8. What is the difference between a solvent and an insolvent partner in a liquidation?

A solvent partner has a positive capital balance, while an insolvent partner has a negative capital balance

A solvent partner has a negative capital balance, while an insolvent partner has a positive capital balance

A solvent partner has a positive net worth, while an insolvent partner has a negative net worth

A solvent partner has a negative net worth, while an insolvent partner has a positive net worth

9. What is the difference between the book value method and the bonus method for calculating a new partner's capital balance?

The book value method subtracts the total partnership liabilities from the total partnership assets, while the bonus method adds a bonus to the total partnership assets

The book value method adds a bonus to the total partnership assets, while the bonus method subtracts the total partnership liabilities from the total partnership assets

The book value method subtracts the total partnership assets from the total partnership liabilities, while the bonus method adds a bonus to the total partnership liabilities

The book value method adds a bonus to the total partnership liabilities, while the bonus method subtracts the total partnership assets from the total partnership liabilities

11. If a new partner acquires a partnership interest directly from the partners rather than from the partnership itself,

The existing partners' capital accounts should be reduced and the new partner's account increased.

The partnership assets should be revalued.

The partnership has undergone quasi-reorganization.

12. Which of the following results in dissolution of a partnership?

The contribution of additional assets to the partnership by an existing partner.

The receipt of a draw by an existing partner.

The winding up of the partnership and the distribution of remaining assets to the partners.

The withdrawal of a partner from a partnership.

13. When a new partner is admitted to a partnership, an original partner's capital account may be adjusted for

His or her share of previously unrecorded intangible assets traceable to the original partners.

A proportionate share of the incoming partner's investment.

His or her share of previously unrecorded intangible assets traceable to the incoming partners.

14. Which of the following best characterizes the bonus method of recording a new partner's investment in a partnership?

Assuming that recorded assets are properly valued, the book value of the new partnership is equal to the book value of the previous partnership and the investment of the new partner.

Net assets of the previous partnership are not revalued.

The new partner's initial capital balance is equal to his or her investment.

The bonus always results in an increase to the previous partners' capital balances.

15. If goodwill is traceable to the previous partners, it is A.

Allocated among the previous partners according to their original profit and loss sharing percentages.

Allocated among the previous partners according to their interest in capital.

Allocated among the previous partners only if there are no other assets to be revalued.

Not possible for goodwill to also be traceable to the incoming partner.

16. The goodwill and the bonus methods are two means of adjusting for differences between the net book value and the fair market value of partnership when new partners are admitted. Which of the following statements about these methods is correct?

The bonus method does not revalue assets to market values.

The bonus method revalues assets to market values.

Both methods result in the same balances in the partner capital accounts.

Both methods result in the same total value of partner capital account, but the individual capital account varies.

21. M and O are partners with capital balances of P50,000 and P70,000, respectively, and they share profits and losses equally. The partners agree to take P into the partnership for a 40% interest in capital and profits, while M and O each retain a 30% interest. P pays P60,000 cash directly to M and O for his 40% interest, and goodwill implied by P’s payment is recognized on the partnership books. If M and O transfer equal amounts of capital to P, the capital balances after P’s admittance will be:

M – P35,000; O – P55,000; P – P60,000

M – P45,000; O – P45,000; P – P60,000

M – P36,000; O – P36,000; P – P48,000

M – P26,000; O – P46,000; P – P48,000

PARTNERSHIP LIQUIDATION AND DISSOLUTION - POST EXAMINATION

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PARTNERSHIP LIQUIDATION AND DISSOLUTION - POST EXAMINATION

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MULTIPLE CHOICE QUESTION

30 sec • 1 pt

1. What is the first step in the liquidation of a partnership?

Determine the partner's capital balances

Distribute cash to partners

Sell partnership assets

Pay off partnership liabilities

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

2. That is the formula for calculating a partner's capital balance in a liquidation?

Total partnership assets / Number of partners

Total partnership liabilities - Total partnership assets

Total partnership assets - Total partnership liabilities

Total partnership liabilities / Number of partners

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

3. What is the effect of admitting a new partner on the existing partners' profit/loss sharing ratios?

The existing partners' profit/loss sharing ratios remain the same

The existing partners' profit/loss sharing ratios increase

The existing partners' profit/loss sharing ratios decrease

The existing partners' profit/loss sharing ratios become zero

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

4. What is the book value method for calculating a new partner's capital balance?

The new partner's capital balance is equal to the total partnership assets

The new partner's capital balance is equal to the total partnership liabilities

The new partner's capital balance is equal to the total partnership assets minus the total partnership liabilities

The new partner's capital balance is equal to the total partnership assets divided by the number of partners

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

5. What is the bonus method for calculating a new partner's capital balance?

The new partner's capital balance is equal to the total partnership assets

The new partner's capital balance is equal to the total partnership liabilities

The new partner's capital balance is equal to the total partnership assets minus the total partnership liabilities

The new partner's capital balance is equal to the total partnership assets plus a bonus

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

6. What is the formula for calculating the amount to distribute to a solvent partner in a liquidation?

Total partnership assets / Total partnership liabilities

Total partnership liabilities / Total partnership assets

Total partnership assets - Total partnership liabilities

Total partnership liabilities - Total partnership assets

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

7. What is the formula for calculating the amount to distribute to an insolvent partner in a liquidation?

Total partnership assets / Total partnership liabilities

Total partnership liabilities / Total partnership assets

Total partnership assets - Total partnership liabilities

Total partnership liabilities - Total partnership assets

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PARTNERSHIP LIQUIDATION AND DISSOLUTION - POST EXAMINATION

1. What is the first step in the liquidation of a partnership?

2. That is the formula for calculating a partner's capital balance in a liquidation?

3. What is the effect of admitting a new partner on the existing partners' profit/loss sharing ratios?

4. What is the book value method for calculating a new partner's capital balance?

5. What is the bonus method for calculating a new partner's capital balance?

6. What is the formula for calculating the amount to distribute to a solvent partner in a liquidation?

7. What is the formula for calculating the amount to distribute to an insolvent partner in a liquidation?

8. What is the difference between a solvent and an insolvent partner in a liquidation?

9. What is the difference between the book value method and the bonus method for calculating a new partner's capital balance?

10. What is the effect of admitting a new partner on the existing partners' capital balances?

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