2/21/22, 8:37 PM Assignment Print View

Score: 45/45 Points 100 %

 
 1. Award: 9 out of 9.00 points  

During a liquidation, if a partner’s capital account balance drops below zero, what should happen?

 The deficit balance is removed from the accounting records with only the remaining partners sharing in future gains and losses.

✓  The partner with a deficit contributes enough assets to offset the deficit balance.

 The other partners file a legal suit against the partner with the deficit balance.

 The partner with the highest capital balance contributes sufficient assets to eliminate the deficit.

No further explanation details are available for this problem.

References

Multiple Choice Difficulty: 1 Easy Learning Objective: 15-03 Determine the distribution of available
cash when one or more partners has a deficit capital balance or
becomes personally insolvent.

 
 2. Award: 9 out of 9.00 points  

If a partnership is liquidated, how is the final allocation of business assets made to the partners?

 Equally.

 According to the initial investment made by each of the partners.

✓  According to the final capital account balances.

 According to the profit and loss ratio.

No further explanation details are available for this problem.

References

Multiple Choice Difficulty: 1 Easy Learning Objective: 15-01 Determine amounts to be paid to
partners in a liquidation.

https://ezto.mheducation.com/hm.tpx?todo=C15PrintView&wid=13252718142524321&role=student&sid=13252718952801031 1/3
2/21/22, 8:37 PM Assignment Print View
 
 3. Award: 9 out of 9.00 points  

A partnership is considering possible liquidation because one of the partners (Bell) is personally insolvent. Profits and losses are divided on a 4:3:2:1
basis, respectively. Capital balances at the current time are
 
     
Bell, capital $ 50,000
Hardy, capital   56,000
Dennard, capital   14,000
Suddath, capital   80,000
 
Bell’s creditors have filed a $21,000 claim against the partnership’s assets. The partnership currently holds assets of $300,000 and liabilities of
$100,000. If the assets can be sold for $190,000, what is the minimum amount that Bell’s creditors would receive?

 $6,000

 $2,800

✓  $2,000

 $0

After payment of liabilities, $90,000 ($190,000 − $100,000) would be available from the sale of assets for distribution to individual partners.  The cash
distributions to partners is determined as follows:
 
  Bell Hardy Dennard Suddath
Reported balances $ 50,000  $ 56,000  $ 14,000  $ 80,000  
Loss on sale of assets ($110,000) split on a 4:3:2:1 basis   (44,000)   (33,000)   (22,000)   (11,000)
Adjusted balances $ 6,000  $ 23,000  $ (8,000) $ 69,000  
Potential loss from Dennard deficit (split 4:3:1)   (4,000)   (3,000)   8,000    (1,000)
Minimum cash distributions $ 2,000  $ 20,000  $ 0  $ 68,000  

 
Bell would receive $2,000 from the sale of partnership assets; this amount would be available for payment to Bell’s creditors.

References

Multiple Choice Difficulty: 1 Easy Learning Objective: 15-03 Determine the distribution of available
cash when one or more partners has a deficit capital balance or
becomes personally insolvent.

https://ezto.mheducation.com/hm.tpx?todo=C15PrintView&wid=13252718142524321&role=student&sid=13252718952801031 2/3
2/21/22, 8:37 PM Assignment Print View
 
 4. Award: 9 out of 9.00 points
 

A local partnership is liquidating and is currently reporting the following capital balances:
 
       
Barley, capital (50% share of all profits and losses) $ 44,000  
Carter, capital (30%)   32,000  
Desai, capital (20%)   (24,000)
 
Desai has indicated that a forthcoming contribution will cover the $24,000 deficit. However, the two remaining partners have asked to receive the
$52,000 in cash that is currently available. How much of this money should each of the partners receive?

 Barley, $32,500; Carter, $19,500.

✓  Barley, $29,000; Carter, $23,000.

 Barley, $22,000; Carter, $30,000.

 Barley, $32,000; Carter, $20,000.

Partner with deficit capital balance

 
Barley, Carter, Desai,
 
Capital (50%) Capital (30%) Capital (20%)
Reported balances $ 44,000   $ 32,000   $ (24,000)
Potential loss from Desai deficit (split 5/8:3/8)   (15,000)   (9,000)   24,000  
Cash distributions $ 29,000   $ 23,000   $ 0  

References

Multiple Choice Difficulty: 1 Easy Learning Objective: 15-03 Determine the distribution of available
cash when one or more partners has a deficit capital balance or
becomes personally insolvent.

 
 5. Award: 9 out of 9.00 points  

Which of the following statements is true concerning the accounting for a partnership going through liquidation?

✓  Gains and losses are reported directly as increases and decreases in the appropriate capital account.

 Within a liquidation, all gains and losses are divided equally among the partners.

 A separate income statement is created to measure only the profit or loss generated during liquidation.

 Because gains and losses rarely occur during liquidation, no special accounting treatment is warranted.

No further explanation details are available for this problem.

 
 

References

Multiple Choice Difficulty: 1 Easy Learning Objective: 15-01 Determine amounts to be paid to
partners in a liquidation.

https://ezto.mheducation.com/hm.tpx?todo=C15PrintView&wid=13252718142524321&role=student&sid=13252718952801031 3/3