SOLUTION MANUALS ACCOUNTING FOR PARTNERSHIPS: LIQUIDATION

SOLUTION MANUALS ACCOUNTING FOR PARTNERSHIPS: LIQUIDATION SOLUTION MANUALS FOR Partnerships: Liquidation Multiple Choice Questions 1. The capital balances, prior to the liquidation of the XYZ partnership, were as follows: X, Y, and Z share profits and losses in the ratio of 5:3:2. As a result of a loan, the partnership owes Y $80,000. Using the information above, which partner has the highest Loss Absorption Power (LAP) prior to liquidation? A. X B. Y C. Z D. Both X and Y 2. The balance sheet given below is presented for the partnership of Janet, Anton, and Millet: The partners share profits and losses in the ratio of 5:3:2, respectively. The partners agreed to dissolve the partnership after selling the other assets for $50,000. On dissolution of the partnership, Janet should receive: A. $0. B. $80,000. C. $10,000. D. $30,000. 16-2 3. On December 1, 2009, the partners of Tim, Williams, and Levin, who share profits and losses in the ratio of 4:4:2, decided to liquidate their partnership. On this date the partnership condensed balance sheet was as follows: On December 11, 2009, the first cash sale of other assets with a carrying amount of $200,000 realized $140,000. Safe installment payments to the partners were made on the same date. How much cash should be distributed to each partner? A. Option A B. Option B C. Option C D. Option D Tom, Dick, and Harry are partners in an equipment leasing business that has not been able to generate the type of revenue expected by the partners. They share profits and losses in a ratio of 5:3:2. They have decided to liquidate the business and have sold all the assets except for one piece of heavy machinery. All partnership liabilities have been settled and all the partners are personally insolvent. The machinery has a book value of $85,000, and the partners have capital account balances as follows: Each of the following are independent cases. 16-3 4. Refer to the information given above. What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for 65,000 dollars? A. Option A B. Option B C. Option C D. Option D 5. Refer to the information given above. What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for 33,000 dollars? A. Option A B. Option B C. Option C D. Option D 6. Refer to the information given above. What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for 21,100 dollars? A. Option A B. Option B C. Option C D. Option D 16-4 Partners Dennis and Lilly have decided to liquidate their business. The following information is available: Dennis and Lilly share profits and losses in a 3:2 ratio. During the first month of liquidation, half the inventory is sold for $60,000, and $60,000 of the accounts payable is paid. During the second month, the rest of the inventory is sold for $45,000, and the remaining accounts payable are paid. Cash is distributed at the end of each month, and the liquidation is completed at the end of the second month. 7. Refer to the information provided above. Using a safe payments schedule, how much cash will be distributed to Dennis at the end of the first month? A. $64,000 B. $60,000 C. $24,000 D. $36,000 8. Refer to the information provided above. Using a safe payments schedule, how much cash will be distributed to Lilly at the end of the first month? A. $24,000 B. $40,000 C. $16,000 D. $64,000 9. Refer to the information provided above. Using a safe payments schedule, how much cash will be distributed to Dennis at the end of the second month? A. $18,000 B. $27,000 C. $36,000 D. $60,000 16-5 10. Refer to the information provided above. Using a safe payments schedule, how much cash will be distributed to Lilly at the end of the second month? A. $27,000 B. $36,000 C. $18,000 D. $0 11. Refer to the information provided. Assume instead that the remaining inventory was sold for $10,000 in the second month. What payments will be made to Dennis and Lilly at the end of the second month? A. Option A B. Option B C. Option C D. Option D 12. In the computation of a partner's Loss Absorption Power (LAP), the individual partner's capital balance and profit-and-loss percentage are used in which of the following ways? A. Option A B. Option B C. Option C D. Option D 16-6 13. During the liquidation of the FGH partnership, a cash distribution was made to all the partners, who share profits and losses 60 percent, 20 percent, and 20 percent, respectively. Assuming that the cash distribution referred to was made properly, how much would G receive if an additional $60,000 was distributed? A. $60,000 B. $20,000 C. $17,000 D. $12,000 14. Which of the following items are important in the determination of safe installment payments to partners? I. Deficits created in capital accounts are distributed to the remaining partners. II. All unsold noncash assets are assumed to be worthless. A. I only B. II only C. Both I and II D. Neither I nor II 15. In the computation of a partner's Loss Absorption Power (LAP), which of the following statements is incorrect? I. The computation of LAPs for all partners allows cash to be distributed before all partnership assets have been sold and all creditors have been paid. II. The computation of LAPs for all partners indicates the relative strength of each partner's net capital position so that available cash is distributed in respective loss-sharing ratios. A. I B. II C. Both I and II D. Neither I nor I