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ACTBFAR LE 3 > Partnerships Liquidation (Part I) > Flashcards

Partnerships Liquidation (Part I) Flashcards

1
Q

In the event of a liquidation, we exhaust the personal assets of the partners. True or False?

A

False. We first exhaust the assets of the partnership before the partners’ personal assets

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2
Q

What are included in the partnership assets in the time of liquidation?

A

Current, Non-current assets, and the partners’ capital contributions

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3
Q

Who gets priority when partnership property and individual properties of the partners are in possess of a court FOR DISTRIBUTION?

A

partnership creditors

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4
Q

What is the difference between partnership creditors and separate creditors?

A

Partnership creditors have priority on partnership properties while separate creditors have priority on individual properties

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5
Q

When doing final distribution remaining cash to partners, what account are we debiting and crediting?

A

Debit - Capital balances
Credit - cash

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6
Q

Limited partners will not be required to pay for any deficiencies. True or False?

A

True

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7
Q

When a partner is insolvent, he will no longer have any share in the losses or liquidation expenses. True or False?

A

False

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8
Q

Partner A has a capital deficiency of P25,000, and the partnership has an existing loan payable to A amounting to P30,000. Partner A can opt to collect just the balance of P5,000 from the partnership. This option is called the:

A. capital deficiency
B. right of offset
C. loss on realization
D. balance payment

A

B. right of offset

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9
Q

In liquidation, the sale of non-cash assets is called

A. realization
B. net proceeds
C. gain from sale
D. loss from sale

A

A. realization

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10
Q

Lump sum liquidation is the process where partners receive cash as it becomes available. True or False?

A

False

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11
Q

A deficiency occurs for a partner when

A. his personal assets are less than his personal liabilities
B. his share in the losses of the partnership is more than the capital balance
C. his personal assets are lesser than his capital balance
D. loan payable by the partnership to him is greater than his capital balance

A

B. his share in the losses of the partnership is more than the capital balance

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12
Q

If the proceeds from the sale is less than the book value of the non-cash assets sold, this will decrease partnership assets but increase the partners’ equity. True or False?

A

False

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13
Q

If A’s capital is deficient, but there is a loan payable to B, the right of offset can be applied. True or False?

A

False

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14
Q

This results when a partner dies and the remaining partners decide to terminate the business:

A. dissolution
B. liquidation
C. incorporation
D. recognition

A

B. liquidation

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15
Q

The feature of unlimited liability covers all partners. True or False?

A

False

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16
Q

In partnership liquidation, gains or losses on realization of non-cash assets are allocated among the partners in proportion to their capital equity interests. True or False?

A

False. It is allocated in proportion to their capital contribution

17
Q

Liquidation is the process of converting the assets of the partnership into cash and distributing the cash to partners and creditors, in that order of priority. True or False?

A

False. Creditors first

18
Q

When payment to a retiring partner is made from the personal assets of the continuing partners, the total capital of the partnership does not change. True or False?

A

True. It is a personal transaction, which is not recorded

19
Q

When does liquidation occur?

A

When there is mutual partner agreement to sell the business, death of a partner, bankruptcy, or imprisonment

20
Q

Which of the following would MOST likely contribute to capital deficiency of a partner?

A. Loaning money to the partnership
B. Loaning money from the partnership
C. Allocating gains on realization of non-cash assets
D. Allocating profits for the period

A

B. Loaning money from the partnership

21
Q

Distribution of final cash to partners is based on

A. Ownership interest
B. Available cash balance
C. Profit and loss ratio
D. Final capital balances

A

D. Final capital balances

ACTBFAR LE 3 (6 decks)

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