Module 7

Question 1

This is the termination of the life of an existing partnership.

Answer 1

Dissolution

Question 2

What are the two things that may follow a dissolution of a partnership?

Answer 2

The formation of a new partnership or liquidation.

Question 3

This is known as dissolution by change in ownership structure where the business activities of the dissolved partnership are continued without interruption.

Answer 3

Formation of new partnership

Question 4

This refers to the termination of business activities carried on by the partnership
and the winding up of partnership affairs preparatory to going out of business. This involves
the sale or conversion of assets into cash, paying creditors, and distributing the remaining
cash to the partners.

Answer 4

Liquidation

Question 4

True or false: A partnership cannot be dissolved without being liquidated.

Answer 4

False. A partnership may be dissolved without being liquidated.

Question 4

This is the inability to pay all debts

Answer 4

Insolvency

Question 5

True or false: A new partner may be admitted in a partnership with the consent of the majority of the partners.

Answer 5

False. Consent of ALL partners is required.

Question 5

True or False: The admission of a new partner dissolves a partnership.

Answer 5

True

Question 5

How may a partner be admitted?

Answer 5

a. by purchase of an interest
b. by investment of asset in the partnership

Question 6

True or False: The purchase of a new partner of interests from the partners is recorded in the partnership books.

Answer 6

False. The transaction is personal between the buyer (new partner) and the seller (current partner).

Question 7

What should only be recorded in the partnership books as capital of the new partner if a partner sells their share in a higher net value?

Answer 7

Only the capital without the excess as the excess would be considered as a personal transaction between the current partner and the new partner.