Partnership Liquidation Quiz

Republic of the Philippines
BATANGAS STATE UNIVERSITY

The National Engineering University
Pablo Borbon Campus
Rizal Avenue Ext., Batangas City, Batangas, Philippines 4200
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
E-mail Address: cabeihm.pb@g.batstate-u.edu.ph | Website Address: https://www.batstate-u.edu.ph
College of Accountancy, Business, Economics and International Hospitality Management
QUIZ – PARTNERSHIP LIQUIDATION
MULTIPLE CHOICE
Directions: Encircle the letter with the correct answer
1. A liquidation differs from a dissolution in that a liquidation

a. Assets may be revalued
b. The business will not continue
c. There may be an adjustment of partners’ capital accounts
d. Gains and losses are distributed according to the partnership agreement
1. 2. Which of the following

procedures is acceptable when
accounting for a deficit balance
in a
2. partner’s capital account
during partnership liquidation?
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3. a. A partner with a negative

capital balance must contribute
personal assets to the
4. partnership that are sufficient
to bring the capital account to
zero.
5. b. If a partner with a negative
capital balance is personally
insolvent, the negative capital
6. balance may be absorbed by
those partners having a positive
capital balance according

Pablo Borbon Campus
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
7. to the residual profit and loss

sharing ratios that apply to all
the partners.
8. c. If a partner with a negative
capital balance is personally
insolvent, the negative
9. capital balance may be
absorbed by those partners
having a positive capital
10. balance according to the
residual profit and loss sharing
ratios that apply to those
11. partners having positive
balances.
Pablo Borbon Campus
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
12. d. d. All the above

procedures are acceptabl
2. Which of the following procedures is acceptable when accounting for a deficit balance in a
partner’s capital account during partnership liquidation?
a. A partner with a negative capital balance must contribute personal assets to the partnership that
are sufficient to bring the capital account to zero.
b. If a partner with a negative capital balance is personally insolvent, the negative capital balance
may be absorbed by those partners having a positive capital balance according to the residual
profit and loss sharing ratios that apply to all the partners.
c. If a partner with a negative capital balance is personally insolvent, the negative capital balance
may be absorbed by those partners having a positive capital balance according to the residual
profit and loss sharing ratios that apply to those partners having positive balances.
d. All of the above
3. In a simple partnership liquidation, the last remaining cash distribution should be made according
to the ratio of
a. the individual partner’s profit and loss agreement.
b. the individual partner's capital accounts, increased by partner loans to the partnership.
c. the individual partner’s capital accounts, increased by partnership loans to the partners and
decreased by partner loans to the partnership.
d. the individual partner’s capital accounts, decreased by partnership loans to the partners and
increased by partner loans to the partnership.

Pablo Borbon Campus
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
4. In partnership liquidations, what are safe payments?

a. The amounts of distributions that can be made to the partners, after all creditors have been
paid in full.
b. The amounts of distributions that can be made to the partners with assurance that such
amounts will not have to be returned to the partnership.
c. The amounts of distributions that can be made to the partners, after all non-cash assets have
been adjusted to fair market value
d. All of the above
5. If conditions produce a debit balance in a partner’s capital account when liquidation losses are
allocated
a. the partner receives further allocations of liquidation losses, but not gains.
b. the partner receives no further allocation of liquidation losses and gains
c. the partner is no longer obligated to partnership creditors.
d. the partner has an obligation of personal net assets to the other partners.
6. If a partner is insolvent, his personal properties shall first be distributed

a. To partnership creditors
b. To the partners by way of additional contributions when the assets of the partnership were
insufficient to settle all obligations.
c. To partnership and separate creditors in the ratio of their loan exposures
d. To separate creditors
7. In a partnership liquidation, the assets of the partnerships shall be applied lastly to

Pablo Borbon Campus
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
a. Those owing to outside creditors,

b. Those owing to the partners with respect to their share of the profits
c. Those owing to the partners with respect to their capital contributions
d. Those owing to inside creditors in the form of loans or advances for business expenses by the
partners,
8. A partner’s loss absorption balance is calculated by

a. Dividing the partner’s capital balance by his percentage interest in capital’
b. Multiplying distributable assets by the partner’s profit sharing percentage
c. Dividing the partner’s total interests by his profit and loss sharing percentage
d. Multiplying the partner’s total interests by his profit and loss sharing percentage
9. Which of the following is not correct with respect to an instalment liquidation of a partnership?
a. All remaining liquidation expenses are anticipated
b. All non-cash assets are assumed to be worthless
c. Distributions to partners are always made according to their profit sharing percentages
d. Partners with the greatest ability to absorb losses and expenses are the first to receive
instalment distributions.
10. In a liquidation, the liabilities of the partnership should be paid

a. Before any sales of assets
b. Before the distribution of cash to partners
c. Before the distribution of gains and losses on the disposal of assets
d. After a revaluation of assets
II. PROBLEM SOLVING

Pablo Borbon Campus
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
Assume the following data for QRS Partnership had the following condensed balance sheet just before
liquidation on November 1, 20x4, reports the following balances:
Assume the following data for QRS

Partnership had the following
condensed balance sheet just before
liquidation on November 1, 20x4,
reports the following balances:
Prepare the statement of liquidation, assuming:
Q.1 The noncash assets were realized at P96,000

Pablo Borbon Campus
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
Q.4 The capital and loan balances for partners Bernardino, Lee and Ong are shown below. They share
profits or losses in the ratio 4:4:2, respectively.
Prepare a cash priority program and assume that P250,000 cash is available for initial distribution, prepare
the entries to record the distribution to the partners.
Q.5 On Jan 3, 2018, the partners Mikasa, Eren and Armin who share profits and losses in the ratio 2:4:4
respectively decided to liquidate their partnership. On this date the partnership condensed statement of
financial position was as follows:
On Jan.20, the first cash sale of other assets with a carrying amount of 200,000 realized 150,000. Safe
installment payments to the partners were made same date. How much cash should be distributed to each
partner?

Pablo Borbon Campus
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
ANSWER KEY
I.MULTIPLE CHOICE
1. B
2. C
3. A
4. B
5. D
6. D
7. B
8. C
9. B
10.C
II. PROBLEM SOLVING

Q.1

Pablo Borbon Campus
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
Q.2
Q.3

Pablo Borbon Campus
Tel Nos.: (+63 43) 980-0385; 980-0387; 980-0392 to 94; 425-7158 to 62 loc. 1124
Q.4
Q.5

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Republic of the Philippines

BATANGAS STATE UNIVERSITY

College of Accountancy, Business, Economics and International Hospitality Management

QUIZ – PARTNERSHIP LIQUIDATION

1. A liquidation differs from a dissolution in that a liquidation

1. 2. Which of the following

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College of Accountancy, Business, Economics and International Hospitality Management

3. a. A partner with a negative

Leading Innovations, Transforming Lives, Building the Nation

College of Accountancy, Business, Economics and International Hospitality Management

7. to the residual profit and loss

College of Accountancy, Business, Economics and International Hospitality Management

12. d. d. All the above

Leading Innovations, Transforming Lives, Building the Nation

College of Accountancy, Business, Economics and International Hospitality Management

4. In partnership liquidations, what are safe payments?

6. If a partner is insolvent, his personal properties shall first be distributed

7. In a partnership liquidation, the assets of the partnerships shall be applied lastly to

Leading Innovations, Transforming Lives, Building the Nation

College of Accountancy, Business, Economics and International Hospitality Management

a. Those owing to outside creditors,

8. A partner’s loss absorption balance is calculated by

10. In a liquidation, the liabilities of the partnership should be paid

II. PROBLEM SOLVING

Leading Innovations, Transforming Lives, Building the Nation

College of Accountancy, Business, Economics and International Hospitality Management

Assume the following data for QRS

Q.1 The noncash assets were realized at P96,000

Q.2 The noncash assets were realized at P48,000

Q.3 The noncash assets were realized at P42,000

Leading Innovations, Transforming Lives, Building the Nation

College of Accountancy, Business, Economics and International Hospitality Management

Leading Innovations, Transforming Lives, Building the Nation

College of Accountancy, Business, Economics and International Hospitality Management

II. PROBLEM SOLVING

Leading Innovations, Transforming Lives, Building the Nation

College of Accountancy, Business, Economics and International Hospitality Management

Leading Innovations, Transforming Lives, Building the Nation

College of Accountancy, Business, Economics and International Hospitality Management

Leading Innovations, Transforming Lives, Building the Nation

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