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- The following balance sheet is for a local partnership in which the partners have become very unhappy with each other. To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as an situation related to the partnership’s liquidation. The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 2:3:3:2 basis, respectively, how will the $10,000 be divided? The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated on a 2:2:3:3 basis, respectively, how will the $10,000 be divided? The building is immediately sold for $70,000 to give total cash of $110,000. The liabilities are then paid, leaving a cash balance of $80,000. This cash is to be distributed to the partners. How much of this money will each…1. During liquidation, a partners’ capital account balance drops below zero. What should happen? a. The partner with a deficit should contribute enough assets to offset the deficit balance. b. The other partners should file a legal suit against the partner with the deficit balance. c. The partner with the highest capital balance should contribute sufficient assets to eliminate the deficit. d. The deficit balance should be removed from the accounting records with only the remaining partners sharing in future gains and losses. 2. If the total debits in the statement of realization and liquidation exceeds the total credits, there is a.none of these b. net loss for the period c. either net gain for the period d.net gain for the period 3. In the liquidation of a partnership, a loan payable to a partner: a. Must be closed to that partners’ drawing account. b.Has the same priority as amounts payable to outside creditors of the partnership. c.Will not advance the time of payment to that…During liquidation, a partners’ capital account balance drops below zero. What should happen? a. The other partners should file a legal suit against the partner with the deficit balance. b. The partner with the highest capital balance should contribute sufficient assets to eliminate the deficit. c. The deficit balance should be removed from the accounting records with only the remaining partners sharing in future gains and losses. d. The partner with a deficit should contribute enough assets to offset the deficit balance.
- Write TRUE if the statement is correct and FALSE if the statement is wrong. Write your answers on the space provided before the number. Erasures are strictly NOT allowed. 1. The loss absorption balances represent the maximum loss that the partners could absorb without reducing their equity below zero. 2. Gains and losses on the sale of assets in liquidation are divided equally among partners. 3. A partnership maybe dissolved without being liquidated but liquidation is always preceded by dissolution. 4. Under the installment method of partnership liquidation, realization of non-cash assets is accomplished over an extended period of time. When cash is available, creditors may be partially or fully paid. Any excess maybe distributed to the partners in accordance with a program of safe payments or a cash priority program. This process persists until all the non-cash assets are sold. 5. Restricted interest are provided for assumed non-sale of remaining non-cash assets and…During a liquidation, if a partner’s capital account balance drops below zero, what Should Happen? The other partners file a legal suit against the partner with the deficit balance. The partner with the highest capital balance contributes sufficient assets to eliminate the deficit. The deficit balance is removed from the accounting records with only the remaining partners sharing in future gains and losses. The partner with a deficit contributes enough assets to offset the deficit balance.(TCO G) The partnership of Jewel, Maggie, and Waters was insolvent and will be unable to pay $50,000 in liabilities currently due. What recourse is available to the partnership's creditors? Group of answer choices They must present their claims to the three partners in the order of the partners' capital account balances. They must try to obtain a payment from the partner with the largest capital account balance. They may seek remuneration from any partner they choose. They cannot seek remuneration from the partners as individuals. They must present equal claims to the three partners as individuals.
- During a liquidation, if a partner's capital account balance drops below zero, what should happen? Multiple Choice The partner with a deficit contributes enough assets to offset the deficit balance. The other partners file a legal suit against the partner with the deficit balance. The partner with the highest capital balance contributes sufficient assets to eliminate the deficit. The deficit balance is removed from the accounting records with only the remaining partners sharing in future gains and losses.Triple G Company, Ltd. Is composed of G1, G2 and G3 as general partners, and L as limited partner. The firm owes C, a third person, P60,000, and L, P30,000. Which is not a true statement? A. If the firm owns a certain lot, L cannot receive or hold such lot by way of mortgage, to secure his claim against the partnership. B. If the firm owns a certain lot, L can receive or hold such lot by way of mortgage, to secure his claim against the partnership. C. If the firm has assets of P70,000. L cannot receive any payment for his claim of P30,000 either from the firm or from any of the three general partners because the firm’s remaining assets would only be P40,000, which amount is not sufficient to pay the firm’s debt to C in the amount of P60,000. D. If the firm owes C P60,000 and has assets of P70,000 including a receivable from L in the amount of P30,000, L cannot obtain a release from his liability to the prejudice of C since the firm’s remaining…(a) Fleming will invest the assets of Fleming’s Plumbing Supplies, and the partnership will assume all liabilities. The market values of the office and store equipment are estimated to be $18,000 and $8,000, respectively. All other values reported on the balance sheet are reasonable approximations of market values. Fleming has no knowledge of any uncollectible accounts receivable. (b) Bond will invest $50,000 cash. (c) Fleming will draw a salary allowance of $50,000 per year, and Bond will receive $30,000. (d) Each partner will receive 10% interest on the January 1 balance of his capital account. (e) Profits or losses remaining after allocating salaries and interest will be distributed as follows: Fleming, 60% and Bond, 40%. Fleming’s Plumbing Supplies Balance Sheet December 31, 20-1 1 Assets Liabilities 2 Cash $13,544.00 Notes payable $36,000.00 3 Accounts receivable $15,280.00 Accounts…
- 1. In a partnership liquidation the realization losses result in a debit balance in one partners’ capital account. If this partner fails to contribute personal assets to make up this deficit, how should the debit balance be handled by the partners? a. It should be written off against partnership profits like any other bad debt. b. It should be allocated to all the partners in their profit and loss ratio. c. It should be allocated to the remaining partners in their remaining P and L ratio. d. It should be set up as a receivable and turned over to a collection agency. 2. During liquidation, a partners’ capital account balance drops below zero. What should happen? a. The other partners should file a legal suit against the partner with the deficit balance. b. The partner with the highest capital balance should contribute sufficient assets to eliminate the deficit. c. The deficit balance…Choose the correct. During a liquidation, if a partner’s capital account balance drops below zero, what should happen?a. The other partners file a legal suit against the partner with the deficit balance.b. The partner with the highest capital balance contributes sufficient assets to eliminate the deficit.c. The deficit balance is removed from the accounting records with only the remaining partners sharing in future gains and losses.d. The partner with a deficit contributes enough assets to offset the deficit balance.Which of the following statements is CORRECT? O a. In a limited partnership, the limited partners have voting control, while the general partner has operating control over the business, and the limited partners are individually responsible, on a pro rata basis, for the firm's debts in the event of bankruptcy. O b. Partnerships have more difficulty attracting large amounts of capital than corporations because of such factors as unlimited liability, the need to reorganize when a partner dies, and the illiquidity (difficulty buying and selling) of partnership interests. O c. In a typical partnership, liability for other partners' misdeeds is limited to the amount of a particular partner's investment in the business. O d. A slow-growth company, with little need for new capital, would be more likely to organize as a corporation than would a faster growing company. O e. A major disadvantage of a partnership relative to a corporation is the fact that federal income taxes must be paid by the…