WorksheetsPARTNERSHIP LIQUIDATION AND DISSOLUTION - POST EXAMINATION
Total questions: 25
Worksheet time: 13mins
Name
Class
Date
1.
1. What is the first step in the liquidation of a partnership?
a)
Determine the partner's capital balances
b)
Distribute cash to partners
c)
Sell partnership assets
d)
Pay off partnership liabilities
2.
2. That is the formula for calculating a partner's capital balance in a liquidation?
a)
Total partnership assets / Number of partners
b)
Total partnership liabilities - Total partnership assets
c)
Total partnership assets - Total partnership liabilities
d)
Total partnership liabilities / Number of partners
3.
3. What is the effect of admitting a new partner on the existing partners' profit/loss sharing ratios?
a)
The existing partners' profit/loss sharing ratios remain the same
b)
The existing partners' profit/loss sharing ratios increase
c)
The existing partners' profit/loss sharing ratios decrease
d)
The existing partners' profit/loss sharing ratios become zero
4.
4. What is the book value method for calculating a new partner's capital balance?
a)
The new partner's capital balance is equal to the total partnership assets
b)
The new partner's capital balance is equal to the total partnership liabilities
c)
The new partner's capital balance is equal to the total partnership assets minus the total partnership liabilities
d)
The new partner's capital balance is equal to the total partnership assets divided by the number of partners
5.
5. What is the bonus method for calculating a new partner's capital balance?
a)
The new partner's capital balance is equal to the total partnership assets
b)
The new partner's capital balance is equal to the total partnership liabilities
c)
The new partner's capital balance is equal to the total partnership assets minus the total partnership liabilities
d)
The new partner's capital balance is equal to the total partnership assets plus a bonus
6.
6. What is the formula for calculating the amount to distribute to a solvent partner in a liquidation?
a)
Total partnership assets / Total partnership liabilities
b)
Total partnership liabilities / Total partnership assets
c)
Total partnership assets - Total partnership liabilities
d)
Total partnership liabilities - Total partnership assets
e)
7.
7. What is the formula for calculating the amount to distribute to an insolvent partner in a liquidation?
a)
Total partnership assets / Total partnership liabilities
b)
Total partnership liabilities / Total partnership assets
c)
Total partnership assets - Total partnership liabilities
d)
Total partnership liabilities - Total partnership assets
8.
8. What is the difference between a solvent and an insolvent partner in a liquidation?
a)
A solvent partner has a positive capital balance, while an insolvent partner has a negative capital balance
b)
A solvent partner has a negative capital balance, while an insolvent partner has a positive capital balance
c)
A solvent partner has a positive net worth, while an insolvent partner has a negative net worth
d)
A solvent partner has a negative net worth, while an insolvent partner has a positive net worth
9.
9. What is the difference between the book value method and the bonus method for calculating a new partner's capital balance?
a)
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
b)
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
c)
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
d)
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
10.
10. What is the effect of admitting a new partner on the existing partners' capital balances?
a)
The existing partners' capital balances remain the same
b)
The existing partners' capital balances increase
c)
The existing partners' capital balances decrease
d)
The existing partners' capital balances become zero
11.
11. If a new partner acquires a partnership interest directly from the partners rather than from the partnership itself,
a)
No entry is required.
b)
The partnership assets should be revalued.
c)
The existing partners' capital accounts should be reduced and the new partner's account increased.
d)
The partnership has undergone quasi-reorganization.
12.
12. Which of the following results in dissolution of a partnership?
a)
The contribution of additional assets to the partnership by an existing partner.
b)
The receipt of a draw by an existing partner.
c)
The winding up of the partnership and the distribution of remaining assets to the partners.
d)
The withdrawal of a partner from a partnership.
13.
13. When a new partner is admitted to a partnership, an original partner's capital account may be adjusted for
a)
A proportionate share of the incoming partner's investment.
b)
His or her share of previously unrecorded intangible assets traceable to the original partners.
c)
His or her share of previously unrecorded intangible assets traceable to the incoming partners.
d)
None of the above
14.
14. Which of the following best characterizes the bonus method of recording a new partner's investment in a partnership?
a)
Net assets of the previous partnership are not revalued.
b)
The new partner's initial capital balance is equal to his or her investment.
c)
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.
d)
The bonus always results in an increase to the previous partners' capital balances.
15.
15. If goodwill is traceable to the previous partners, it is A.
a)
Allocated among the previous partners according to their interest in capital.
b)
Allocated among the previous partners only if there are no other assets to be revalued.
c)
Allocated among the previous partners according to their original profit and loss sharing percentages.
d)
Not possible for goodwill to also be traceable to the incoming partner.
16.
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?
a)
The bonus method does not revalue assets to market values.
b)
The bonus method revalues assets to market values.
c)
Both methods result in the same balances in the partner capital accounts.
d)
Both methods result in the same total value of partner capital account, but the individual capital account varies.
17.
17. X, Y and Z are partners who share profits and losses in the ratio of 5:3:2, respectively. They agree to sell a 25% of their respective capital and profits and losses ratio for a total payment directly to the partners in the amount of P140,000. They agree that goodwill or revaluation of assets of P60,000 is to be recorded prior to admission of A. The condensed balance sheet of the XYZ partnership is as follows:
Cash : P 60,000
Non Cash : P 540,000
Total : P600,000
Liabilities: P100,000
X, Capital : P250,000
Y, Capital : P150,000
Z Capital : P100,000
Total : P600,000
The capital of X, Y and Z respectively after the payment and admission of A are:
a)
P187,500; P112,500; P75,000
b)
P210,000; P126,000; P84,000
c)
P280,000; P168,000; P112,000
d)
P250,000; P150,000; P100,000
18.
18. On June 30, 2021, the balance sheet of W Marketing, a partnership, is summarized as follows:
Sundry Assets P150,000
W, Capital 90,000
T, Capital 60,000
W and T share profits and losses at a 60:40 ratio, respectively. They agreed to take in C as a new partner, who purchased 1/8 interest of W and T for P25,000. What is the amount of C’s capital to be taken up in the partnership books if book value method is used?
a)
P12,500
b)
P18,750
c)
P25,000
d)
P31,250
19.
19. P contributed P24,000 and C contributed P48,000 to form a partnership, and they agreed to share profits in the ratio of their original capital contributions. During the first year of operations, they made a profit of P16,290. P withdrew P5,050 and C P8,000. At the start of the following year, they agreed to admit G into the partnership. He was to receive a one-fourth interest in the capital and profits upon payment of P30,000 to P and C, whose capital accounts were to be reduced by transfers to G’s capital account of amounts sufficient to bring them back to their original capital ratio. How should the P30,000 paid by G be divided between P and C?
a)
P – P9,825; C – P20,175
b)
P – P15,000; C – P15,000
c)
P – P10,000; C – P20,000
d)
P – P9,300; C – P20,700
20.
20. On January 31, 2021, partners L, M and N had the following loan and capital account balances (after closing entries for January):
Loan Receivable from L P20,000 dr
Loan Payable to N 60,000 cr
L, Capital 30,000 dr
M, Capital 120,000 cr
N, Capital 70,000 cr
The partnership’s income sharing ratio was L – 50%, M – 20%, and N – 30%. On January 31, 2021, O was admitted to the partnership for a 20% interest in total capital of the partnership in exchange for an investment of P40,000 cash. Prior to O’s admission, the existing partners agreed to increase the carrying amount of the partnership’s inventories to current fair value, a P60,000 increase. The capital account to be credited to O:
a)
P60,000
b)
P40,000
c)
P52,000
d)
P46,000
21.
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:
a)
M – P35,000; O – P55,000; P – P60,000
b)
M – P45,000; O – P45,000; P – P60,000
c)
M – P36,000; O – P36,000; P – P48,000
d)
M – P26,000; O – P46,000; P – P48,000
22.
22. R, S and T decided to dissolve the partnership on November 30, 2021. Their capital balances and profit ratio on this date follow:
R – P50,000; 40%
S – P60,000; 30%
T – P20,000; 30%
The net income from January 1 to November 30, 2021 is P44,000. Also, on this date, cash and liabilities are P40,000 and P90,000, respectively. For R to receive P55,200 in full settlement of his interest in the firm, how much must be realized from the sale of the firm’s non-cash assets?
a)
P196,000
b)
P177,000
c)
P193,000
d)
P187,000
23.
23. A local partnership was considering the possibility of liquidation since one of the partners is solvent (T) and the others are insolvent. Capital balance at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.
D, Capital P60,000
L, Capital 67,000
E, Capital 17,000
T, Capital 96,000
D’s creditors filed a P25,000 claim against the partnership’s assets. At that time, the partnership held assets reported at P360,000 and liabilities of P120,000. If the assets could be sold for P228,000, what is the minimum amount that D’s creditors would have received?
a)
P0
b)
P2,500
c)
P36,000
d)
P38,720
24.
24. The K, L and M partnership had the following balance sheet just before entering liquidation:
Cash : P 10,000
Non Cash : P 300,000
Total : P310,000
Liabilities: P130,000
K, Capital : P60,000
L, Capital : P40,000
M, Capital : P80,000
Total : P310,000
K, L and M share profits and losses in a ratio of 2:4:4. Noncash assets were sold for P180,000. Liquidation expenses were P10,000. Assume that K was personally insolvent with assets of P8,000 and liabilities of P60,000. L and M were both solvent and able to cover deficits in their capital accounts, if any. What amount of cash could K’s personal creditors have expected to receive from partnership assets?
a)
P0
b)
P26,000
c)
P30,000
d)
P34,000
25.
25.A, B and C are partners in ABC Partnership and share profits and losses 50%, 30% and 20% respectively. The partners have agreed to liquidate the partnership and some liquidation expenses to be incurred. Prior to the liquidation, the partnership balance sheet reflects the following book values:
Cash P25,200
Non-cash assets 297,600
Notes Payable to C 38,400
Other Liabilities 184,800
A, Capital 72,000
B, Capital (deficit) (12,000)
C, Capital 39,600
Assuming that the actual liquidation expenses are P16,800 and that the non-cash assets with a book value of P240,000 are sold for P216,000. How much cash should C receive?
a)
P45,467
b)
P39,600
c)
P74,571
d)
P0
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