PARTNERSHIP

Question 1

Causes of Dissolution

Answer 1

1. Admission
2. Retirement/ Death/ Withdrawal
3. Incorporation

Question 2

Types of Admitting a New Partner

Answer 2

1. Purchase of Interest
2. Investment of Assets

Question 3

What type of transaction is the purchase of interest (dissolution)

Answer 3

Personal Transaction (does not change assets, liabilities, and equity of partnership)

Question 4

Asset Revaluation

Fair value > Book value

Answer 4

Upward (+) Asset Revaluation

Question 5

Asset Revaluation

Fair value < Book value

Answer 5

Downward (-) Asset Revaluation

Question 6

Asset Revaluation

Fair value = Book value

Answer 6

No asset revaluation

Question 7

Who are entitled to the asset revaluation in the dissolution by admission of new partner

Answer 7

Original partners

Question 8

Admission by Investment of Assets (Dissolution)

Total Agreed Capital = Total Contributed Capital

Answer 8

No Asset Revaluation

Question 9

Admission by Investment of Assets (Dissolution)

Total Agreed Capital < Total Contributed Capital

Answer 9

Downward (-) Asset Revaluation

Question 10

Admission by Investment of Assets (Dissolution)

Total Agreed Capital > Total Contributed Capital

Answer 10

Upward (+) Asset Revaluation

Question 11

NPCC > NPI

Answer 11

Bonus from old to new

Question 12

NPCC < NPI

Answer 12

Bonus from new to old

Question 13

NPCC = NPI

Answer 13

No bonus

Question 14

Formula of NPCC

Answer 14

Total Agreed Capital
x New Partner’s Ownership %

Question 15

The interest of the retiring/ withdrawing partner may be

Answer 15

1. Sold to new partner or outsider
2. Sold to the remaining partners
3. Sold to the partnership

Question 16

The total interest of the retiring/ withdrawing partner may be paid as follows:

Answer 16

1. Equal to book value
2. More than book value
3. Less than book value

Question 17

Who are included in the asset revaluation in the dissolution through retirement/ withdrawal of old partner?

Answer 17

All partners (old + new)

Question 18

Total interest of the retiring partner MORE THAN the book value / cash to be paid

Answer 18

Bonus TO remaining partners

Question 19

Total interest of the retiring partner LESS THAN the book value / cash to be paid

Answer 19

Bonus TO retiring partner

Question 19

Total interest of the outgoing partner (Formula)

Answer 19

Adjusted capital balance
Add: Payable to partner
Less: Receivable from partner

Question 20

Incorporation of a Partnership (Procedures)

Answer 20

1. Revaluate assets and liabilities of the partnership
2. Distribute share to the partners

Question 21

Fair value of net assets > Aggregate Par value of shares

Answer 21

credit to share premium

Question 22

Where do you divide the FVNA to get the number of shares issued

Answer 22

Current value of shares

Question 23

The liabilities of the partnership are paid in this rank

Answer 23

1. Creditors
2. Partners (other than for capital and profits)
3. Partners (capital)
4. Partners (profits)

Question 24

Types of Liquidation

Answer 24

1. Lump-sum Liquidation 2. Installment Liquidation

Question 25

Lump-sum Liquidation

Answer 25

conversion of all non-cash assets into cash in one transaction or in several transaction but within a short period of time

Question 26

Proceeds > Carrying value of the non cash asset sold

Answer 26

Gain on realization

Question 27

Proceeds < Carrying value of the non cash asset sold

Answer 27

Loss on realization

Question 28

Solvent Partner

Answer 28

Personal assets > Personal liabilities

Question 29

Insolvent Partner

Answer 29

Personal assets < Personal Liabilities

Question 30

To eliminate capital deficiency (solvent)

Answer 30

Additional investment

Question 31

To eliminate capital deficiency (insolvent)

Answer 31

Remaining partners will absorb the capital deficiency

Question 32

Installment Liquidation

Answer 32

assets are realized on a little-by-little basis

Question 33

Two schedules that may be used under installment liquidation to determine cash distribution

Answer 33

1. Schedule of safe payments 2. Cash priority program

Question 34

Inherent assumptions (schedule of safe payments)

Answer 34

1. All unsold non cash assets are unrealizable 2. Any capital deficient partner is assumed to be insolvent

Question 35

Maximum possible loss

Answer 35

Worst loss that could possibly occur in the future

Question 36

Composition of Maximum Possible Loss

Answer 36

1. CV of the unsold non-cash assets 2. Cash withheld for ALEUL

Question 37

ALEUL

Answer 37

Anticipated liquidation expenses and unrecorded liabilities