Exam 15: Partnerships: Termination and Liquidation

For a partnership, how should liquidation gains and losses be accounted for?

When a partnership is insolvent and a partner has a deficit capital balance, that partner is legally required to:

What is a safe cash payment?

Matching -Safe capital balances At the start of a liquidation, this document provides guidance for all payments made to the partners throughout the liquidation.

As of January 1, 2013, the partnership of Canton, Yulls, and Garr had the following account balances and percentages for the sharing of profits and losses: The partnership incurred losses in recent years and decided to liquidate. The liquidation expenses were expected to be $10,000. What would be the maximum amount Garr might have to contribute to the partnership to eliminate a deficit balance in his account?

Which of the following could result in the termination and liquidation of a partnership? 1) Partners are incompatible and choose to cease operations. 2) There are excessive losses that are expected to continue. 3) Retirement of a partner.

As of January 1, 2013, the partnership of Canton, Yulls, and Garr had the following account balances and percentages for the sharing of profits and losses: The partnership incurred losses in recent years and decided to liquidate. The liquidation expenses were expected to be $10,000. How much of the existing cash balance could be distributed safely to partners at this time?

What accounting transactions are not recorded by an accountant during partnership liquidation?

A local partnership was considering the possibility of liquidation since one of the partners (Ding) was personally insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively. Creditors of partner Ding filed a $25,000 claim against the partnership's assets. At that time, the partnership held noncash assets reported at $360,000 and liabilities of $120,000. There was no cash on hand at the time. If the assets could be sold for $228,000, what is the minimum amount that Ding's creditors would have received?

White, Sands, and Luke has the following capital balances and profit and loss ratios: $60,000 (30%); $100,000 (20%); and $200,000 (50%). The partnership has received a predistribution plan. How would $200,000 be distributed?

The Keaton, Lewis, and Meador partnership had the following balance sheet just before entering liquidation: Keaton, Lewis, and Meador share profits and losses in a ratio of 2:4:4. Noncash assets were sold for $60,000. How much will each partner receive in the liquidation?

The balance sheet of Rogers, Dennis & Berry LLP prior to liquidation included the following: The three partners shared net income and losses in a 5:3:2 ratio, respectively. Noncash assets were sold for $60,000. Creditors were paid in full, partners were paid $35,000, and the balance of cash was retained pending future developments. Determine the cash to be retained and prepare a schedule to distribute $35,000 cash to the partners.

A local partnership has assets of cash of $130,000 and land recorded at $700,000. All liabilities have been paid and the partners are all personally insolvent. The partners' capital accounts are as follows Roberts, $500,000, Ferry, $300,000 and Mones, $30,000. The partners share profits and losses 5:3:2. If the land is sold for $450,000, how much cash will Mones receive in the final settlement?

Matching -Predistribution plan One or more partners may have a negative capital balance often as a result of losses incurred in disposing of assets.

Hardin, Sutton, and Williams have operated a local business as a partnership for several years. All profits and losses have been allocated in a 3:2:1 ratio, respectively. Recently, Williams has undergone personal financial problems, and is insolvent. To satisfy Williams' creditors, the partnership has decided to liquidate. The following balance sheet has been produced: During the liquidation process, the following transactions take place: - Noncash assets are sold for $116,000. - Liquidation expenses of $12,000 are paid. No further expenses are expected. - Safe capital distributions are made to the partners. - Payment is made of all business liabilities. - Any deficit capital balances are deemed to be uncollectible. Compute safe cash payments after the noncash assets have been sold and the liquidation expenses have been paid.

Which one of the following statements is correct?

As of January 1, 2013, the partnership of Canton, Yulls, and Garr had the following account balances and percentages for the sharing of profits and losses: The partnership incurred losses in recent years and decided to liquidate. The liquidation expenses were expected to be $10,000. How much cash should each partner receive at this time, pursuant to a proposed schedule of liquidation?

The Henry, Isaac, and Jacobs partnership was about to enter liquidation with the following account balances: Estimated expenses of liquidation were $5,000. Henry, Isaac, and Jacobs shared profits and losses in a ratio of 2:4:4. What amount of cash was available for safe payments, based on the above information?

What financial schedule would be prepared for a partnership that has begun liquidation but has not yet completed the process? What is the purpose of this schedule?

Which of the following statements is false concerning the partnership Schedule of Liquidation?