LIQUIDATION S2. The outside creditors have priority of claims over the assets of the partnership.

TRUE

EXAM 14. S1. If loss on distribution resulted to capital deficiency, the partner is obligated to invest an amount equal
to his capital deficiency. TRUE
S2. In the case of a general partner's capital deficiency, he is liable to make additional investment in the
1. In the final partnership liquidation transaction, remaining cash is distributed to A PARTNERS BASED partnership to eliminate his capital deficiency. TRUE
ON CAPITAL BALANCES.
15. In the final liquidation transaction, the remaining cash is distributed to the partners: The partners' share
2. A partnership dissolution differs from a liquidation in that A PARTNER WITHDRAWS FROM THE in the cash distribution is according to their CAPITAL BALANCES.
BUSINESS AND THE ENTERPRISE CONTINUES TO FUNCTION
16. S1. The safe payments schedule indicates how the available cash should be distributed to the creditors.
3. The process of liquidation of a partnership includes all the following steps, except FALSE
 Distributing the remaining cash. S2. In the lump-sum liquidation, the distribution of cash to partners is made only after all the non-cash
 OBTAINING COURT APPROVAL. assets have been realized, the total amount of gain or loss on realization has been determined and
 Paying the partnership liabilities. distributed and all liabilities have been paid. TRUE
 Selling the assets.
17. In the cash priority program, the partner who receives the first cash distribution is the one who has the
4. A deficiency in the capital of an insolvent partner is A LOSS TO THE PARTNERS. highest LOSS ABSORPTION POTENTIAL

5. S1. There is a gain on realization when all assets of the partnership are sold for more than its carrying 18. Assuming that a partnership has no loans from partners, how is a partner's loss absorption potential
value. TRUE computed? DIVIDE HIS PRE-LIQUIDATION CAPITAL BALANCE BY HIS PROFIT AND LOSS
S2. The partners' claims over the asset of the partnership are limited only to their respective capital RATIO
balances. TRUE
19. S1. Under the installment basis of partnership liquidation, the cash payment to the partner is possible
6. S1. Liquidation is synonymous with "winding up of business activities." TRUE only after all noncash assets are realized into cash. FALSE
S2. The principle of equitable distribution of assets demands proper allocation of liquidation expenses S2. Any gain or loss from liquidation is distributed to the partners' accounts based on their capital
among the partners before actual cash payments are made to individual partners. TRUE balances. FALSE

7. The process of terminating the business, selling the assets, paying the liabilities and disbursing the 20. Which of the following procedures in acceptable when accounting a deficit balance in a partner's capital
remaining cash to the partners is called LIQUIDATION account during for partnership liquidation? IF A PARTNER WITH NEGATIVE CAPITAL BALANCE
IS PERSONALLY INSOLVENT, THE NEGATIVE CAPITAL BALANCE MAY BE ABSORBED BY
8. If all partners are included in the first installment of an installment liquidation, then in future installments THOSE PARTNERS HAVING A POSITIVE CAPITAL BALANCE ACCORDING TO THE
CASH WILL BE DISTRIBUTED ACCORDING TO THE RESIDUAL PROFIT AND LOSS RESIDUAL PROFIT AND LOSS SHARING RATIOS THAT APPLY TO THOSE PARTNERS
SHARING RATIO HAVING POSITIVE BALANCES.

9. Which of the following transactions would not take place in a partnership liquidation? A PARTNER 21. The selling of noncash assets for cash in partnership liquidation, any difference between book value and
SETTLES HIS DEFICIENCY BY DECLARING BANKRUPTCY the cash proceeds is called GAIN OR LOSS REALIZATION

10. S1. In the statement of liquidation, the partner's interest includes his loan receivable and/or loan payable 22. The ABC Partnership is terminated when the claims of company creditors exceed partnership assets by
to the partnership. TRUE P50,000. The capital balances of A. B. and C are P35,000, P5,000 and P(90,000), respectively. Who
S2. The cash priority program will allow premature cash distribution without the risk of overpayment to among the partners is/are personally and individually liable for all partnership liabilities? A, B AND C
the partner. TRUE
23. S1. In liquidation, the partnership continues to operate as a going concern. FALSE
11. S1.A partnership is always liquidated when its term is terminated. FALSE S2. The final payments to the partners are based on the debit balance of their respective capital balances.
S2. The assets of the partnership are applied first to the partners' personal creditors. FALSE FALSE

12. In the preparation of schedule of safe payments to partners, cash withheld for possible liquidation 24. S1. Personal creditors of the partner have the priority over the assets of the partner. TRUE
expenses and unrecognized liabilities is treated as POSSIBLE LOSS S2. The general partner is liable for the liabilities of the partnership up to the extent of his personal
assets. TRUE
13. S1. Liquidation is always preceded by dissolution, but dissolution is not always followed by liquidation.
TRUE
25. In the liquidation of a partnership in installments, the profit and loss ratio is used for cash payments to
partners ONCE THE PARTNER’S CAPITAL ACCOUNT BALANCES HAVE BEEN REDUCED TO
THE PROFIT AND LOSS RATIO

26. S1. In the liquidation process, the noncash assets are sold only to outside parties but never to any of the
partners. FALSE
S2. Any capital deficiency of a limited or insolvent partner is to be absorbed by the other partners in
accordance with their capital balances. FALSE
31. The carrying amount of the assets sold P204,000
27. D, T and M Partnership became insolvent on December 31, 2018 and to be liquidated. D, T and M have
the following capital balances respectively, P65,000, (P30,000), (P4,000). After paying their personal
liabilities, D had P10,000 while T had P15,000 of their personal assets. However, M had still unpaid
personal liabilities amounting to P40,000 and his personal assets amounted only P30,000. The partners
share profits and losses equally. How much is the maximum amount that D can expect receive from the
partnership? P46,000

32. TOTAL AMOUNT OF CASH TO BE RECEIVED BY PARTNER V P110,100

29. Which of the following statements is incorrect? TOTAL AMOUNT REALIZED FROM THE NON-
33. Cash Distribution P55,000 AND 45,000 RESPECTIVELY
CASH P598, 750

30. Ryan and Mark would receive cash of P15,000 AND P 20,000 RESPECTIVELY
34. TOTAL AMOUNT OF CASH TO BE RECEIVED BY IVES IN THE FIRST DISTRIBUTION:  The total partnership assets as of August 31, 2018 are P396,000
P147,000  For Lorna to receive P60,000 in final settlement of her equity, the non-cash asset must be sold for
P232,500

38. If RS received P10,000 from the first distribution of cash, how much did RX receive at that time?
P2,400

39. Partners Annie and Jovy who have been dividing profits and losses in the ratio of 3:2, respectively,
decided to liquidate their partnership. Capital balances before liquidation were: Annie, P40,000; and
35. AMOUNT OF CASH AVAILABLE TO PARTNERS P8,000,000
Jovy, P30,000. After paying in full liabilities of P30,000, they have P49,000 cash to divide.
 Loss on realization was P21,000
 In full settlement of their equities Annie and Jovy must receive cash of P27,000 AND P21,600
RESPECTIVELY

40. In a partnership liquidation, balances prior to the distribution of cash to the partners are: Cash P240,000,
Mikee, Capital, P112,000; Teeny, Capital. P104,000; and Jenny, Capital P24,000. The income ratio is
6:2:2, respectively.
How much should be distributed to Mikee? P112,000
Assume that there is only P204,000 in cash and Jenny has a capital deficiency of P12,000. How much
should be distributed to Teeny? P101,000

36. CPP MAAS IN THE AMOUNT OF P55,000

37. Matching