During a liquidation, if a partner's capital account balance drops below zero, what should happen? Multiple Choice O 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. O The partner with the highest capital balance contributes sufficient assets to eliminate the deficit.

During a liquidation, if a partner's capital account balance drops below zero, what should happen? Multiple Choice O 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. O The partner with the highest capital balance contributes sufficient assets to eliminate the deficit.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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In a partnership, a capital deficiency occurs for a partner when Options: • His share in the losses of the partnership is more than his capital balance • Loan payable by the partnership to him greater than his capital balance • His solvency is lesser than his capital balance • His personal assets are less than his personal liabilities
Which of the following is true regarding capital deficiencies? O a Ob Oc Od The partners do not have a legally enforceable claim against the partner with the capital deficiency. If a partner with a capital deficiency is unable to pay the amount owed to the partnership, the partners with debit balances must absorb the loss. The loss is allocated based on the profit and loss ratios between the partners whether with credit or debit balances. if the partner with the capital deficiency pays the amount owed to the partnership, the deficiency is eliminated.
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Julie contributes, as part of her initial investment, accounts receivable with an allowance for doubtful accounts. Which of the following reflects a proper treatment? O The accounts receivable and allowance should not be recorded on the books of the partnership because a partner must invest cash in the business. O The balance of the accounts receivable account should be recorded on the books of the partnership at its net realizable value. O The allowance account may be set up on the books of the partnership because it relates to the existing accounts that are being contributed. O The allowance account should not be recorded in the books of the partnership.
What is the meaning of the statement below? Please explain. In the partnership agreement, interest will not accrue on partnes' loan balances during the liquidation process.
How may the capital deficiency of an insolvent partner can be eliminated?
PARTNERSHIP DISSOLUTION True or False _______1. Insolvency, insanity, or incapability to perform by a partner may cause the dissolution of the firm. _______2. Dissolution and liquidation mean the same thing. _______3. Asset revaluation may be recognized for the current partners when the new equity is greater than the original partners' equity. _______4. Dissolution may not necessarily change the basic function or operation of the partnership. _______5. Dissolution always immediately causes the termination of a firm. _______6. An admission of a new partner causes a change in the ownership interest of the original partners. _______7. Ownership may be transferred at will by anyone partner without consulting the other partners. _______8. Bonus is, in effect, transfer of capital from one partner to another partner. _______9. Recognizing undistributed profit or loss share of the partners at dissolution date is necessary in effecting dissolution. _______10. ABC Partnership decided to admit D…
Statement I: In lumpsum liquidation, the remaining cash available after realization and payment of liquidation expenses, will be equal to the total interest of the partners.Statement II: In installment liquidation, the partner who has the highest absorption capacity shall be prioritized in the payment of interest. Group of answer choices Both statements are false Both statements are true S1 is true; S2 is false S1 is false; S2 is true
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According to the RUPA, a new partner is admitted to a partnership if a majority of the partners consent. TRUE OR FALSE Which of the following refers to the sale of the partnership’s assets during the winding up process? Multiple Choice Destruction. Termination. Dissociation. Elimination. Liquidation.
Which of the following is not a reason for the dissolution by the court? O a. Admission of new partner O b. Partner becomes insane O C. The business cannot be carried on except at a loss O d. Transfer whole interest of a partner is transferred to a third party