Partnership Concepts

Which of the following statements pertains to partnership dissolution?

• It refers to the process of converting the non-cash assets of the partnership and distributing the total cash to the creditors and the remainder to the partners.

• It refers to the change in the relation of the partners caused by any partner ceasing to be associated in the carrying on of the partnership.

• It refers to the extinguishment of the juridical personality of the partnership.

• It refers to the end of the life of the partnership.

Which of the following will not result to the dissolution of a partnership?

• Insolvency of the partnership

• Admission of a new partnering an existing partnership

• Assignment of an existing partner's interest to a third person

• Retirement of a partner

Which of the following statements is correct when a new partner is admitted to an existing partnership by purchasing a portion of a capital interest of an existing partner?

• It will result to revaluation or impairment of existing assets of the partnership

• The partnership will recognize gain or loss in the transfer of capital from one partner to another partner.

• The partnership is not dissolved by the admission of a new partner by purchase

• It will result to credit to capital of newly admitted partner with corresponding debit to capital of the selling partner.

In case of admission of a new partner in an existing partnership through investment to the partnership, which of the following scenarios will result in a bonus to the new partner and asset revaluation?

• The total contributed capital of all partners is equal to the total agreed capital of new partnership while the agreed capital of new partner is higher than the amount he has contributed

• The total contributed capital of all partners is more than the total agreed capital of new partnership while the agreed capital of new partner is lower than the amount he has contributed.

• The total contributed capital of all partners is less than the total agreed capital of new partnership while the agreed capital of new partner is higher than the amount he has contributed.

• The total contributed capital of all partners is more than the total agreed capital of new partnership while the total agreed capital of old partners is equal to the amount they contributed.

If a partner who retired from the partnership receives less than the capital balance before retirement which also results in a decrease in the capital balance of remaining partners, which is correct?

• The retiring partner receives bonus from remaining partner.

• An impairment loss is recognized before retirement.

• Revaluation surplus is recognized before retirement.

• The retiring partner gives bonus to the remaining partner.

Who may acquire the ownership interest of a partner who is withdrawing from a partnership?

• Existing partner

• New investor

• The partnership

• All of the above

Which of the following statements is true with regard to a withdrawing partner?

• A bonus must be paid to the retiring partner.

• A bonus may be paid to the retiring partner.

• A bonus must be paid to the retiring partner or to the remaining partners.

• Recognizing a bonus is not appropriate when a partner retires.

Which of the following procedures is acceptable when accounting for a deficit balance in a partner's capital account during partnership liquidation?

• A partner with a negative capital balance must contribute personal assets to the partnership that are sufficient to bring the capital account to zero.

• If a partner with a negative capital balance is personally insolvent, the negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to all the partners.

• If a partner with a negative capital balance is personally insolvent, the negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to those partners having positive balances.

• All the above procedures are acceptable.

In a partnership liquidation, how are partner salary allocations treated?

• Salary allocations take precedence over creditor payments.

• Salary allocations take precedence over amounts due to partners with respect to their capital interests, but not profits.

• Salary allocations take precedence over amounts due to partners with respect to their capital profits, but not capital interests.

• Salary allocations are disregarded.

A simple partnership liquidation requires:

• Periodic payments to creditors and partners determined by a safe payments schedule.

• Partnership assets to be converted into cash with full payment made to all outside creditors before remaining cash is distributed to partners in a lump sum payment.

• Only creditors to be paid in an orderly manner.

• Periodic payments to partners as cash becomes available.