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Exam 17: Partnership Liquidation

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Question 21

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Use the following information to answer the question(s) below. Lola, Melvin, and Nettie are in the process of liquidating their partnership. Since it may take several months to convert the other assets into cash, the partners agree to distribute all available cash immediately, except for $12,000 that is set aside for contingent expenses. The balance sheet and residual profit and loss sharing percentages are as follows: -What is the proper disposition of a partnership loan that was made from a partner who has a debit balance in the capital account?

A) The loan is ignored in liquidation.
B) The loan is offset against the debit balance in the capital account.
C) The loan is charged off to the capital accounts of all the partners in their profit and loss sharing ratios.
D) The loan is held for payment after all other capital accounts are covered.

E) C) and D)
F) All of the above

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Question 22

Multiple Choice

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Use the following information to answer the question(s) below. Lola, Melvin, and Nettie are in the process of liquidating their partnership. Since it may take several months to convert the other assets into cash, the partners agree to distribute all available cash immediately, except for $12,000 that is set aside for contingent expenses. The balance sheet and residual profit and loss sharing percentages are as follows: -In a schedule of assumed loss absorptions

A) the partner with lowest loss absorption is eliminated last.
B) it is necessary to have a cash distribution plan first.
C) the least vulnerable partner is eliminated first.
D) the most vulnerable partner is eliminated first.

E) A) and B)
F) None of the above

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Question 23

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Gains and losses incurred at liquidation are distributed to the partners using the residual profit and loss sharing ratios because

The partners of Nelatyna Manufacturing have decided to dissolve their partnership as of the end of 2013. The partnership is going to liquidate during the first several months of 2014. The four partners of Nell, Ann, Tyler and Nadine, share profits and losses 35%, 30%, 25%, and 10%, respectively. The partnership trial balance at December 31, 2013 is as follows: Required: Prepare a cash distribution plan for January 1, 2014, showing how cash installments will be distributed among the partners as it becomes available. Prepare vulnerability rankings for the partners and a schedule of assumed loss absorption.

Alf, Bill, Cam, and Dot are partners who share profits and losses 30%, 20%, 35%, and 15%, respectively. The partnership will be liquidated gradually over several months beginning January 1, 2014. The partnership trial balance at December 31, 2013 is as follows: Required: Prepare a cash distribution plan for January 1, 2014, showing how cash installments will be distributed among the partners as it becomes available. Prepare vulnerability rankings for the partners and a schedule of assumed loss absorption.

The Catt, Dogg, and Eustus partnership was dissolved by the partners in early 2014. On March 1, the partners prepared the following financial statement before commencement of final liquidation: Liquidation events in March were as follows: - Receivables recorded at $120,000 were collected at $110,000; - Inventory recorded at cost of $80,000 was sold for $60,000; - Plant assets with a book value of $100,000 were sold for $140,000. Required: Determine how the available cash on March 31, 2014 should be distributed.

Use the following information to answer the question(s) below. On June 30, 2014, the Able, Baker, and Charlie partnership had the following fiscal year-end balance sheet: The percentages shown are the residual profit and loss sharing ratios. The partners dissolved the partnership on July 1, 2014, and began the liquidation process. During July the following events occurred: -The book value of the partnership equity (i.e., total equity of the partners) on June 30, 2014 is

The balance sheet of the Ama, Bade, and Calli partnership on May 1, 2014 (before commencement of partnership liquidation) was as follows: Liquidation events in May were as follows: - The inventory was sold for $12,000 below book value; - Plant assets with a book value of $100,000 were sold for $120,000. Required: Determine how the available cash on May 31, 2014 should be distributed.

Use the following information to answer the question(s) below. On June 30, 2014, the Able, Baker, and Charlie partnership had the following fiscal year-end balance sheet: The percentages shown are the residual profit and loss sharing ratios. The partners dissolved the partnership on July 1, 2014, and began the liquidation process. During July the following events occurred: -The cash available for distribution to the partners on July 31, 2014 is

A cash distribution plan for the Sammi, Tammy, and Udd partnership was as follows:

Use the following information to answer the question(s) below. Lola, Melvin, and Nettie are in the process of liquidating their partnership. Since it may take several months to convert the other assets into cash, the partners agree to distribute all available cash immediately, except for $12,000 that is set aside for contingent expenses. The balance sheet and residual profit and loss sharing percentages are as follows: -The year-end balance sheet and residual profit and loss sharing percentages for the Gary, Harold, and Ivan partnership on December 31, 2014, are as follows: The partners agree to liquidate the business and distribute cash when it becomes available. A cash distribution plan is developed with vulnerability rankings for the Gary, Harold and Ivan partnership. After outside creditors are paid, the cash available will initially go to

The balance sheet of the Maude, Ned, and Oscar partnership on November 1, 2014 (before commencement of partnership liquidation) was as follows: Liquidation events in November were as follows: - All the inventory was sold for $10,000 above book value; - Plant assets with a book value of $60,000 were sold for $34,000. Required: Determine how the available cash on November 30, 2014 should be distributed.

Use the following information to answer the question(s) below. On June 30, 2014, the Able, Baker, and Charlie partnership had the following fiscal year-end balance sheet: The percentages shown are the residual profit and loss sharing ratios. The partners dissolved the partnership on July 1, 2014, and began the liquidation process. During July the following events occurred: -How much cash would Able receive from the cash that is available for distribution on July 31? (Assume a safe payments schedule is used.)

The partnership of May, Novem, and Octo was dissolved. By August 1, 2014, all assets had been converted into cash and all partnership liabilities were paid. The partnership balance sheet on August 1, 2014 (with partner residual profit and loss sharing percentages) was as follows:

Use the following information to answer the question(s) below. Lola, Melvin, and Nettie are in the process of liquidating their partnership. Since it may take several months to convert the other assets into cash, the partners agree to distribute all available cash immediately, except for $12,000 that is set aside for contingent expenses. The balance sheet and residual profit and loss sharing percentages are as follows: -If all partners are included in the first installment of an installment liquidation, then in future installments

The Justin, Kyle, and Lulu partnership was dissolved by the partners on May 1, 2014. Their balance sheet on that date is shown below: In May, other assets with a book value of $46,000 were sold for $50,000 in cash. Required: Determine how the available cash on May 31, 2014 will be distributed.

Use the following information to answer the question(s) below. On June 30, 2014, the Able, Baker, and Charlie partnership had the following fiscal year-end balance sheet: The percentages shown are the residual profit and loss sharing ratios. The partners dissolved the partnership on July 1, 2014, and began the liquidation process. During July the following events occurred: -How much cash would Baker receive from the cash that is available for distribution on July 31? (Assume a safe payments schedule is used.)

The partners of the Minion, Nocti and Overly partnership share profits and losses in the ratio of 6:3:1, respectively. The partners have decided to liquidate and terminate the partnership. Prior to liquidation, the partnership balance sheet was as follows: Required: Prepare a schedule of liquidation, given that the partnership sold the inventory for $40,000 and the fixed assets for $120,000.

The balance sheet of the Addy, Bess, and Clara partnership on January 1, 2014 (the date of partnership dissolution) was as follows: In January, other assets with a book value of $16,000 were sold for $10,000 in cash. Required: Determine how the available cash on January 31, 2014 will be distributed. (Use a safe payments schedule.)

A cash distribution plan for the Jonah, Krispy, and Lemon partnership was as follows: Required: If $700,000 of cash was distributed by the partnership, how much was received respectively by the priority creditors, Jonah, Krispy, and Lemon?