Piecemeal Distribution of Assets and Liabilities in Firm Dissolution

The video tutorial explains the process of firm dissolution, focusing on the realization of assets and the payment of liabilities. It introduces the concept of piecemeal distribution, where liabilities are paid in stages based on urgency and regulatory standards. The tutorial details the order of payment, starting with realization expenses and contingent liabilities, followed by secured and unsecured creditors, and finally partners. The proportionate capital method is introduced to determine the order of capital repayment among partners. An example illustrates the creation of a statement of distribution and the allocation of realized funds to partners based on their profit-sharing ratios.

What is the term used for distributing money in parts or stages during firm dissolution?

• Sequential distribution

• Incremental distribution

• Piecemeal distribution

• Lump sum distribution

Which expense is prioritized first when paying out liabilities?

• Taxes

• Employee salaries

• Secured creditors

• Realization expenses

What is a contingent liability?

• A liability that is unlikely to occur

• A liability that has already occurred

• A liability that is certain to occur

• A liability that may occur if a certain event happens

In what order are partners' capitals paid off?

• Based on the amount of capital contributed

• Based on the profit-sharing ratio

• Based on the excess capital

• Based on the age of the partners

What method is used to determine the correct proportionate and excess capital?

• Profit-sharing method

• Capital contribution method

• Proportionate capital method

• Equity method

How is the base capital determined in the proportionate capital method?

• By taking the average of all capitals

• By selecting the lowest unit capital

• By selecting the highest unit capital

• By using the total capital

In the example provided, who should be paid first among the partners?

• All partners equally

• Partner A

• Partner C

• Partner B

What happens if the last realization results in a surplus?

• The surplus is used to pay off debts

• The surplus is distributed among partners in their profit-sharing ratio

• The surplus is distributed among partners in their capital ratio

• The surplus is kept by the firm

If the last realization results in a loss, how is it handled?

• The loss is distributed among partners in their capital ratio

• The loss is ignored

• The loss is distributed among partners in their profit-sharing ratio

• The loss is covered by the firm's reserves

What is the purpose of the statement of distribution?

• To calculate the total assets

• To record the firm's profits

• To determine the order and amount to pay each partner

• To list all liabilities