. assets will be revalued.

c. gains and losses are distributed according to the partnership agreements

d. There are no differences between the two.

Under the Partnership Law, partnership assets are o be distributed to partners in this order:*

1 point

a. Capital balances, loans, profits

b. Loans, profits, capital balances

c. Loans, capital balances, profits

d. Profits, capital balances, loan

In the installment liquidation of a partnership, the P & L ratio can now be used for cash payments to partners:*

1 point

a. Anytime

b. Throughout the liquidation process

c. Once the partners' capital balances are in proportion to the profit and loss ratio

d. None of the above

Which is not a valid reason for partnership dissolution?*

1 point

a. admission of a new partner

b. retirement of a partner

c. declaration of partner's insolvency

d. partnership incurred net loss for the year

When a partner retires from a partnership taking assets greater than his capital balance,*

1 point

a. no bonus will occur

b. the withdrawing partner receives a bonus

c. the remaining partners receive a bonus

d. none of the above

1st: As a rule, the personal assets of the partners shall first be paid first to their respective personal creditors. 2nd: In general, insolvency arises when a business cannot pay obligations as they become due*

1 point

a. Only 1st statement is correct

b. Only 2nd statement is correct

c. Both statements are correct

d. Both statements are wrong

What should happen when a partner's capital account balance drops below zero during partnership liquidation?*

1 point

a. The other partners should file a legal suit against the partner with the deficit balance

b. The partner with the highest capital balance should contribute sufficient assets to eliminate the deficit

c. The deficit balance should be removed from the accounting records with only the remaining partners sharing in future gains and losses.

d. The partner with a deficit should contribute enough assets to offset the deficit balance.

It is the process of selling the assets, paying the liabilities, and distributing the remaining cash to the partners*

1 point

a. Dissolution

b. Formation

c. incorporation

d. Liquidation

In liquidation, the liabilities of the partnership should be paid*

1 point

a. after revaluation of assets.

b. before any sale of assets.

c. before the distribution of cash to partners.

d. none of the above.

The cash available for distribution to partners in an installment liquidation could be equal to the*

1 point

a. Cash available after realization of non-cash asset is made

b. Cash available after payment to creditors were made

c. Cash available after payment to creditors were made and after setting aside an amount for possible liquidation expenses.

d. All of the above

The proper order of priority in a partnership liquidation is as follows:*

1 point

a. Outside creditors, partners for capital accounts and partners for loan accounts

b. Partners for capital accounts, partners for loan accounts, and outside creditors

c. Partners for loan account, partners for capital account and outside creditors

d. Outside creditors, loan payable to partner's, partner's capital credit balance

What is the largest estimated possible loss that could arise in a safe payment schedule?*

1 point

a. Book value of recorded assets

b. Book value of recorded non cash assets

c. Fair value of recorded assets

d. Any of the above

In preparing a cash distribution plan, loss absorption of every partner is computed by:*

1 point

a. Dividing each partners' capital balance by the percentage of that partners' capital balance in relation to the total capital of the partners.

b. Multiplying each partners' capital balance by the percentage of that partner's capital

balance in relation to the total partnership capital

c. Dividing the total of each partners' capital interest by the partner's profit and loss ratio

d. None of the above

If a bonus is to be given to the existing partners, it is allocated among them according to the*

1 point

a. Profit and loss ratio of the existing partnership

b. Profit and loss ratio of the new partnership

c. Capital ratio of existing partners

d. Capital ratio of all the partners, including the new partner

Upon dissolution, the partners may adjust the partnership assets and liabilities. The net effect of such restatement must be distributed to the partners based on their*

1 point

a. ending capital balances

b. old profit and loss ratio

c. new profit and loss ratio

d. beginning capital balances

The partner who should first receive cash under an installment distribution plan is the partner who*

1 point

a. Can absorb the largest possible loss

b. Has the biggest capital balance

c. Has the smallest profit and loss percentage

d. Has the biggest profit and loss share

Before dissolution takes effect, liabilities should be restated at their*

1 point

a. fair market values

b. present values

c. liquidating values

d. historical values

Which among the following partners would get the first cash distribution?*

1 point

a. The partner with the largest loan balance

b. The partner with the largest loss absorption potential

c. The partner with the largest capital balance

d. The partner with the largest profit and loss ratio

If a partner fails to invest additional assets to make up his deficit, how should the debit balance be handled by the partners?*

1 point

a. It should be written off as a regular bad debt expense

b. It should be allocated to all the partners in their profit and loss ratio

c. It should be distributed to the remaining partners in their remaining profit and loss ratio

d. None of the above

In preparing the cash priority program, the maximum loss absorption can be derived by*

1 point

a. Multiplying the total interest of the partner in the partnership by his profit and loss percentage

b. Multiplying the capital balance of the partner by his profit and loss percentage

c. Dividing the total interest of the partner in the partnership by his profit and loss percentage

d. Dividing the capital balance of the partner by his profit and loss percentage

What is a cash priority program?*

1 point

a. A guideline for the cash distributions made to partners during a liquidation

b. A list of the rules to be performed during a partnership dissolution

c. A list of the transactions that will transpire in the reorganization of a partnership

d. None of the above

Under the bonus method, which of the following best describes the effect on "Net Assets" and "Total Capital" of an admission of a new partner when he invests an amount larger than his capital credit?*

1 point

a. No effect, increase

b. Increase, increase

c. Decrease, decrease

d. No effect, no effect

When a partner withdraws taking assets that are less than his capital balance,*

1 point

a. the remaining partners receive a bonus

b. no bonus results.

c. the remaining partners owe the withdrawing partner the difference.

d. the withdrawing partner receives a bonus

Which would lead to a legal dissolution of a partnership?*

1 point

a. Demise of a partner

b. Withdrawal of a partner

c. Admission of a partner

d. All of the above

Which of the following is not a valid cause for partnership dissolution?*

1 point

a. retirement of one of the partners

b. admission of new partner

c. death of a partner

d. marriage between partners

A partnership is said to be insolvent when*

1 point

a. At least one partner is insolvent

b. At least one partner's capital account has a credit balance

c. Its liabilities exceed its assets

d. Its assets exceeded its liabilities

Assets need to be reappraised when*

1 point

a. a new partner is admitted to the partnership through purchase of interest,

b. a partner leaves the partnership.

c. profits and losses are being distributed.

d. the partnership is liquidated

In installment liquidation computation, a partnership loan payable to the partner is*

1 point

a. Added to the other regular liabilities of the partnership

b. Added to the balance in the partner's capital account

c. Deducted from the balance in the partner's capital account

d. Ignored during the calculation

In installment liquidation, each cash installment is distributed:*

1 point

a. In the partner's profit and loss ratio

b. In the ratio of partner's capital account balances

c. As agreed to by the partners

d. As if no more cash would be collected anymore

In a partnership liquidation,*

1 point

a. partners' loans are paid first before creditors.

b. creditors are paid first before partners' loans

c. partners' capital balances are paid first before partners' loans.

d. partners' capital balances are paid first before creditors

During partnership liquidation, the final allocation of the assets to partners should be?*

1 point

a. Made equally

b. According to the profit or loss ratio

c. According to the final capital account balances

d. According to the initial investment made by each of the partners

Which of the following instances would not dissolve a partnership?*

1 point

a. Death of a partner

b. Bankruptcy of a partner

c. Retirement of a partner

d. Approved annulment proceedings of a partner

The following events dissolve a partnership except*

1 point

a. admission of a partner

b. change of the partnership name

c. conversion of a partnership to a corporation

d. impairment of partnership assets

In an installment liquidation plan, how is the amount of a cash distribution determined?*

1 point

a. By multiplying a partner's P & L ratio by his capital before the liquidation

b. By subtracting a partner's loss absorption potential from the loss absorption potential of the next strongest partner

c. By subtracting a partner's loss absorption potential from the loss absorption potential of the next strongest partner and dividing this difference by his profit and loss ratio

d. By multiplying a partner's profit and loss ratio by the difference between his loss absorption potential and the loss absorption potential of the next strongest partners.

Which of the following will not lead to a dissolution of a partnership?*

1 point

a. Death of a partner

b. Withdrawal of a partner

c. Admission of a new partner

d. Auction sale of some of its assets

Total partners' equity will not be affected when a retiring partner*

1 point

a. withdraws assets equal to his capital balance

b. withdraws assets less than his capital balance

c. sells his interest to a new or remaining partner

d. withdraws assets greater than his or her capital balance

When A retired from the partnership, the final payment to A exceeded his capital balance, under the bonus method, the excess*

1 point

a. Will reduce the capital balance of B and C

b. Will not have an effect to the capital balance of B and C

c. Will be recorded as a loss

d. Will be recorded as a shortage

The following transactions will affect the balance of the total partnership capital except*

1 point

a. retirement of a partner by paying an amount equal to his interest

b. the partnership incurred net loss for the year

c. admission by purchase with bonus

d. permanent retirement by partners

Which of the following is incorrect with regards to the admission of a new partner?*

1 point

a. Admission of a new partner needs the consent of each of the old partners

b. Admission by purchase of interest of one of existing partners need not have the consent of remaining partners

c. Admission of new partner by direct investment in the partnership must have the consent of all the existing partners

d. Admission of new partner either by purchase or by direct investment in the partnership will lead to the dissolution of the partnership

In the preparation of a schedule of safe payments, cash withheld for future liquidation expenses, and unrecorded liabilities that may be discovered is treated as:*

1 point

a. Operating expenses

b. Other Expense

c. Loss on realization

d. Possible loss

If a partner retires and receives cash that is less than his capital balance,*

1 point

a. The difference should be credited to all the partners based on their capital ratio

b. The difference should be debited to all the partners based on their profit and loss ratio

c. The difference should be credited to the remaining partners based on their remaining profit and loss ratio

d. The difference should be debited to the remaining partners based on their remaining capital ratio

In calculating safe payment to partners, we should assume that:*

1 point

a. Partnership liabilities will not be paid

b. No more liquidation expenses will be paid

c. All non-cash assets are worthless

d. None of the above

Which of the following will not lead to dissolution?*

1 point

a. Insanity of a partner

b. Capital deficiency of a partner

c. Bankruptcy of a partner

d. Admission of a new partner

Bill, Carl, and Dwayne are in a partnership. Dwayne decided that he wants to withdraw from the partnership by selling his interest to Ethel. Bill and Carl agreed to such. Bill's Capital account and Carl's Capital account*

1 point

a. will not be affected when Ethel is admitted.

b. will surely decrease.

c. will surely increase.

d. all of the above

Who will receive the bonus if the investment of a new partner exceeds the new partner's initial capital balances?*

1 point

a. The new partner

b. The old partners, using their old profit and loss ratio

c. The old partners, using their new profit and loss ratio

d. The old and new partners in their new profit and loss ratio

When Janang retired from the partnership, the final settlement of her interest exceeded her capital balance, under the bonus method, the excess is*

1 point

a. Recorded as an impairment of asset

b. Recorded as an expense

c. Does not affect the capital balance of the partners

d. Deducted from the capital balances of the other partners

If cash payments to partners during liquidation are delayed until all non-cash assets have been sold, any cash remaining after all the partnership creditors have been paid is distributed*

1 point

a. According to the liquidator's choice

b. In the profit or loss ratio

c. In the amount equal to the partner's remaining interest

d. Any of the above

Lump-sum liquidation can be best described as a scenario where*

1 point

a. assets are sold in one event only

b. liabilities are paid in one event only

c. cash available to partners is distributed to them at once

d. assets are sold at once and all the available cash is distributed to creditors and partners in one transaction

In a partnership liquidation,*

1 point

a. creditors should be paid before the partners

b. gains and losses on the sale of assets are distributed to the partners on the ratio of their current capital balances,

c. the last entry credits the partners' Capital accounts.

d. all of the above

Which of the following does not result in the dissolution of a partnership?

a. Death of a partner

b. Admission of a new partner

c. Retirement of a partner

d. Sale of inventory at less than its cost

How is a partner's loss absorption potential computed?

a. Multiply her pre-liquidation capital balance by her P & L ratio

b. Multiply her pre-liquidation capital balance by her fractional share of profits and losses

c. Divide her pre-liquidation capital balances by her P & L ratio

d. Divide her P & L ratio by her pre- liquidation capital balances

If a partner with a loan receivable from a partnership, receives cash during such liquidation, the payment is recorded with a debit in the partnership books to:

a. Loan Receivable from Mr.- X

b. Mr. X, Capital

c. Mr. X, Drawing

d. Loan Payable to Mr. X