Activity 2: Skill-building Activities (with answer key) (18 mins + 2 mins checking)

Directions: Try this exercise and see how well do you understand the concepts about
partnership
liquidation. In the spaces provided, write T if the statement below is true otherwise F if it is false.
T 1) The creditors of the partnership shall have priority in payments over those of the partners'
separate creditors as regards the partnership properties.
T 2) The loss absorption balances represent the maximum loss that the partners could absorb
without reducing their equity below zero.
F 3) Gains and losses on the sale of assets in liquidation are divided equally among partners.
T 4) A partnership may be dissolved without being liquidated but liquidation is always preceded
by dissolution.
T 5) A partner's inability to meet his obligations at the time of liquidation relieves that individual
of
his liabilities to the other partners.
F 6) A partner's unrestricted interest represents the portion of a partner's interest which should
remain available to absorb possible future losses.
T 7) In partnership liquidation, one partner may haye make up for the deficit in another partner's
account.
F 8) When a partnership goes out of business, all the remaining non-cash assets will be
declared
as a total loss. This loss on liquidation shall be divided among the partners in their profit and
loss ratio.
T 9) Liquidation of a partnership is the winding up of its business activities characterized by sale
of all non-cash assets, settlement of all liabilities and distribution of the remaining cash to
the partners.
T 10) Partnership creditors shall have priority in payments than those of the partners' separate
creditors as regards the separate properties of the partners.

Activity 3: Check for Understanding (5 mins)

Direction: Discuss the role of an accountant in the accounting process of partnership liquidation.

In a partnership liquidation, the accountant's main duty is to run the business in a way that will
guarantee payment to the creditors who aren't partners. When a partnership is liquidated, the
accountants are not held responsible if the creditors are not paid.