Chapter9ed16

Chapter9ed16 - Chapter 16 Test Bank DISSOLUTION AND...

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Chapter 16 Test Bank DISSOLUTION AND LIQUIDATION OF A PARTNERSHIP Multiple Choice Questions LO1 1. Which statement is correct in describing the rank order of payments as specified by the Uniform Partnership Act? a. Payments to partners with loans to the partnership are ranked equally with payments to other creditors. b. Payments to partners with loans to the partnership are ranked ahead of payments to partners without loans to the partnership. c. Payments to other creditors are ranked ahead of payments to partners with loans to the partnership. d. After payments are made to other creditors and partners with loans to the partnership, payment can be made to partners with capital interests. LO1 2. Which of the following procedures is acceptable when accounting for a deficit balance in a partner’s capital account during partnership liquidation? a. A partner with a negative capital balance must contribute personal assets to the partnership that are sufficient to bring the capital account to zero. b. If a partner with a negative capital balance is personally insolvent, the negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to all the partners. c. If a partner with a negative capital balance is personally insolvent, the negative capital balance may be absorbed by those partners having a positive capital balance according to the residual profit and loss sharing ratios that apply to those partners having positive balances. d. All the above procedures are acceptable. 114
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LO1 3. A partnership dissolution differs from a liquidation in that a. *payments are made to creditors before partners receive value. b. *periodic payments to partners are made when cash becomes available. c. **a partner withdraws from the business and the enterprise continues to function. d. *with full payment is made to all outside creditors before remaining cash is distributed to partners in a final lump sum payment. LO1 4. A partnership in liquidation has converted all assets into cash and paid all liabilities. According to the Uniform Partnership Act, the order of payment a. *will have amounts due to partners with respect to their capital accounts take precedence over amounts owed by partners other than for capital and profits b. * be according to the partners’ residual profit and loss sharing ratios c. **will have amounts owed by partners other than for capital and profits take precedence over amounts due to partners with respect to their capital accounts d. * be by any manner that is both reasonable and rational for the partnership LO1 5. In partnership liquidation, how are partner salary allocations treated? a. Salary allocations take precedence over creditor payments.
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This note was uploaded on 01/29/2009 for the course BA 459 taught by Professor Slattery during the Spring '09 term at Southern Oregon.

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Chapter9ed16 - Chapter 16 Test Bank DISSOLUTION AND...

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