A.

MULTIPLE CHOICES
Choose the letter of the best answer.

1. In accounting for the liquidation of a partnership, cash payments to partners after all outside
creditors’ claims have been satisfied, but before the final cash distribution, should be made
according to
A. Safe payments computation
B. The partners’ profit and loss sharing ratio
C. The final balances in partners’ capital accounts
D. Partners’ share of the gain or loss on liquidation

2. In a partnership liquidation, a gain on sale of non cash assets is

A. Allocated to the partners based on their capital balances
B. Allocated to the partners based on their profit and loss sharing ratio
C. Allocated to the partner with the lowest capital balance
D. Allocated to partnership liabilities

3. Liquidation of a partnership includes all of the following steps, except

A. Obtaining court approval
B. Selling the partnership’s noncash assets
C. Paying the partnership liabilities
D. Distributing the remaining cash to partners

4. Settlement of a partner’s personal liabilities may come from

A. Personal assets
B. Partner’s claim on partnership assets
C. Claims of co-partners
D. A and B only

5. Liquidation losses would include

A. Loss on realization of non cash assets
B. Liquidation expenses
C. Share on the deficiency of an insolvent partner
D. All of the above

6. A capital deficiency can be eliminated by the following except

A. Offsetting against a partner’s loan
B. Additional investment
C. Selling non cash assets at a gain
D. Loss to the other partners

7. A partner’s interest includes

A. Capital balance
B. Partner’s loan to the partnership
C. A only
D. A and B

8. A capital deficiency in a partner’s capital that is uncollectible is

A. The result of a sale of non cash asset at a profit
B. The result of a loss in operations
C. A loss to the other partners
D. A gain to the other partners

9. The other partners must absorb the deficiency in a partner’s capital account in liquidation
because of
 A. Limited life and mutual agency
B. Mutual agency and unlimited liability
C. Limited life and co-ownership of property
D. Mutual agency and partnership’s taxability

10. When a partnership is liquidated, all of the following may occur, except
A. A partner erases his deficiency by declaring bankruptcy
B. The other partners absorb a partner’s deficiency
C. A partner erases his deficiency by contributing property
D. A partner erases his deficiency by contributing cash

11. The order of partnership liquidation process is

A. Sell assets, disburse cash to partners, pay liabilities
B. Disburse cash to partners, pay liabilities, sell assets
C. Pay liabilities, sell assets, disburse cash to partners
D. Sell assets, pay liabilities, disburse cash to partners

12. In a partnership liquidation, a loss from sale of non cash assets is

A. Allocated to the partner with the highest capital balance
B. Allocated to the partnership liabilities
C. Allocated to the partners based on their capital balances
D. Allocated to the partners based on their profit and loss sharing ratio

13. Which of the following statement is incorrect?

A. Partnership creditors are preferred as to partnership assets
B. Partnership creditors are preferred as to each partner’s separate assets
C. A partner’s separate creditors are preferred as to the partner’s separate assets
D. A partner’s separate creditors may attach a partner’s share in the partnership assets

14. The process of converting non cash assets into cash is called
A. Winding up of assets
B. Disposal of property
C. Realization
D. Dissolution

15. The partner with the _____ loss absorption capacity is the least priority on cash distributions.
A. Highest
B. Lowest
C. A and B
D. Neither A nor B