CH 16

Package Title: Test Bank Questions
Course Title: Advanced Accounting, 6e

Chapter Number: 16
Question Type: Multiple Choice
1) Which of the following statements is correct?
a) Personal creditors have first claim on partnership assets.

b) Partnership creditors have first claim on partnership assets.
c) Partnership creditors have first claim on personal assets.
d) Partnership creditors have first claim on partnership assets; and partnership creditors have first claim on
personal assets.
Answer: b
Question Title: Test Bank (Multiple Choice) Question 01

Difficulty: Easy
Learning Objective: 2 List the order of priority for each class of creditors in partnership liquidation under
the UPA.
Section Reference: 16.2
2) The first step in the liquidation process is to:
a) convert noncash assets into cash.

b) pay partnership creditors
c) compute any net income (loss) up to the date of dissolution.
d) allocate any gains or losses to the partners.
Answer: c

Difficulty: Easy
Learning Objective: 1 Describe the steps used to distribute available partnership assets in liquidation under
the Uniform Partnership Act (UPA).
3) A schedule prepared each time cash is to be distributed is called a(n) :
a) advance cash distribution schedule.

b) marshaling of assets schedule.
c) loss absorption potential schedule.
d) safe payment schedule.
Answer: d

Difficulty: Easy
Learning Objective: 4 Prepare a “safe payment approach” liquidation schedule.
4) An advance cash distribution plan is prepared:
a) each time cash is distributed to partners in an installment liquidation.

b) each time a partnership asset is sold in an installment liquidation.
c) to determine the order and amount of cash each partner will receive as it becomes available for
distribution.
d) none of these.
Answer: c

Difficulty: Medium
Learning Objective: 4 Prepare a “safe payment approach” liquidation schedule., 5 Describe the four steps in
the preparation of an advance plan for the distribution of cash in a partnership liquidation.
5) The first step in preparing an advance cash distribution plan is to:
a) determine the order in which partners are to participate in cash distributions.

b) compute the amount of cash each partner is to receive as it becomes available for distribution.
c) allocate any gains (losses) to the partners in their profit-sharing ratio.
d) determine the net capital interest of each partner.
Answer: d

Difficulty: Medium
6) Offsetting a partner's loan balance against his debit capital balance is referred to as the:
a) marshaling of assets.
b) right of offset.
c) allocation of assets.
d) liquidation of assets.
Answer: b

Difficulty: Easy
7) If a partner with a debit capital balance during liquidation is personally solvent, the:
a) partner must invest additional assets in the partnership.

b) partner's debit balance will be allocated to the other partners.
c) other partners will give the partner enough cash to absorb the debit balance.
d) partnership will loan the partner enough cash to absorb the debit balance.
Answer: a

Difficulty: Easy
the UPA.
Section Reference: 16.2, 16.3
8) Shrek, Donkey, and Fiona are partners in SDF and share profits and losses in the ratio of 5:3:2,
respectively. The partnership has cash of $10,000 and noncash assets of $90,000 when they decide to
liquidate. Liabilities at the time of liquidation are $40,000, including a note payable to Fiona of $5,000. The
partner capital accounts are Shrek $40,000, Donkey $ 15,000 and Fiona $5,000. The non-cash assets of the
partnership were sold for $26,000. The liabilities other than the note payable to Fiona are paid. Fiona is
personally insolvent. Shrek and Donkey are not insolvent. Under the circumstances:
a) Shrek will receive a distribution in liquidation of $8,000.

b) Fiona will be required to contribute $2,800 to the partnership.
c) Shrek will receive a distribution in liquidation of $6,250.
d) Donkey will be required to contribute $4,200 to the partnership.
Answer: c

Difficulty: Hard
the UPA., 3 Prepare a liquidation schedule to settle debts and allocate assets.
9) The partnership of Larry, Moe, and Curly shares profits and losses 60%, 30%, and 10%, respectively. On
January 1, 2017, the partners voted to dissolve the partnership, at which time the assets, liabilities, and
capital balances were as follows:
Assets Liabilities and Capital

Cash $ 400,000 Accounts Payable $ 580,000
Other Assets 1,200,000 Larry, Capital 440,000
Moe, Capital 380,000
Curly, Capital 200,000
Total assets $1,600,000 Total liabilities $1,600,000
All of the partners are personally insolvent.
Assume that all noncash assets are sold for $840,000 and all available cash is distributed in final liquidation
of the partnership. Cash should be distributed to the partners as follows:
a) Larry, $744,000; Moe, $372,000; Curly, $124,000.

b) Larry, $440,000; Moe, $380,000; Curly, $200,000.
c) Larry, $224,000; Moe, $272,000; Curly, $164,000.
d) Larry, $396,000; Moe, $198,000; Curly, $66,000.
Answer: c

Difficulty: Hard
Learning Objective: 3 Prepare a liquidation schedule to settle debts and allocate assets.
10) The partnership of Peter, Paul, and Mary share profits and losses in the ratio of 4:4:2, respectively. The
partners voted to dissolve the partnership when its assets, liabilities, and capital were as follows:
Assets
Cash $ 250,000
Other assets 1,000,000
$1,250,000
Liabilities and Capital

Liabilities $ 200,000
Peter, Capital 300,000
Paul, Capital 350,000
Mary, Capital 400,000
$1,250,000
The partnership will be liquidated over a prolonged period of time. As cash is available, it will be distributed
to the partners. The first sale of noncash assets having a book value of $600,000 realized $475,000. How
much cash should be distributed to each partner after this sale?
a) Peter, $90,000; Paul, $140,000; Mary, $295,000

b) Peter, $210,000; Paul, $290,000; Mary, $145,000
c) Peter, $290,000; Paul, $210,000; Mary, $105,000
d) Peter, $150,000; Paul, $175,000; Mary, $200,000
Answer: a

Difficulty: Hard
11) In a partnership liquidation the final cash distribution to the partners should be made in accordance with
the:
a) partners' profit and loss sharing ratio.

b) balances of the partners' capital accounts.
c) ratio of the capital contributions by the partners.
d) ratio of capital contributions less withdrawals by the partners.
Answer: b

Difficulty: Easy
12) In an advance plan for installment distributions of cash to partners of a liquidating partnership, each
partner's loss absorption potential is computed by:
a) dividing each partner's capital account balance by the percentage of that partner's capital account balance
to total partners' capital.
b) multiplying each partner's capital account balance by the percentage of that partner's capital account
balance to total partners' capital.
c) dividing the total of each partner's capital account less receivables from the partner plus payables to the
partner by the partner's profit and loss percentage.
d) some other method.
Answer: c

Difficulty: Medium
13) Under the Uniform Partnership Act:
a) partnership creditors have first claim (Rank I) against the assets of an insolvent partnership.
b) personal creditors of an individual partner have first claim (Rank I) against the personal assets of all
partners.
c) partners with credit capital balances share (Rank I) the personal assets of an insolvent partner that has a
debit capital balance with personal creditors of that partner.
d) personal creditors of the partners of an insolvent partnership share partnership assets on a pro rata basis
(Rank I) with partnership creditors.
Answer: a

Difficulty: Easy
the UPA.
14) During the liquidation of the partnership of Karr, Rice, and Long. Karr accepts, in partial settlement of
his interest, a machine with a cost to the partnership of $150,000, accumulated depreciation of $70,000, and
a current fair value of $110,000. The partners share net income and loss equally. The net debit to Karr's
account (including any gain or loss on disposal of the machine) is:
a) $90,000.
b) $100,000.
c) $110,000.
d) $150,000.
Answer: b

Difficulty: Medium
15) X, Y, and Z have capital balances of $90,000, $60,000, and $30,000, respectively. Profits are allocated
35% to X, 35% to Y, and 30% to Z. The partners have decided to dissolve and liquidate the partnership.
After paying all creditors, the amount available for distribution is $60,000. X, Y, and Z are all personally
solvent. Under the circumstances, Z will:
a) receive $18,000.
b) receive $30,000.
c) personally have to contribute an additional $6,000.
d) personally have to contribute an additional $36,000.
Answer: c

Difficulty: Hard
16) The ABC partnership has the following capital accounts on its books at December 31, 2017:
Credit
A, Capital $400,000
B, Capital 240,000
C, Capital 80,000
All liabilities have been liquidated and the cash balance is zero. None of the partners have personal assets in
excess of his personal liabilities. The partners share profits and losses in the ratio of 3:2:5. If the noncash
assets are sold for $400,000, the partners should receive as a final payment:
a) A, $304,000; B, $176,000; C, $80,000

b) A, $256,000; B, $144,000; C, $-0-
c) A, $304,000; B, $176,000; C, $-0-
d) A, $120,000; B, $80,000; C, $200,000
Answer: b

Difficulty: Hard
17) The summarized balances of the accounts of MNO partnership on December 31, 2017, are as follows:
Assets Liabilities and Capital

Cash $ 15,000 Liabilities $ 15,000
Noncash 90,000 M, Capital 45,000
N, Capital 30,000
O, Capital 15,000
Total Assets $105,000 Total Equities $105,000
The agreed upon profit/loss ratio is 50:40:10, respectively. Using the information given above, which one of
the following amounts, if any, is the loss absorption potential of partner N as of December 31, 2017?
a) $20,000
b) $35,000
c) $75,000
d) $120,000
Answer: c

Difficulty: Hard
18) Gilligan, Skipper, and Professor are partners with a profit and loss ratio of 4:3:3. The partnership was
liquidated and, prior to the liquidation process, the partnership balance sheet was as follows:
GILLIGAN, SKIPPER, AND PROFESSOR

Balance Sheet
January 1, 2017
Assets Liabilities and Equity

Cash $ 60,000 Gilligan, Capital $216,000
Other assets 540,000 Skipper, Capital 240,000
Professor, Capital 144,000
Total Assets $600,000 Total Liabilities & Equities $600,000
After the partnership was liquidated and the cash was distributed, Skipper received $96,000 in cash in full
settlement of his interest.
The liquidation loss must have been:
a) $360,000
b) $144,000
c) $504,000
d) $480,000
Answer: d

Difficulty: Hard
19) The partnership of Mick, Keith, and Charlie has been dissolved and is in the process of liquidation. On
July 1, 2017, just before the second cash distribution, the assets and equities of the partnership along with
residual profit sharing ratios were as follows:
Assets Liabilities & Equities

Receivables-net 50,000 Mick, Capital 50% 100,000
Inventories 150,000 Keith, Capital 30% 175,000
Equipment-net 100,000 Charlie, Capital 20% 75,000
Total assets $ 500,000 Total Lia & Equity 500,000
Assume that the available cash is distributed immediately, except for a $25,000 contingency fund that is
withheld pending complete liquidation of the partnership. How much cash should be paid to each of the
partners?
a) Mick, $87,500; Keith, $52,500; Charlie, $35,000

b) Mick 12,500; Keith , 7,500; Charlie, 10,000
c) Mick - 0 -; Keith, 25,000; Charlie, - 0 -
d) Mick - 0 -; Keith, 15,000; Charlie, 10,000
Answer: c

Difficulty: Hard
20) The partnership of Mick, Keith, and Charlie has been dissolved and is in the process of liquidation. On
July 1, 2017, just before the second cash distribution, the assets and equities of the partnership along with
residual profit sharing ratios were as follows:

Receivables-net 50,000 Mick, Capital 50% 100,000
Inventories 150,000 Keith, Capital 30% 175,000
Equipment-net 100,000 Charlie, Capital 20% 75,000
Total assets $ 500,000 Total Lia & Equity 500,000
Assume that Mick takes equipment with a fair value of $40,000 and a book value of $50,000 in partial
satisfaction of his equity in the partnership. If all the $200,000 cash is then distributed, the partners should
receive:
a) Mick, $100,000; Keith, $60,000; Charlie, $40,000

b) Mick, 25,000; Keith, 15,000; Charlie, 10,000
c) Mick, - 0; Keith, 45,000; Charlie, 5,000
d) - 0; Keith, 50,000; Charlie, - 0
Answer: d

Difficulty: Hard
21) The partnership of Homer, Marge, and Bart share profits and losses in the ratio of 4:4:2, respectively.
The partners voted to dissolve the partnership when its assets, liabilities, and capital were as follows:

Cash $150,000 Liabilities $120,000
Other assets 600,000 Homer, Capital 180,000
Marge, Capital 210,000
Bart, Capital 240,000
Total assets $750,000 Total Lia & Equity $750,000
The partnership will be liquidated over a prolonged period of time. As cash is available, it will be distributed
to the partners. The first sale of noncash assets having a book value of $360,000 realized $285,000. How
much cash should be distributed to each partner after this sale?
a) Homer, $54,000; Marge, $84,000; Bart, $177,000.

b) Homer, $174,000; Marge, $174,000; Bart, $87,000.
c) Homer, $126,000; Marge, $126,000; Bart, $63,000.
d) Homer, $90,000; Marge, $105,000; Bart, $120,000.
Answer: a

Difficulty: Hard
Learning Objective: 3 Prepare a liquidation schedule to settle debts and allocate assets., 4 Prepare a “safe
payment approach” liquidation schedule., 5 Describe the four steps in the preparation of an advance plan for
the distribution of cash in a partnership liquidation.
22) A, B, and C have capital balances of $80,000, $80,000, and $40,000, respectively. Profits are allocated
40% to A, 40% to B and 20% to C. The partners have decided to dissolve and liquidate the partnership.
After paying all creditors the amount available for distribution is $20,000. A, and B are personally solvent.
C is personally insolvent. Under the circumstances, A and B will each:
a) receive $10,000.
b) receive $9,000.
c) receive $8,000.
d) receive $6,000.
Answer: c

Difficulty: Medium
23) The ABC partnership has the following capital accounts on its books at December 31, 2017:
Credit
A, Capital $200,000
B, Capital 120,000
C, Capital 40,000
All liabilities have been liquidated and the cash balance is zero. None of the partners have personal assets in
excess of his personal liabilities. The partners share profits and losses in the ratio of 3:2:5. If the noncash
assets are sold for $150,000, the partners should receive as a final payment:
a) A, $152,000; B, $88,000 C, $40,000

b) A, $128,000; B, $72,000; C, $ - 0 -
c) A, $152,000; B, $88,000; C, $ - 0 -
d) A, $60,000; B, $40,000; C, $100,000
Answer: b

Difficulty: Hard
24) The summarized balances of the accounts of RST partnership on December 31, 2017, are as follows:

Noncash 180,000 R, Capital 90,000
S, Capital 60,000
T, Capital 30,000
Total Assets $210,000 Total Lia & Equities $210,000
The agreed upon profit/loss ratio is 50:40:10, respectively. Using the information given above, which one of
the following amounts, if any, is the loss absorption potential of partner S as of December 31, 2017?
a) $60,000
b) $70,000
c) $150,000
d) $240,000
Answer: c

Difficulty: Hard
25) The partnership of Stan, Kenney, and Cartman has been dissolved and is in the process of liquidation.
On July 1, 2017, just before the second cash distribution, the assets and equities of the partnership along
with residual profit sharing ratios were as follows:

Receivables-net 20,000 Stan, Capital 50% 40,000
Inventories 60,000 Kenney, Capital 30% 70,000
Equipment-net 40,000 Cartman, Capital 20% 30,000
Assume that the available cash is distributed immediately, except for a $10,000 contingency fund that is
withheld pending complete liquidation of the partnership. How much cash should be paid to each of the
partners?
a) Stan, $35,000; Kenney, $21,000; Cartman, $14,000

b) Stan, $5,000; Kenney, $3,000; Cartman, $4,000
c) Stan, $0; Kenney, $10,000; Cartman, $0
d) Stan, $0; Kenney, $6,000; Cartman, $4,000
Answer: c

Difficulty: Hard
Question Type: Essay
26) The Uniform Partnership Act specifies specific steps in distributing available partnership assets in
liquidation. Describe the steps used to distribute partnership assets during the liquidation process.
Answer: The first step in the liquidation process is to compute any net income/loss up to the date of
dissolution. Any net income/loss is allocated to the partners according to their profit and loss agreement. In
the next step, the assets that are not acceptable for distribution in their present form are converted into cash,
and any gains/losses realized are allocated according to the profit and loss ratio. The last step is to distribute
the available cash to creditors and partners.
Question Title: Test Bank (Essay) Question 26

Difficulty: Easy
27) An advance cash distribution plan specifies the order in which each partner will receive cash and the
dollar amount each will receive as it becomes available for distribution. Identify the four steps in the
preparation of an advance cash distribution plan.
Answer: Steps in the preparation of an advance cash distribution plan include:

 Determine the net capital interest of each partner by combining partners’ capital accounts with any
loans to or receivables from the partners.
 Determine the order in which the partners are to participate in cash distributions.
 Compute the amount of cash each partner is to receive as it becomes available for distribution.
 Prepare the cash distribution plan.
Question Title: Test Bank (Essay) Question 27

Difficulty: Medium
28) The NOR Partnership is being liquidated. A balance sheet prepared prior to liquidation is presented
below:

Cash $240,000 Liabilities $ 160,000
Other Assets 300,000 Rice, Loan 60,000
Nutt, Capital 180,000
Ohm, Capital 60,000
Rice, Capital 80,000
Total Assets $540,000 Total Equities $540,000
Nutt, Ohm, and Rice share profits and losses in a 40:40:20 ratio. All partners are personally insolvent.
Required:
A. Prepare the journal entries necessary to record the distribution of the available cash.
B. Prepare the journal entries necessary to record the completion of the liquidation process, assuming the
other assets are sold for $120,000.
Answer:
A. Nutt Ohm Rice_
Net interest $(180,000) $(60,000) $(140,000)
Potential loss–$300,000 120,000 120,000 60,000
(60,000) 60,000 (80,000)
Potential loss–$60,000 40,000 (60,000) 20,000
Cash distribution $(20,000) $ -0- $(60,000)
Liabilities 160,000
Cash 160,000
Rice, Loan 60,000

Cash 80,000
B.
Cash 120,000
Nutt, Capital ($180,000 × .40) 72,000
Ohm, Capital ($180,000 × .40) 72,000
Rice, Capital ($180,000 × .20) 36,000
Other Assets 300,000
Nutt, Capital ($12,000 × [40/60]) 8,000

Rice, Capital ($12,000 × [20/60]) 4,000
Ohm, Capital ($72,000 - $60,000) 12,000

Rice, Capital 40,000
Cash 120,000
Question Title: Test Bank (Problem) Question 16-1

Difficulty: Medium
29) The trial balance for the ABC Partnership is as follows just before liquidation:
OTHER BALL ADLER BALL CARL

CASH ASSETS RECEIVABLE = LIABILITIES CAPITAL CAPITAL CAPITAL
180,000 625,000 90,000 150,000 420,000 270,000 180,000
Partners share profits a 50:30:20 ratio.
Required:
Prepare an advance cash distribution plan showing how available cash would be distributed.
Answer:
__Alder__ __Bell__ __Cone__
Net capital interest $420,000 $180,000 $180,000
Profit-loss ratio / .50 / .30 / .20
Loss absorption potential $840,000 $600,000 $900,000
Order of cash distribution 2 3 1
Loss Absorption Potential

Alder Bell Cone
Profit-Loss Ratio .50 .30 .20
Distribution to Cole 60,000
Balances after distribution 840,000 600,000 840,000
Distribution to Adams & Cole 240,000 240,000
Balances after distribution $600,000 $600,000 $600,000
Asset Distribution
Alder Bell Cone
Profit-Loss Ratio .50 .30 .20
Distribution to Cole 12,000
Balances after distribution 420,000 180,000 168,000
Distribution to Adams & Cole _120,000 _ 48,000
Balances after distribution $300,000 $180,000 $120,000
Remainder of asset distributions .50 .30 .20
Cash Distribution Plan

Alder Bell Cone
Order of Cash Distribution Liabilities .5 .3 .2
1. First $150,000 100%
2. Next $12,000 100%
3. Next $168,000 71% 29%
4. Remainder 50% 30% 20%

Difficulty: Hard
Learning Objective: 4 Prepare a “safe payment approach” liquidation schedule., 5 Describe the four steps in the
preparation of an advance plan for the distribution of cash in a partnership liquidation.
30) Lennon, Newman, and Ott operate the LNO Partnership. The partnership agreement provides that the
partners share profits in the ratio of 40:40:20, respectively. Unable to satisfy the firm's debts, the partners
decide to liquidate. Account balances just prior to the start of the liquidation process are as follows:
Debit Credit
Cash $ 90,000
Other Assets 330,000
Liabilities $165,000
Ott, Loan 36,000
Lennon, Capital 165,000
Newman, Capital 36,000
Ott, Capital 39,000
Ott, Drawing 21,000 _______
Totals $441,000 $441,000
During the first month of liquidation, other assets with a book value of $150,000 are sold for $165,000, and
creditors are paid. In the following month unrecorded liabilities of $12,000 are discovered and assets carried
on the books at a cost of $90,000 are sold for $36,000. During the third month the remaining other assets are
sold for $42,000 and all available cash is distributed.
Required:
Prepare a schedule of partnership realization and liquidation. A safe distribution of cash is to be made at the
end of the second and third months. The partners agreed to hold $30,000 in cash in reserve to provide for
possible liquidation expenses and/or unrecorded liabilities. All of the partners are personally insolvent.
Answer:
CashAssets = Liabilities
Balances 90,000 330,000
= (165,000)
Sale of assets 165,000 (150,000)
255,000 180,000
= (165,000)
Distribute cash to creditors (165,000) 165,000
90,000 180,000
= -0-
Record liabilities (12,000)
90,000 180,000
= (12,000)
Sale of assets 36,000 (90,000)
126,000 90,000 (12,000)
Distribute cash (96,000) 12,000
30,000 90,000 -0-
Sale of assets 42,000 (90,000)
72,000 -0- -0-
Allocate Newman's deficit
72,000 -0- -0-
Distribute cash (72,000)
Balances -0- -0- -0-__
Capital Interest
Lennon Newman = Ohm
Balances (165,000) (36,000)
= (54,000)
Sale of assets (6,000) (6,000) (3,000)
(171,000) (42,000)
= (57,000)
Distribute cash to creditors
(171,000) (42,000)
= (57,000)
Record liabilities 4,800 4,800 2,400
(166,200) (37,200)
= (54,600)
Sale of assets 21,600 21,600 10,800
(144,600) (15,600) (43,800)
Distribute cash 75,000 9,000
(69,600) (15,600) (34,800)
Sale of assets 19,200 19,200 9,600
(50,400) 3,600 (25,200)
Allocate Newman's deficit 2,400 (3,600) 1,200
(48,000) -0- (24,000)
Distribute cash 48,000 24,000
Balances -0- -0- -0-
Lennon Newman Ohm

Capital interest (144,600) (15,600) (43,800)
Potential loss plus
cash reserve (120,000) 48,000 48,000 32,000
(96,600) 32,400 (19,800)
Allocate potential deficit (2/3) 14,400 (21,600)(1/3) 10,800
Cash distribution (75,000) -0- ( 9,000)

Difficulty: Hard
31) Due to the fact that the partnership had been unprofitable for the past several years, A, B, C, and D
decided to liquidate their partnership. The partners share profits and losses in the ratio of 40:30:20:10,
respectively. The following balance sheet was prepared immediately before the liquidation process began:
A B C D Partnership
Balance Sheet
Cash $ 100,000 Liabilities $250,000

Other Assets 350,000 A, Capital 55,000
B, Capital 60,000
C, Capital 50,000
D, Capital 35,000
The personal status of each partner is as follows:

Personal Personal
_Assets_ Liabilities
A $165,000 $ 120,000
B 100,000 140,000
C 180,000 160,000
D 60,000 70,000
The partnership's other assets are sold for $100,000 cash. The partnership operates in a state which has
adopted the Uniform Partnership Act.
Required:
A. Complete the following schedule of partnership realization and liquidation. Assume that a partner makes
additional contributions to the partnership when appropriate based on their individual status.
OTHER CAPITAL
CASH ASSETS LIABILITIES __A__ __B__ __C__ __D__
$100,000 $350,000 $250,000 55,000 60,000 50,000 35,000
B.Complete the following schedule to show the total amount that will be paid to the personal creditors.
From Distribution Total Paid

Personal from to Personal
_Assets_ _Partnership_ _Creditors_
A
B
C
D
Answer:
A.
Other
Cash Assets = Liabilities
Account Balances 100,000 350,000
= (250,000)
Sale of Assets 100,000 (350,000)
200,000 -0- = (250,000)
Allocated Debit
Balance of B* 200,000 -0- = (250,000)
Investment from C 10,000
Investment from A 45,000
255,000 -0- (250,000)
Distribute Cash (255,000) 250,000
-0- -0- -0-
Capital
A B C D
.4 .3 .2 .1
Account Balances (55,000) (60,000) (50,000) (35,000)
Sale of Assets 100,000 75,000 50,000 25,000
45,000 15,000 -0- (10,000)
Allocate Debit
Balance of B* (15,000) 10,000 5,000
45,000 -0- 10,000 (5,000)
Investment from C (10,000)
Investment from A (45,000)
-0- -0- -0- (5,000)
Distribute Cash 5,000
-0- -0- -0- -0-
*Allocate only to C and D, since A is able to contribute only $45,000 from personal assets.
B. From Distribution Total Paid

Personal from to Personal
Assets Partnership Creditors
A 120,000 120,000
B 100,000 100,000
C 160,000 160,000
D 60,000 5,000 65,000

Difficulty: Hard
32) A trial balance for the DEF partnership just prior to liquidation is given below:
Debit Credit
Cash $ 75,000
Noncash Assets 750,000
Nonpartner Liabilities $240,000
Dugan, Loan 75,000
Dugan, Capital 225,000
Elston, Capital 153,000
Flynn, Capital 132,000
Totals $825,000 $825,000
The partners share income and loss on the following basis:

Dugan 50%
Elston 30%
Flynn 20%
Required:
Prepare an advance cash distribution plan for the partners.
Answer:
Dugan Elston Flynn
Capital balances $225,000 $153,000 $132,000
Loan balances 75,000
Net capital interest 300,000 153,000 132,000
Profit and loss ratio / .5 / .3 / .2
Loss Absorption Potential Asset Distribution

Dugan Elston Flynn Dugan Elston Flynn
Profit & loss ratio .5 .3 .2 .5 .3 .2
Loss absorption
potential $600,000 $510,000 $660,000
Net cap. interest $300,000 $153,000 $132,000
Distrib. to Flynn 60,000
(60,000 × .2) 12,000
600,000 510,000 600,000 300,000 153,000 120,000
Distrib. to Dugan
and Flynn 90,000 90,000
(90,000 × .2) 18,000
(90,000 × .5) 45,000
$510,000 $510,000 $510,000 $255,000 $153,000 $102,000
Remainder .5 .3 .2
Order of cash distribution after creditors have been paid:

Dugan Elston Flynn
First $12,000 100%
Next $63,000 5/7 2/7
Remainder 50% 30% 20%
Difficulty: Hard
33) David, Paul, and Burt are partners in a CPA firm sharing profits and losses in a ratio of 2:2:3,
respectively. Immediately prior to liquidation, the following balance sheet was prepared:

Noncash assets 580,000 David, Capital 160,000
_______ Burt, Capital 80,000
Required:
Assuming the noncash assets are sold for $300,000, determine the amount of cash to be distributed to each
partner. Complete the worksheet and clearly indicate the amount of cash to be distributed to each partner in
the spaces provided. No cash is available from any of the three partners.
Noncash David Paul Burt

Cash Assets Liabilities Capital Capital Capital
Beginning Bal. 100,000 580,000 280,000 160,000 160,000 80,000
Answer:
Beginning Balance 100,000
580,000
280,000
160,000
160,000
80,000
Sale of Assets 300,000
(580,000)
(80,000)
(80,000)
(120,000
Balances 400,000
-0- 280,000
80,000
80,000
(40,000)
Pay Liabilities (280,000)
(280,000)
Balances 120,000
-0- -0- 80,000
80,000
(40,000)
Allocate deficit (20,000)
(20,000)
40,000
Balances 120,000
-0- -0- 60,000
60,000
-0-
Cash payment to partners (120,000) (60,000)
(60,000)
Balances -0- -0- -0- -0- -0- -0-

Difficulty: Hard
34) David, Paul, and Burt are partners in a CPA firm sharing profits and losses in a ratio of 2:2:3,
respectively. Immediately prior to liquidation, the following balance sheet was prepared:

Noncash assets 580,000 David, Capital 160,000
_______ Burt, Capital 80,000
Required:
Assuming the noncash assets are sold for $160,000, determine the amount of cash to be distributed to each
partner assuming all partners are personally solvent. Complete the worksheet and clearly indicate the
amount of cash to be distributed to each partner in the spaces provided.

Beginning Bal. 100,000 580,000 280,000 160,000 160,000 80,000
Answer:
Beginning Balance 100,000
580,000
280,000
160,000
160,000
80,000
Sale of Assets 160,000
(580,000)
(120,000)
(120,000)
(180,000)
Balances 260,000
-0- 280,000
40,000
40,000
(100,000)
Cash payment from Burt 100,000
100,000
Balances 360,000
-0- 280,000
40,000
40,000
-0-
Pay Liabilities (280,000)
(280,000)
Balances 80,000
-0- -0- 40,000
40,000
-0-
Cash payment to partners (80,000)
(40,000)
(40,000)
Balances -0- -0- -0- -0- -0- -0-

Difficulty: Hard
35) The December 31, 2016, balance sheet of the Deng, Danielson, and Gibson partnership, along with the
partners’ residual profit and loss sharing ratios, is summarized as follows:

Cash $ 150,000 Accounts Payable $ 225,000
Receivables 300,000 Loan from Danielson 50,000
Inventories 375,000 Deng, Capital (20%) 250,000
Other Assets 475,000 Danielson, Capital (30%) 400,000
Gibson, Capital (50%) 375,000
Total Assets $1,300,000 Total Lia & Equities $1,300,000
The partners agree to liquidate their partnership as soon as possible after January 1, 2017 and to distribute all
cash as it becomes available.
Required:
Prepare an advance cash distribution plan to show how cash will be distributed as it becomes available.
Answer:
Deng Danielson Gibson
Profit/Loss ratio / .20 / .30 / .50
Loss absorption potential $1,250,000 $1,500,000 $750,000
Loss Absorption Potential

Loss absorption potential $1,250,000 $1,500,000 $750,000
Distribution to Danielson (250,000) ________ ________
Balances $1,250,000 $1,250,000 $750,000
Distribution to Deng & Danielson (500,000) (500,000) _ ______
Balances $750,000 $ 750,000 $750,000
Asset Distribution
Distribution to Danielson __75,000 ___ ___
Balances 250,000 375,000 375,000
Distribution to Deng & Danielson (100,000) (150,000)
_______
Balances $150,000 $225,000 $375,000
Remainder of asset distributions 0.20 0.30 0.50

Order of Cash Distribution Liabilities 0.20 __0.30__ __0.50__
1. First $225,000 100%
2. Next $75,000 100%
3. Next $250,000 40% 60%
4. Remainder 20% 30% 50%

Difficulty: Hard

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Package Title: Test Bank Questions

Course Title: Advanced Accounting, 6e

Question Type: Multiple Choice

1) Which of the following statements is correct?

a) Personal creditors have first claim on partnership assets.

Question Title: Test Bank (Multiple Choice) Question 01

2) The first step in the liquidation process is to:

a) convert noncash assets into cash.

Question Title: Test Bank (Multiple Choice) Question 02

3) A schedule prepared each time cash is to be distributed is called a(n) :

a) advance cash distribution schedule.

Question Title: Test Bank (Multiple Choice) Question 03

4) An advance cash distribution plan is prepared:

a) each time cash is distributed to partners in an installment liquidation.

Question Title: Test Bank (Multiple Choice) Question 04

5) The first step in preparing an advance cash distribution plan is to:

a) determine the order in which partners are to participate in cash distributions.

Question Title: Test Bank (Multiple Choice) Question 05

Question Title: Test Bank (Multiple Choice) Question 06

a) partner must invest additional assets in the partnership.

Question Title: Test Bank (Multiple Choice) Question 07

a) Shrek will receive a distribution in liquidation of $8,000.

Question Title: Test Bank (Multiple Choice) Question 08

Assets Liabilities and Capital

a) Larry, $744,000; Moe, $372,000; Curly, $124,000.

Question Title: Test Bank (Multiple Choice) Question 09

Liabilities and Capital

a) Peter, $90,000; Paul, $140,000; Mary, $295,000

Question Title: Test Bank (Multiple Choice) Question 10

a) partners' profit and loss sharing ratio.

Question Title: Test Bank (Multiple Choice) Question 11

Question Title: Test Bank (Multiple Choice) Question 12

13) Under the Uniform Partnership Act:

Question Title: Test Bank (Multiple Choice) Question 13

Question Title: Test Bank (Multiple Choice) Question 14

Question Title: Test Bank (Multiple Choice) Question 15

a) A, $304,000; B, $176,000; C, $80,000

Question Title: Test Bank (Multiple Choice) Question 16

Assets Liabilities and Capital

Question Title: Test Bank (Multiple Choice) Question 17

GILLIGAN, SKIPPER, AND PROFESSOR

Assets Liabilities and Equity

The liquidation loss must have been:

Question Title: Test Bank (Multiple Choice) Question 18

Assets Liabilities & Equities

a) Mick, $87,500; Keith, $52,500; Charlie, $35,000

Question Title: Test Bank (Multiple Choice) Question 19

Assets Liabilities & Equities

a) Mick, $100,000; Keith, $60,000; Charlie, $40,000

Question Title: Test Bank (Multiple Choice) Question 20

Assets Liabilities and Equity

a) Homer, $54,000; Marge, $84,000; Bart, $177,000.

Question Title: Test Bank (Multiple Choice) Question 21

Question Title: Test Bank (Multiple Choice) Question 22

a) A, $152,000; B, $88,000 C, $40,000

Question Title: Test Bank (Multiple Choice) Question 23

Assets Liabilities and Equity

Question Title: Test Bank (Multiple Choice) Question 24

Assets Liabilities and Equity

a) Stan, $35,000; Kenney, $21,000; Cartman, $14,000

Question Title: Test Bank (Multiple Choice) Question 25

Question Type: Essay