REVIEWER ST 4

1. I. A partnership that has limited liability often confer separation between the parties and the
separate vehicle.

II. When the contractual arrangement establishes the allocation of revenues and expenses
on the basis of relative performance of each party to the joint arrangement. The
arrangement is a joint venture.
a. True, True
b. False, False
c. True, False
d. False, True

2. Which of the following is not a responsibility of an accountant during a partnership

liquidation?
a. To protect the creditors.
b. To distribute the most cash to the partner with the greatest capital account.
c. To ensure that partner distributions do not jeopardize payments to creditors.
d. To manage the liquidation process in a manner that results in the greatest amount of
cash collected.

3. I. Payments on partners based on periodic computation of safe payment brings, at some

point of liquidation, the partners’ capitals to the profit-sharing ratio.
II. Safe payments refers to the distribution of cash according to vulnerability ranking.
a. True, True
b. False, False
c. False, True
d. True, False

4. I. The partnerships existing partner and new investor may acquire the ownership interest of
a partner who is withdrawing from the partnership.

II. If no profit and loss sharing is specified in the partnership agreement, the partnership
requires that profits and losses be shared equally.
a. True, True
b. False, False
c. True, False
d. False, True

5. As a general rule, the cash/assets should be distributed in what order.

I. To partners for capital accounts.
II. To outside creditors.
III. To partners for loan accounts.

a. I, II, III
REVIEWER ST 4

b. III, I, II
c. II, I, III
d. II, III, I