Partnership - Dissolution & Liquidation

Dissolution always immediately causes the termination of the firm.

• T

• F

Partnership assets are not affected whenever the admission of a new partner is through purchase of interest of an existing partner.

• T

• F

Upon the admission of a new partner under the BONUS method, the new partner will be the one to receive the bonus when his/her share in the agreed capital exceeds his contribution.

• T

• F

Asset revaluation affects the capital balances of not just the existing partners, but also the incoming new partner.

• T

• F

ABC Partners whose capital balances amounted to P400,000 decided to admit D who invested P100,000 cash for a 20% interest. Using bonus method, the accountant should recognize

• bonus to D

• asset revaluation for A, B, C

• bonus to A, B, C

• no bonus nor asset revaluation

Lump sum liquidation is the process where partners receive cash as it becomes available.

• T

• F

If A's capital is deficient, but there is a loan payable to B, the right of offset can be applied.

• T

• F

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.

• T

• F

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

• T

• F

A deficiency occurs for a partner when

• 
  his personal assets are less than his personal liabilities

• 
  his personal assets are lesser than his capital balance

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

• loan payable by the partnership to him is greater than his capital balance