Multiple Choice (Theories)

1. The other partners must absorb the deficiency in a partner’s capital account on
liquidation because of:
a. Limited life and Mutual Agency
b. Limited life and co-ownership of property
c. Mutual Agency and Partnership non-taxability
d. Mutual Agency and Unlimited Liability

2. In the final liquidation transaction, the remaining cash is distributed to the partners
according to:
a. Capital balances
b. Cash balances
c. Profit and loss ratio
d. Withdrawals

3. When a partnership is liquidated, all of the following may occur except:

a. A partner erases his deficiency by contributing cash
b. A partner erases his deficiency by contributing non-cash
c. A partner erases his deficiency by declaring bankruptcy
d. The other partners absorb a partner’s deficiency

4. A capital deficiency in a partner’s capital, which is not made good is:

a. A loss to the other partners
b. A gain to the other partners
c. A result of a loss in operations
d. A result of a sale on non-cash assets at a gain

5. Liquidation of a partnership includes all of the following steps, except:

a. Distributing the remaining cash
b. Obtaining court approval
c. Paying the partnership liabilities
d. Selling the assets

6. The order of the partnership liquidation process is:

a. Distribute cash to the partners, pay liabilities and sell assets
b. Pay liabilities, sell assets and distribute cash to the partners
c. Sell assets, distribute the cash to the partners and pay liabilities
d. Sell assets, pay liabilities and distribute cash to the other partners

7. In a partnership liquidation, a gain from the sales of asset is credited to the

a. Partners with the lowest capital balance
b. Partners with the highest capital balance
c. Partners based on withdrawals
 d. Partners based on profit and loss ratio

8. In the final partnership liquidation transaction, the remaining cash is allocated to

a. Partnership based on withdrawals
b. Partners based on withdrawals
c. Partnership based on capital balances
d. Partners based on capital balances

9. The ABC partnership is terminated when the claims of company creditors exceed the
partnership assets by 50,000. The capital balances of A, B, C are 35,000, 5,000 and
(90,000), respectively. Who among the partners is/are personally and individually liable
for the partnership liabilities:
a. A
b. B
c. A and B
d. A, B and C

10. In the liquidation of the partnership, the gains and losses from assets sold are divided:
a. Equally
b. Based on the capital balances
c. Profit/Loss ratio
d. Withdrawals

Supply the Answer:

1. Seya and Ivana are partners with capital balances of 25,000 and 16,000 respectively, they share
profits and loss ratio of 2:3, respectively. The partners decided to liquidate the partnership. The
firm’s liabilities amount to 36,000 including 4,000 owing to Seya and 3,000 owing to Ivana.

After realization of assets, the cash on hand amounted to 36,000.

______________1. How much is the loss on realization?

______________2. How much should Ivana receive in final settlement of their respective
interest?
______________3. How much should Seya receive in final settlement of their respective
interest?

2. Aries, Joselito and Aljon are partners with a profit and loss ratio of 5:4:1, respectively. The
partnership is to be liquidated. Prior to the liquidation, the statement of Financial Position
shows the following balances:
 Cash P20,000 Liabilities P20,000
Other Assets 180,000 Aries, Capital 80,000
Joselito, Capital 60,000
Aljon, Capital 40,000

After realization, Joselito received P30,000 as settlement of his interest.

______________1. How much was the loss on the sale of assets?

______________2. How much did Aljon receive in Final settlement of his interest?
______________3. What amount of total cash is distributed to the partners?

3. The condensed Statement of Financial Position of Kenneth, Dianne and Cyrus just before
liquidation shows the following:

Cash P5,000
Non-Cash Assets 60,000
Accounts Payable 10,000
Cyrus, Loan 10,000
Kenneth, Capital 15,500
Dianne, Capital 22,000
Cyrus, Capital 7,500

Kenneth, Dianne and Cyrus share profit and loss ratio of 3:2:5, respectively. The Non-Cash assets
were sold for 40,000.

______________1. How much cash is available for distribution to partners in settlement of their
capital balances?
______________2. How much cash is received by Cyrus in full settlement of his total interests in
the partnership, including loans?

4. Partners Anna, Jellie and Pauline who shares profit and loss ratio of 2:2:1, respectively decided
to liquidate. The condensed Statement of Financial Position just prior the liquidation shows the
following:
Cash P100,000
Non-cash Assets 400,000
Liabilities 140,000
Anna, Loan 10,000
Anna, Capital 45,000
Jellie, Capital 105,000
Pauline, Capital 200,000

After paying the liabilities to creditors, cash of 207,500 is available for distributions to the
partners. Any capital deficiency is made good by the deficient partners, since all three is solvent.

______________1. How much was the loss on the realization?

______________2. How much would Jellie receive in the final settlement of her interest?
______________3. How much would Pauline receive in the final settlement of her interest?
 5. Mary, Ann, Christine and Paula are partners sharing profits in the ratio of 3/21, 4/21, 6/21 and
8/21 respectively. The partners decided to liquidate. They converted the non-cash assets into
233,000 cash. After paying the liabilities amounting to 30,000. They have 222,000 to divide.
Assume that a debit balance in any partner’s capital accounts is uncollectible. Their capital
balances are:

Mary – 10,000 Christine – 250,000

Ann – 250,000 Paula – 90,000

_____________1. How much was the amount of cash before the conversion of non-cash assets?
_____________2. How much was the book value of non-cash assets?
_____________3. How much was received by Ann in the final settlement of her interest?

Multiple Choice. (Problems)

1. Shella, Priscille and Andrea are partners sharing profits and losses in the ratio of 1:1:2,
respectively. They decided to liquidate the business, the assets were sold and the liabilities of
20,000 were paid. At this point, the capital balances of the partners are as follows:

Shella – P20,000 (credit)

Priscille – 15,000 (debit)
Mark – 30,000 (credit)

Priscille is personally insolvent. The cash available for distribution to partners is:

a. 15,000
b. 35,000
c. 55,000
d. 65,000

2. Shella and Andrea would receive cash of:

a. 21,667 and 43,333 respectively
b. 20,000 and 30,000 respectively
c. 15,000 and 20,000 respectively
d. 11,667 and 23,333 respectively
 3. Ariel and Larry are partners sharing profits ad losses in the ratio of 7:3, respectively. On October
1, 2012, they decided to liquidate the business when the account balances are as follows:

Debit Credit

Cash 50,000

Non-cash Assets 150,000

Liabilities 50,000
Ariel, Capital 90,000
Larry, Capital 60,000

During the same month, non-cash assets were sold for 100,000. After paying liabilities, Connie
and Miriam, in final settlement of their interest would receive cash of:

a. 105,000 and 45,000 respectively

b. 90,000 and 60,000 respectively
c. 55,000 and 45,000 respectively
d. 70,000 and 30,000 respectively

4. D, T and M partnership became insolvent on December 31, 2012 and is to be liquidated. D T and
M have the following capital balances respectively, 65,000, (30,000) and (4,000). After paying
their personal liabilities, D had still 10,000 while T had 15,000 personal assets while M is insolvent.
The partnerships share profits and losses equally.

How much is the maximun amount that D can expect to receive from the partnership?
a. 31,000
b. 35,000
c. 46,000
d. 61,000

5. Partners Faith, Eunice and Angela decided to liquidate their partnership. Non-cash assets were
sold for 128,000 and all the creditors were paid. Profit and loss sharing ratios were: 20:30:50
respectively, balances in each capital account before and after the sale are as follows:

Faith Eunice Angela

Before the Sale 48,000 12,000 62,000
After the Sale 32,800 10,800 24,000

How much is the book value of the assets sold?

a. 60,400
b. 182,400
c. 195,600
d. 204,000
 6. Partners Camille and Bea who have been dividing profits and losses in the ratio of 3:2,
respectively. Decided to liquidate their partnership. Capital balances before liquidation were:
Camille, 40,000 and Bea, 30,000. After paying in full liabilities of 30,000, they have 49,000 cash to
divide. Loss on the realization was:

a. 9,000
b. 21,000
c. 51,000
d. 89,000

7. In full settlement of their equities, Camille and Bea must receive cash of
a. 9,400 and 9,600 respectively
b. 29,400 and 19,600 respectively
c. 27,400 and 21,600 respectively
d. 28,000 and 21,000 respectively

8. In Liquidation, balances prior to the distribution of cash to the partners are: Cash – 240,000; Zyra,
capital – 112,000, Toni, Capital – 104,000 and Rose capital, 24,000. The income ratio is 6:2:2
respectively.

How much cash should be distributed to Zyra?

a. 112,000
b. 100,000
c. 109,000
d. 120,000

9. Assume that there is only 204,000 cash and Rose has a capital deficiency of (12,000). How much
cash should be distributed to Toni?

a. 98,000
b. 101,000
c. 95,000
d. 104,000

10. Kris, Charry and Ganda decided to dissolve their partnership on August 31,2012. They have been
dividing profits and losses in the ratio of 4:3:3, respectively and their capital balances as of January
1, 2012 were as follows:

Kris – 75,000
Charry – 90,000
Ganda – 30,000

The operations of the partnership for the period January 1, 2012 to August 31, 2012 resulted to
net income of 66,000, As of August 31, 2012, cash balance is 60,000 and the liabilities are 135,000.
The total partnerships assets as of August 31, 2012:
a. 396,000
b. 336,000
c. 330,000
d. 261,000