1.

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

a. Obtaining court approval
b. Selling the partnership’s non-cash assets
c. Paying the partnership liabilities
d. Distributing the remaining cash to partners

2. 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

3. 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

4. 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

5. A partner’s interest includes

a. Capital balance
b. Partner’s loan to the partnership
c. Neither a nor b
d. a and b

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

a. The result of a sale of non-cash assets 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

7. 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

8. 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

9. In the final liquidation transaction, the remaining cash is distributed to the partners. The partners share in the cash
according to their
a. Profit and loss ratio
b. Withdrawals
c. Capital balances
d. Cash balance

10. 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
11. In a partnership liquidation, a loss from sale of non-cash assets is allocated to the
a. Partner with the lowest capital balance
b. Partnership liabilities
c. Partners based on their capital balances
d. Partners based on the profit and loss sharing ratio

12. In accounting for the liquidation of a partnership, cash payments to partners after all outside creditor’s 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

13. In an installment liquidation, the final cash distribution to the partners should be made in accordance with the
a. Ratio of capital contributions less withdrawals by the partners
b. Ratio of the original capital contributions plus additional investment
c. Balances of the partners’ loan and capital accounts
d. Partners’ profit and loss sharing ratio

14. In a partnership liquidation, a gain on sale of noncash 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
d. Allocated to partnership liabilities

15. On December 31, 2021, the accounting records of CTK Partnership included the following information:
C, Drawing 24,000
K, Drawing 9,000
Loan from T 30,000
C, Capital (50%) 123,000
T, Capital (30%) 100,500
K, Capital (20%) 108,000

The total assets, including cash of 52,500, amounted to 478,500. The partners agreed to liquidate the partnership. K
received a total amount of 83,250 cash. How much did C receive?
a. 59,000 c. 59,625
b. 65,625 d. 83,250

(16 to 17) The following statement of financial position, together with the residual profit sharing ratios, was prepared on
May 1, 2021 when the partners decided to liquidate the business.
Cash 140,000 Accounts payable 60,000
Inventories 145,000 Payable to British 20,000
Loan to American 25,000 American, Capital (20%) 75,000
Plant assets, net 200,000 British, Capital (40%) 200,000
Chinese, Capital (40%) 155,000
Total 510,000 Total 510,000

Answer the following independent questions:

16. If the available cash on May 1, 2021, except for a contingency fund for future liquidation expenses of 5,000, is
distributed immediately, how much will British receive?
a. 80,000 c. 70,000
b. 32,000 d. 72,500

17. Assuming that Chinese accepted an inventory that cost 20,000 and had a realizable value of 12,000 and that all
available cash on May 1, 2021, except for a contingency fund for future liquidation expenses of 3,000, is distributed
immediately, how much cash will British receive?
a. P0 c. 78,500
b. 81,000 d. 77,000
(18 to 19) At the end of its fiscal year, June 30, 2021, GET Partnership had account balances as follows:
Cash 20,000 Accounts payable 35,000
Accounts receivable 30,000 Loan from Early 25,000
Inventories 70,000 Georgie, Capital (20%) 70,000
Plant assets, net 60,000 Early, Capital (30%) 50,000
Loan to Georgie 30,000 Toby, Capital (50%) 30,000
Total 210,000 Total 210,000

Toby also gets a 12,000 annual salary allowance. The partners agreed to liquidate the partnership on July 1, 2021 and
began the liquidation process.

During July, the following events occurred:

1. Receivables of 15,000 were collected
2. All of the inventories were sold for 20,000
3. P20,000 of accounts payable were paid
4. All available cash were distributed on July 31, except for 10,000 expected expenses

During August, the following events occurred:

1. Half of the plant assets were sold at a loss of 5,000
2. Receivables of 10,000 were collected
3. P8,000 liquidation expenses were paid
4. The remaining accounts payable were paid
5. All available cash were distributed on August 31, except for 1,500 expected expenses

18. How much will Early receive for July 31?

a. 10,000 c. 3,000
b. 6,000 d. 9,000

19. How much will Georgie receive on August 31?

a. 12,200 c. 16,200
b. 18,200 d. 4,200

20. Genny, Mae and Joan decided to dissolve their partnership on November 30, 2015. Their profit and loss ratio are as
follows:
Capitals P/L ratio
Genny 400,000 40%
Mae 480,000 30%
Joan 160,000 30%

The net income from January 1, 2015 to November 30, 2015 is 352,000. On November 30, 2015, the cash balance is
320,000 and that of liabilities is 720,000. Genny is to receive 441,600 in the settlement of her interest. The loss on
realization and the amount to be realized from the sale of non-cash assets:
a. 248,000 and 1,496,000 c. 248,000 and 1,544,000
b. 99,200 and 2,040,000 d. 220,800 and 1,544,000

21. Jun, Ben and Dindo are partners sharing profits equally. On January 1, 2015 the capital and drawings of the partners
are:
Capitals Drawings
Jun 60,000 36,000
Ben 48,000 24,000
Dindo 180,000 12,000

Due to the failure of the firm’s debtors to settle their accounts, the partners lose heavily and are therefore compelled to
liquidate. After exhausting all the partnership assets, including those arising from the operating profit of 41,400 in 2015,
there still remain 50,400 liabilities on December 31, 2015, Jun has no personal assets but the others are as well off. (1)
The loss on realization and (2) In the settlement to partners, how much would Dindo receive?
a. 307,800 and 46,800 c. 358,200 and 181,800
b. 307,800 and 79,200 d. 338,400 and 46,800
22. Lorna, Leah and Liza are partners. On January 3, 2015, their capital balances and profit and loss ratio are as follows:
Capital P/L ratio
Lorna 25,000 60%
Leah 50,000 25%
Liza 60,000 15%

Liza withdrew 10,000 during the year. Net loss on December 31, 2015 totaled 20,000. Hence, the partners decided to
liquidate the partnership. It is uncertain how much of the assets will ultimately yield but favorable realization is expected.
It is therefore agreed to distribute cash as it becomes available. There are unpaid liabilities of 5,000 and cash on hand of
700. If Liza received a total of 33,000, the amount that Lorna and Leah would have received at this point (or that time)
would be:
Lorna Leah
a. P0 P0
b. 2,000 21,667
c. P0 21,667
d. P0 45,000

23. A balance sheet for the partnership of Paul, Ceres and Nava who share profits in the ratio of 2:1:1 shows the following
balances just before liquidation:
Cash 12,000
Other assets 59,500
Liabilities 20,000
Paul, Capital 22,000
Ceres, Capital 15,500
Nava, Capital 14,000

On the first month of the liquidation, certain assets are sold for 32,000. Liquidation expenses of 1,000 are paid and
additional liquidation expenses are anticipated. Liabilities are paid amounting to 5,400 and sufficient cash is retained to
insure the payment to creditors before making payments to partners. On the first payments to partners, Paul receives
6,250. Compute (1) The total cash distributed to the partners in the first installment and (2) The amount of cash withheld
for anticipated liquidation expenses and unpaid liabilities.
a. 23,000 and 17,600 c. 23,000 and 14,600
b. 20,000 and 17,600 d. 20,000 and 16,600

24. The accounts of Aries, Leo and Taurus who share profits in a 5:3:2 ratio, are as follows on December 31, 2021:
Aries, Drawing (debit) 10,000
Taurus, Drawing (credit) 4,000
Receivable from Aries (debit) 6,000
Leo, Loan 12,000
Aries, Capital 49,500
Leo, Capital 37,000
Taurus, Capital 32,500

Total assets amount to 176,000 including 53,500 cash. The partnership is liquidated and Taurus ultimately receives 27,500
as his share of cash in final distribution. How much did Aries and Leo received?
a. 11,000 and 35,000 c. 12,000 and 35,500
b. 10,500 and 34,500 d. 11,000 and 35,500

25. Partners DD, EE, FF and GG share profits 50%, 30%, 10% and 10%. Accounts maintained with partners just prior to
liquidation follow:
Advances (debit) Loans (credit) Capitals (credit)
DD 5,000 40,000
EE 10,000 30,000
FF 4,500 15,000
GG 2,500 25,000

At this point 18,000 is available for distribution to the partners. How much cash is to be distributed to GG?
a. 6,625 c. 11,375
b. P0 d. 12,375