IRS CPA REVIEW

Iloilo City and Leganes, Iloilo

REGULATORY FRAMEWORK FOR BUSINESS TRANSACTIONS

LAW ON PARTNERSHIP

DISSOLUTION AND WINDING-UP

1. Statement 1: The dissolution of the partnership is the change in the

relation of the partners caused by any partner ceasing to be associated in
carrying on the business.
Statement 2: In cases when the creditors of the dissolved partnership are
also creditors of the partnership continuing the business, the liability of a
third person becoming a partner in said partnership to the creditors of the
dissolved partnership shall be satisfied out of the partnership property
only.

a. Only statement 1 is correct.

b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are wrong.

2. Statement 1: In cases when the dissolved partnership is continued, the

use by the partnership continuing the business of the partnership name,
or the name of the deceased partner as part thereof, shall not of itself
make the individual property of the deceased partner liable for any debts
contracted by such partnership.
Statement 2: If it becomes apparent that the business of the partnership
has become unprofitable and can only be carried on at a loss, the
partnership may be dissolved.

a. Only statement 1 is correct.

b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are wrong.

3. Statement 1: The partnership is dissolved when a specific thing which a

partner had promised to contribute to the partnership is lost before its
delivery to the partnership.
Statement 2: The creditors of each partner shall be preferred to those of
the partnership as regards the partnership property.

a. Only statement 1 is correct.

b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are wrong.

4. Statement 1: A partnership may be dissolved at any time by any of the

partners.
Statement 2: An industrial partner is not entitled to any share in firm
capital on dissolution, but limited to his share in profit as compensation for
his services.

a. Only statement 1 is correct.

b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are wrong.

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5. Statement 1: A general partnership is automatically dissolved by the
death, insolvency, insanity or civil interdiction of a partner.
Statement 2: The dissolution of the partnership does not of itself
discharge the existing liability of any partner.

a. Only statement 1 is correct.

b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are wrong.

6. Statement 1: When an unlawful partnership is dissolved by a judicial

decree, the capital contributions of the partnership shall be confiscated in
favor of the state.
Statement 2: When an unlawful partnership is dissolved by a judicial
decree, the profits shall be confiscated in favor of the state.

a. Only statement 1 is correct.

b. Only statement 2 is correct.
c. Both statements are correct.
d. Both statements are wrong.

7. Dissolution is caused when a specific thing, which a partner had promised

to contribute to the partnership:

a. Perishes before delivery

b. Perishes after delivery
c. Either a or b
d. None of the above

8. Which of the following statements is/are correct?

1st - The dissolution of the partnership does not of itself discharge the
existing liability of any partner.

2nd- The individual property of a deceased partner shall be liable for all
obligations of the partnership incurred while he was a partner.

a. Only the first is correct.

b. Only the second is correct.
c. The first and second are correct
d. The first and second are wrong

9. If a partner is insolvent, the first order of preference in the distribution of

his assets is:

a. Partner’s contribution to the partnership

b. Partnership creditor
c. Separate creditor of the partner
d. Pro-rata between the separate creditors and partnership creditors

10. One who takes charge of the winding up of partnership affairs upon
dissolution:

a. Silent partner
b. Liquidating partner
c. Ostensible partner
d. None of the above

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11. A partnership is dissolved:

a. In contravention of the partnership agreement by the express will

of any partner at any time.
b. When a specific thing which a partner had promised to contribute
to the partnership perishes before its delivery to the partnership.
c. By the loss of the thing, whether before or after its delivery to the
partnership, when the partner who contributed it having reserved
the ownership thereof, has only transferred to the partnership the
use or enjoyment of the same.
d. All of the above

12. A partnership is automatically dissolved, except:

a. By the death of any partner

b. By the insolvency of any partner or of the partnership
c. By the insanity of any partner
d. All of the above

13. On application by or for partner the court shall decree a dissolution

whenever:

a. A partner becomes in any other way incapable of performing his

part of the partnership contract.
b. A partner has been guilty of such conduct as it tends to affect
prejudicially the carrying on of the business.
c. A partner willfully or persistently commits a breach of the
partnership agreement that it is not reasonably practicable to carry
on the business in partnership with him.
d. All of the above

14. X, Y and Z are in partnership business. X contributed P10,000, Y,

contributed P5,000 and Z his services only. After payment of partnership
debts, what remains of the partnership assets is P6,000 only. In the
absence of terms to the contrary, the share of Z will be equal to:

a. That of Y
b. P2,000
c. That of X
d. Nothing

15. A, B, C and D are partners. Their contributions are as follows: A,

P50,000; B, P30,000; C, P 20,000; D, services. The partnership
incurred obligations to third persons which the firm was unable to pay.
After exhausting the assets of the partnership, there still is unpaid balance
of P10,000. Who are liable for the payment of the unpaid balance of
P10,000? How much each?

a. A, P5,000; B, P3,000; C, P2,000; D, nothing

b. A, P2,500; B, P2,500; C, P2,500; D, P2,500
c. A, P4,000; B, P3,000; C, P2,000; D, P1,000
d. A, P4,000; B, P4,000; C, P2,000; D, nothing

16. A partnership is dissolved without violation of the partnership agreement:

a. By the termination of its definite term or particular undertaking.

b. By the express will of any partner, who must act in good faith,
when no definite term or particular undertaking is specified.
c. By the express will of all the partners who have not assigned their
interests, either before or after the termination of any specified
term or particular undertaking.
d. All of the above

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17. B-1, B-2 and B-3 are equal partners in 3-Brothers Partnership. The
partnership is indebted to PC for P150,000. Partner B-1 is indebted to SC
for P20,000. PC attached and took all the assets of the Partnership
amounting to P90,000. B-2 and B-3 are solvent while B-1 is insolvent and
all what he owns is a land valued at P15,000.

a. SC has priority to the land of B-1 as a separate creditor.

b. PC has priority to the land of B-1 to cover B-1’s share of the
P60,000 remaining liability of the partnership.
c. B-2 and B-3 have priority to the land of B-1 if they paid PC the
P60,000 remaining liability of the partnership
d. PC and SC shall both have priority to the land of B-1 in proportion
to their claims of P60,000 and P20,000, respectively.

18. A partnership is dissolved on the death of a:

a. General partner
b. Industrial partner
c. Limited partner
d. a or b

19. This is the order of preference in the liquidation of a general partnership:

a. Outside creditors; Partners as creditors; Partners’ capital; Partners’

profits.
b. Partners as creditors; Outside creditors; Partners’ capital; Partners’
profits.
c. Partners’ capital; Outside creditors; Partners as creditors; Partners’
profits.
d. Outside creditors; Partners’ capital; Partners’ profits and Partners
as creditors.

20. X, Y, and Z are partners. X contributed his services only; Y, P40,000; and
Z, P20,000. The partnership was liquidated. After payment of the
partnership obligations, only P18,000 worth of assets remained. How
much will be the share of X?

a. Equal to the share of Z

b. P6,000
c. Zero
d. Equal to the share of Y

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