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File: Chapter 15 Partnerships: Termination and LiquidationMultiple Choice[QUESTION] What is a marshaling of assets? A) a listing of estimated realizable values of a business's assets B) the order in which the creditors of a partnership will be paid as partnership assets are liquidated C) the order i...

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File: Chapter 15 Partnerships: Termination and Liquidation Multiple Choice [QUESTION] 1. What is a marshaling of assets? A) a listing of estimated realizable values of a business's assets B) the order in which the creditors of a partnership will be paid as partnership assets are liquidated C) the order in which partners receive cash as partnership assets are liquidated D) a ranking of claims against an individual E) the order in which the partnership's assets are liquidated Answer: D Difficulty: Easy [QUESTION] 2. The partnership of Nurr, Cleamons, and Kelly was insolvent, as was Cleamons personally. The partnership had begun liquidating its assets and Cleamons' capital account had a debit balance. How would the claim of Nurr and Kelly against Cleamons be ranked in comparison with the claims of Cleamons' other creditors? A) It ranks lower in priority than Cleamons' personal creditors and the creditors of the partnership. B) It ranks equal in priority with the claims of Cleamons' personal creditors. C) It ranks lower in priority than Cleamons' personal creditors but higher in priority than the creditors of the partnership. D) It ranks higher in priority than Cleamons' personal creditors and the creditors of the partnership. E) It ranks higher in priority than Cleamons' personal creditors but lower in priority than the creditors of the partnership. Answer: A Difficulty: Easy [QUESTION] 3. The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:

C ash N o n c a s h a s s e ts

T o ta l

$

1 6 ,0 0 0 4 3 4 ,0 0 0

$ 4 5 0 ,0 0 0

L A B C

ia b ilitie s b r a m s , c a p ita l a r tle , c a p ita l r e ig h to n , c a p ita l T o ta l

$ 1 5 0 ,0 0 0 8 0 ,0 0 0 9 0 ,0 0 0 1 3 0 ,0 0 0 $ 4 5 0 ,0 0 0

Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000. If the noncash assets were sold for $234,000, what amount of the loss would have been allocated to Bartle? A) $43,200. B) $46,800.

C) $40,000. D) $42,400. E) $43,100. Answer: C Difficulty: Easy [QUESTION] 4. The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:

C ash N o n c a s h a s s e ts

T o ta l

$

1 6 ,0 0 0 4 3 4 ,0 0 0

L A B C

$ 4 5 0 ,0 0 0

ia b ilitie s b r a m s , c a p ita l a r tle , c a p ita l r e ig h to n , c a p ita l T o ta l

$ 1 5 0 ,0 0 0 8 0 ,0 0 0 9 0 ,0 0 0 1 3 0 ,0 0 0 $ 4 5 0 ,0 0 0

Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000. The noncash assets were sold for $134,000. Which partner(s) would have had to contribute assets to the partnership to cover a deficit in his or her capital account? A) Abrams. B) Bartle. C) Creighton. D) Abrams and Creighton. E) Abrams and Bartle. Answer: D Difficulty: Medium [QUESTION] 5. The Abrams, Bartle, and Creighton partnership began the process of liquidation with the following balance sheet:

C ash N o n c a s h a s s e ts

T o ta l

$

1 6 ,0 0 0 4 3 4 ,0 0 0

$ 4 5 0 ,0 0 0

L A B C

ia b ilitie s b r a m s , c a p ita l a r tle , c a p ita l r e ig h to n , c a p ita l T o ta l

$ 1 5 0 ,0 0 0 8 0 ,0 0 0 9 0 ,0 0 0 1 3 0 ,0 0 0 $ 4 5 0 ,0 0 0

Abrams, Bartle, and Creighton share profits and losses in a ratio of 3:2:5. Liquidation expenses are expected to be $12,000. After the liquidation expenses of $12,000 had been paid and the noncash assets sold, Creighton had a deficit of $8,000. For what amount were the noncash assets sold? A) $170,000. B) $264,000.

C) $158,000. D) $146,000. E) $185,000. Answer: A Difficulty: Hard [QUESTION] 6. The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation:

C ash N o n c a s h a s s e ts

T o ta l

$

1 0 ,0 0 0 3 0 0 ,0 0 0

$ 3 1 0 ,0 0 0

L ia b ilitie s K e a to n , c a p ita l L e w is , c a p ita l M e a d o r, c a p ita l T o ta l

$ 1 3 0 ,0 0 0 6 0 ,0 0 0 4 0 ,0 0 0 8 0 ,0 0 0 $ 3 1 0 ,0 0 0

Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for $180,000. Liquidation expenses were $10,000. Assume that Lewis was personally insolvent and could not contribute any assets to the partnership, while Keaton and Meador were both solvent. What amount of cash would Keaton have received from the distribution of partnership assets? A) $38,000. B) $30,000. C) $24,000. D) $34,000. E) $31,600. Answer: B Difficulty: Hard [QUESTION] 7. The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation:

C ash N o n c a s h a s s e ts

T o ta l

$

1 0 ,0 0 0 3 0 0 ,0 0 0

$ 3 1 0 ,0 0 0

L ia b ilitie s K e a to n , c a p ita l L e w is , c a p ita l M e a d o r, c a p ita l T o ta l

$ 1 3 0 ,0 0 0 6 0 ,0 0 0 4 0 ,0 0 0 8 0 ,0 0 0 $ 3 1 0 ,0 0 0

Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for $180,000. Liquidation expenses were $10,000. Assume that Keaton was personally insolvent with assets of $8,000 and liabilities of $60,000. Lewis and Meador were both solvent and able to cover deficits in their capital accounts, if any. What amount of cash could Keaton's personal creditors have expected to receive from partnership assets?

A) $30,000. B) $0. C) $52,000 D) $26,000 E) $34,000 Answer: E Difficulty: Medium [QUESTION] 8. The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:

C ash N o n c a s h a s s e ts

T o ta l

$

9 0 ,0 0 0 3 0 0 ,0 0 0

$ 3 9 0 ,0 0 0

L ia b ilitie s H e n ry , c a p ita l I s a a c , c a p ita l J a c o b s , c a p ita l T o ta l

$

6 0 ,0 0 0 8 0 ,0 0 0 1 1 0 ,0 0 0 1 4 0 ,0 0 0 $ 3 9 0 ,0 0 0

Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. What amount of cash was available for safe payments, based on the above information? A) $30,000. B) $85,000. C) $25,000. D) $35,000. E) $40,000. Answer: C Difficulty: Easy [QUESTION] 9. The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:

C ash N o n c a s h a s s e ts

T o ta l

$

9 0 ,0 0 0 3 0 0 ,0 0 0

$ 3 9 0 ,0 0 0

L ia b ilitie s H e n ry , c a p ita l I s a a c , c a p ita l J a c o b s , c a p ita l T o ta l

$

6 0 ,0 0 0 8 0 ,0 0 0 1 1 0 ,0 0 0 1 4 0 ,0 0 0 $ 3 9 0 ,0 0 0

Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. Before liquidating any assets, the partners determined the amount of cash available for safe payments. How should the cash be distributed? A) in a ratio of 1:2:2 among the partners. B) $18,333 to Henry and $16,667 to Jacobs.

C) in a ratio of 1:2 between Henry and Jacobs. D) $15,000 to Henry and $10,000 to Jacobs. E) $11,364 to Henry and $13,636 to Jacobs. Answer: D Difficulty: Hard [QUESTION] 10. The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances:

C ash N o n c a s h a s s e ts

T o ta l

$

9 0 ,0 0 0 3 0 0 ,0 0 0

$ 3 9 0 ,0 0 0

L ia b ilitie s H e n ry , c a p ita l I s a a c , c a p ita l J a c o b s , c a p ita l T o ta l

$

6 0 ,0 0 0 8 0 ,0 0 0 1 1 0 ,0 0 0 1 4 0 ,0 0 0 $ 3 9 0 ,0 0 0

Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. Before liquidating any assets, the partners determined the amount of cash for safe payments and distributed it. The noncash assets were then sold for $120,000, and the liquidation expenses of $5,000 were paid. How much of the $120,000 would be distributed to Henry? A) $23,000. B) $24,000. C) $40.000. D) $27,000. E) $28,000. Answer: E Difficulty: Hard [QUESTION] 11. The following account balances were available for the Perry, Quincy, and Renquist partnership just before it entered liquidation:

C ash N o n c a s h a s s e ts

T o ta l

$

9 0 ,0 0 0 3 0 0 ,0 0 0

$ 3 9 0 ,0 0 0

L ia b ilitie s P e r ry , c a p ita l Q u in c y , c a p ita l R e n q u is t, c a p ita l T o ta l

$ 1 7 0 ,0 0 0 7 0 ,0 0 0 5 0 ,0 0 0 1 0 0 ,0 0 0 $ 3 9 0 ,0 0 0

Perry, Quincy, and Renquist had shared profits and losses in a ratio of 2:4:4. Liquidation expenses were expected to be $8,000. All partners were solvent. What would be the minimum amount for which the noncash assets must have been sold for, in order for Quincy to receive some cash from the liquidation? A) any amount in excess of $175,000. B) any amount in excess of $117,000.

C) any amount in excess of $183,000. D) any amount in excess of $198,667. E) any amount in excess of $168,333. Answer: C Difficulty: Hard [QUESTION] 12. . The following account balances were available for the Perry, Quincy, and Renquist partnership just before it entered liquidation:

C ash N o n c a s h a s s e ts

T o ta l

$

9 0 ,0 0 0 3 0 0 ,0 0 0

$ 3 9 0 ,0 0 0

L ia b ilitie s P e r ry , c a p ita l Q u in c y , c a p ita l R e n q u is t, c a p ita l T o ta l

$ 1 7 0 ,0 0 0 7 0 ,0 0 0 5 0 ,0 0 0 1 0 0 ,0 0 0 $ 3 9 0 ,0 0 0

Perry, Quincy, and Renquist had shared profits and losses in a ratio of 2:4:4. Liquidation expenses were expected to be $8,000. Assume that Quincy was insolvent and could not contribute assets to cover any deficit in her capital account. For what amount must the noncash assets have been sold, so that Renquist would have received some cash from the liquidation? A) any amount in excess of $108,000. B) any amount in excess of $58,000. C) any amount in excess of $201,600. D) any amount in excess of $50,000. E) any amount in excess of $104,000. Answer: A Difficulty: Hard [QUESTION] 13. A local partnership was in the process of liquidating and reported the following capital balances:

J u s tic e , c a p ita l (4 0 % s h a re o f a ll p ro fits a n d lo s s e s ) Z o b a rt, c a p ita l (3 5 % ) D o u g la s s , c a p ita l (2 5 % )

$

2 3 ,0 0 0 2 2 ,0 0 0 ( 1 4 ,0 0 0 )

Douglass indicated that the $14,000 deficit would be covered by a forthcoming contribution. However, the two remaining partners asked to receive the $31,000 that was then available. How much of this money should Justice receive? A) $15,000. B) $15,467. C) $17,333. D) $16,533. E) $15,867. Answer: D

Difficulty: Medium [QUESTION] 14. . A local partnership was in the process of liquidating and reported the following capital balances:

J u s tic e , c a p ita l (4 0 % s h a re o f a ll p ro fits a n d lo s s e s ) Z o b a rt, c a p ita l (3 5 % ) D o u g la s s , c a p ita l (2 5 % )

$

2 3 ,0 0 0 2 2 ,0 0 0 ( 1 4 ,0 0 0 )

Douglass indicated that the $14,000 deficit would be covered by a forthcoming contribution. However, the two remaining partners asked to receive the $31,000 that was then available. How much of this money should Zobart receive? A) $15,000. B) $14,467. C) $17,333. D) $15,633. E) $15,867. Answer: B Difficulty: Easy [QUESTION] 15. A local partnership was considering the possibility of liquidation since one of the partners (Ding) was insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.

D in g , c a p ita l L a u re l, c a p ita l E z z a rd , c a p ita l T illm a n , c a p ita l

$ 6 0 ,0 0 0 6 7 ,0 0 0 1 7 ,0 0 0 9 6 ,0 0 0

Ding's creditors filed a $25,000 claim against the partnership's assets. At that time, the partnership held assets reported at $360,000 and liabilities of $120,000. If the assets could be sold for $228,000, what is the minimum amount that Ding's creditors would have received? A) $36,000. B) $0. C) $2,500. D) $38,720. E) $67,250. Answer: C Difficulty: Medium [QUESTION] 16. A local partnership was considering the possibility of liquidation since one of the partners (Ding) was insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.

D in g , c a p ita l L a u re l, c a p ita l E z z a rd , c a p ita l T illm a n , c a p ita l

$ 6 0 ,0 0 0 6 7 ,0 0 0 1 7 ,0 0 0 9 6 ,0 0 0

Ding's creditors filed a $25,000 claim against the partnership's assets. At that time, the partnership held assets reported at $360,000 and liabilities of $120,000. If the assets could be sold for $228,000, what is the minimum amount that Laurel's creditors would have received? A) $36,000. B) $0. C) $2,500. D) $38,250. E) $67,250. Answer: D Difficulty: Medium [QUESTION] 17. A local partnership was considering the possibility of liquidation since one of the partners (Ding) was insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.

D in g , c a p ita l L a u re l, c a p ita l E z z a rd , c a p ita l T illm a n , c a p ita l

$ 6 0 ,0 0 0 6 7 ,0 0 0 1 7 ,0 0 0 9 6 ,0 0 0

Ding's creditors filed a $25,000 claim against the partnership's assets. At that time, the partnership held assets reported at $360,000 and liabilities of $120,000. If the assets could be sold for $228,000, what is the minimum amount that Ezzard's creditors would have received? A) $36,000. B) $0. C) $2,500. D) $38,250. E) $67,250. Answer: B Difficulty: Medium [QUESTION] 18. A local partnership was considering the possibility of liquidation since one of the partners (Ding) was insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.

D in g , c a p ita l L a u re l, c a p ita l E z z a rd , c a p ita l T illm a n , c a p ita l

$ 6 0 ,0 0 0 6 7 ,0 0 0 1 7 ,0 0 0 9 6 ,0 0 0

Ding's creditors filed a $25,000 claim against the partnership's assets. At that time, the partnership held assets reported at $360,000 and liabilities of $120,000. If the assets could be sold, for $228,000 what is the minimum amount that Tillman's creditors would have received? A) $36,000. B) $0. C) $2,500. D) $38,250. E) $67,250. Answer: E Difficulty: Medium [QUESTION] 19. Dancey, Reese, Newman, and Jahn were partners who shared profits and losses on a 4:2:2:2 basis, respectively. They were beginning to liquidate their business. At the start of the process, capital balances were as follows:

D a n c e y , c a p ita l R e e s e , c a p ita l N e w m a n , c a p ita l J a h n , c a p ita l

$ 7 2 ,0 0 0 3 2 ,0 0 0 5 2 ,0 0 0 2 4 ,0 0 0

Which one of the following statements is true? A) The first available $16,000 would go to Newman. B) The first available $16,000 would go to Dancey. C) The first available $8,000 would go to Jahn. D) The first available $8,000 would go to Reese. E) The first available $4,000 would go to Jahn. Answer: A Difficulty: Easy [QUESTION] 20. Which of the following will not result in the dissolution of a partnership? 1) Partners are incompatible and choose to cease operations. 2) Partners realize that the profit figures have failed to reach projected levels. 3) Retirement of a partner. 4) Death of a partner. A) 1 and 2 only B) 3 and 4 only C) 1, 2, and 3 D) 1, 2, 3, and 4 E) Neither 1, 2, 3, or 4 Answer: E

Difficulty: Easy [QUESTION] 21. What accounting transactions are not recorded by an accountant during liquidation? A) The conversion of partnership assets into cash. B) The allocation of the resulting gains and losses. C) The payment of liabilities and expenses. D) Remaining unpaid debts settled, and the distribution of any remaining assets to the partners based on their profit and loss ratio. Answer: D Difficulty: Medium [QUESTION] 22. Which of the following statements is false concerning the Schedule of Liquidation? A) Liquidations may take a considerable length of time to complete. B) Frequent reporting by the accountant is rarely necessary. C) The Schedule of Liquidation provides a listing of transactions to date, current cash, and capital balances. D) The Schedule of Liquidation provides a listing of property still being held by the partnership and liabilities remaining unpaid. E) The Schedule of Liquidation keeps creditors and partners apprised of the results of the process of dissolution. Answer: B Difficulty: Medium [QUESTION] 23. What is the preferred method of resolving a partner's deficit balance, according to the Uniform Partnership Act? A) Partners never have a deficit balance. B) The other partners must contribute personal assets to cover the deficit balance. C) The partnership must sell assets in order to cover the deficit balance. D) The partner with a deficit balance must contribute personal assets to cover the deficit balance. E) The partner with a deficit balance contributes personal assets only if those personal assets exceed personal liabilities. Answer: E Difficulty: Easy [QUESTION] 24. Which of the following statements is true concerning the distribution of safe payments? A) The distribution of safe payments assumes that any capital deficit balances will prove to be a total loss to the partnership. B) Safe payments are equal to the recorded capital balances of partners with positive capital balances. C) The distribution of safe payments may only be made after all liabilities have been paid. D) In computing safe payments, partners with positive capital balances are assumed to absorb an equal share of any deficit balance(s). E) There are no safe payments until the liquidation is complete. Answer: A Difficulty: Medium [QUESTION]

25. Which of the following is the proper ranking order of property distributions stipulated by the Uniform Partnership Act? A) Those owing to partners by way of contribution, those owing to partnership creditors, those owing to separate creditors. B) Those owing to separate creditors, those owing to partnership creditors, those owing to partners by way of contribution. C) Those owing to separate creditors, those owing to partners by way of contribution, those owing to partnership creditors. D) Those owing to partners by way of contribution, those owing to separate creditors, those owing to partnership creditors. E) Those owing to partnership creditors, those owing to partners by way of contribution, those owing to separate creditors. Answer: B Difficulty: Easy [QUESTION] 26. Which statement below is correct? A) If a partner of a liquidating limited liability partnership is unable to pay a capital account deficit, the deficit is absorbed by the other partners in the income-sharing ratio of those partners. B) Gains and losses from the sale of noncash assets are divided in the ratio of the partners' capital account balances if there is no income-sharing plan in the partnership contract. C) A loan receivable from a partner is added to the partner's capital account balance in the preparation of a cash distribution plan. D) Partners may receive cash before creditors receive cash when liquidating a limited liability partnership. E) All cash payments to partners are made using their income-sharing ratio when liquidating the partnership. Answer: A Difficulty: Easy [QUESTION] 27. The marshaling of assets doctrine regulates claims against an individual's assets. The following lists groups interested in potential cash distributions....