DE LA SALLE LIPA

College of Business, Economics, Accountancy and Management

Accountancy Department

5th Quiz in FUNACCO2

PARTNERSHIP LIQUIDATION

Name: _____________________________________ Date: ________

Section: _________ Score: _______

Write the letter of the correct answer before each number.

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

a. Obtaining court approval
b. Selling the partnership’s noncash assets
c. Paying the partnership liabilities
d. Distributing the remaining cash to partners

2. Settlement of a partner’s personal liabilities may come from

a. Personal assets
b. Partner’s claim on partnership assets
c. Claims of co-partners
d. A and B only

3. Liquidation losses would include

a. Loss on realization of non-cash assets
b. Liquidation expenses
c. Share on the deficiency of an insolvent partner
d. All of the above

4. A capital deficiency can be eliminated by the following, except

a. Offsetting against a partner’s loan
b. Additional investment
c. Selling non-cash assets at a gain
d. Loss to the other partners

5. A partner’s interest includes

a. Capital balance
b. Partner’s loan to the partnership
c. A only
d. A and B

6. A capital deficiency in a partner’s capital that is uncollectible is

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

7. The other partners must absorb the deficiency in a partner’s capital account in liquidation because of
a. Limited life and mutual agency
b. Mutual agency and unlimited liability
c. Limited life and co-ownership of property
d. Mutual agency and partnership’s taxability

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

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

9. In the final liquidation transaction, the remaining cash is distributed to the partners. The partners share in the cash according
to their
a. Profit and loss ratio c. Capital balances
b. Withdrawals d. Cash balance

10. The order of partnership liquidation process is

a. Sell assets, disburse cash to partners, pay liabilities
b. Disburse cash to partners, pay liabilities, sell assets
c. Pay liabilities, sell assets, disburse cash to partners
d. Sell assets, pay liabilities, disburse cash to partners

11. In a partnership liquidation, a loss from sale of non-cash assets is allocated to the
a. Partner with the lowest capital balance
b. Partnership liabilities
c. Partners based on their capital balances
d. Partners based on the profit and loss sharing ratio

12. A partnership liquidates and finds an excess cash, after payment of liabilities, of P100,000. The four partners have equal
capital balances and share profit and losses in the ratio of 10:20:30:40. The four partners will receive a final cash distribution
of cash as follows:
a. P25,000; P25,000; P25,000; P25,000;
b. P10,000; P20,000; P30,000; P40,000;
c. P12,000; P20,000; P8,000; P60,000;
d. P100,000; P100,000; P100,000; P100,000;

13. Upon liquidation, the EE partnership realizes a gain on sale of assets amounting to P120,000. The gain is allocated to the
partners, Estrada and Esteban, according to their profit and loss ratio of 2:1. How is the gain allocated to each partner?
a. Estrada: P60,000; Esteban: P60,000
b. Estrada: P80,000; Esteban: P40,000
c. Estrada: P40,000; Esteban: P80,000
d. Estrada: P120,000; Esteban: P240,000

14. The liquidation of the partnership of Emma, Earl and Ester resulted in a deficiency in Emma’s capital account of P100,000.
Emma can contribute only P20,000 to offset her deficiency. The partners share profit and losses in the ratio of 3:3:2. Earl and
Ester, who have capital balances of P250,000 and P50,000, will absorb the deficiency as follows:
a. Earl: P0; Ester: P0
b. Earl: P32,000; Ester: P48,000
c. Earl: P48,000; Ester: P32,000
d. Earl: P40,000; Ester: P40,000

15. Ever, Engel and Encar are partners who share profits and losses in the ratio of 2:3:5. The partners have decided to liquidate
the partnership. Their capital accounts show the following balances: Ever – P60,000 credit; Engel – P90,000 credit; Encar –
P25,000 debit after the sale of non-cash assets and the payment of all liabilities. What is the amount of cash available for
distribution?
a. P60,000 c. P120,000
b. P90,000 d. P130,000

16. The following statement of financial position is for the EEE Partnership. The partners Emy, Ely, and Evy share profits and
losses in the ratio of 5:3:2, respectively.

Cash P 60,000 Liabilities P140,000

Other Assets 540,000 Emy, Capital 280,000
 Ely, Capital 160,000
________ Evy, Capital 20,000
P600,000 P600,000

Assuming the original partners agreed to liquidate the partnership by selling the other assets, what should each of the
respective partners receive if the other assets are sold for P400,000?

a. Emy: P205,000; Ely: P115,000; Evy: P0;

b. Emy: P206,000; Ely: P114,000; Evy: P0;
c. Emy: P210,000; Ely: P111,800; Evy: P8,000;
d. Emy: P280,000; Ely: P160,000; Evy: P20,000;

17. The statement of financial position for the partnership of Eden, Elisa, and Elma, who share profits and losses in the ratio of
4:5:1, is as follows:

Cash P100,000 Accounts Payable P300,000

Inventory 720,000 Eden, Capital 320,000
Elisa, Capital 90,000
Elma, Capital 110,000
P820,000 P820,000

If the inventory is sold for P600,000, how much should Eden receive upon liquidation of the partnership?
a. P96,000 b. P272,000
b. P200,000 d. P320,000

18. Using the same information in No. 17 and assuming the inventory is sold for P360,000, how much should Elma receive upon
liquidation of the partnership?
a. P56,000 b. P74,000
b. P65,000 d. P110,000

19. After all non-cash assets have been converted into cash, in the liquidation of the Estacio and Estioco Partnership, the ledger
contains the following account balances:

Debit Credit
Cash P141,000
Accounts Payable P96,000
Loan Payable to Estacio 45,000
Estacio, Capital 21,000
Estioco, Capital 21,000

Available cash should be distributed withP96,000 going to Accounts Payable and

a. P45,000 to the Loan Payable to Estacio

b. P22,500 each to Estacio and Estioco
c. P24,000 to Estacio and P21,000 to Estioco
d. P21,000 to Estacio and P24,000 to Estioco

20. The partnership accounts of Edna, Elvira, and Emma who share earnings in a 3:3:4 ration are as follows on December 31,
2014

Edna, Drawing (debit balance) P 30,000

Emma, Drawing (credit balance) 10,000
Elvira, Loan 50,000
Edna, Capital 160,000
Elvira, Capital 130,000
Emma, Capital 140,000
 Total assets amounted to P700,000 including P80,000 cash and liabilities total P240,000. The partnership is liquidated in
January 2015 and Emma received P120,000 cash payment in the liquidation. The loss on realization was

a. P75,000 c. P95,000
b. P80,000 d. P100,000

21. In accounting for the liquidation of a partnership, cash payments to partners after all outside creditors’ claim have been
satisfied, but before the final cash distribution, should be made according to
a. Safe payments computation
b. The partners’ profit and loss sharing ratio
c. The final balances in partners’ capital accounts
d. Partners’ share of the gain or loss on liquidation

22. In an installment liquidation, the final cash distribution to the partners should be made in accordance with the
a. Ratio of capital contributions less withdrawals by the partners
b. Ratio of the capital contributions plus additional investment
c. Balances of the partners’ loan and capital accounts
d. Partners’ profit and loss sharing ratio

23. In a partnership liquidation, a gain on sale of noncash assets is

a. Allocated to the partners based on their capital balances
b. Allocated to the partners based on their profit and loss sharing ratio
c. Allocated to the partner with the lowest capital balance
d. Allocated to the partnership liabilities

24. The following statement of financial position is for the partnership Abril, Suarez and Custodio, who share profit and losses in
the ratio of 4:4:2, respectively.
Cash P40,000 Liabilitiies P100,000
Other Assets 360,000 Abril, Capital 74,000
Suarez, Capital 130,000
Custodio, Capital 96,000
P400,000 P400,000

The firm is dissolved and liquidated by selling assets in installments. If the first sale on noncash assets havinga book value of
P180,000 realizes P100,000 and all cash available after settlement with creditors is distributed, the respective partners would
receive (rounded to the nearest peso)

Abril Suarez Custodio

a. P16,000 P16,000 P8,000
b. 12,333 12,333 12,334
c. -0- 26,667 12,333
d. -0- 6,000 34,000

25. Using the same information in No. 24, except that P6,000 cash is to be withheld, the respective partners would then receive
(rounded to the nearest peso)

Abril Suarez Custodio

a. P13,600 P13,600 P6,800
b. 11,333 11,333 11,334
c. -0- 26,667 12,333
d. -0- 2,000 32,000

26. Using the same information in No. 24 and assuming that each partner properly received some cash in the distribution after the
second sale, the cash to be distributed amounts to P24,000 from the third sale, and unsold assets withP16,000 book value
remain (ignore questions 24 and 25), the respective partners would receive
 Abril Suarez Custodio
a. P9,600 P9,600 P9,600
b. P8,000 P8,000 P8,000
c. 37/150 of P24,000 65/150 of P24,000 48/150 of P24,000
d. -0- P16,000 P8,000

27. Partners Donato, Munoz and Torres, who share profits and losses in the ratio of 3:5:2, respectively, have decided to liquidate
their partnership. At the time of liquidation, the statement of financial position of the partnership consisted of the following:

Cash P80,000 Liabilities P 62,000

Other Assets 240,000 Loan from Munoz 20,000
Donato, Capital 72,000
Munoz, Capital 80,000
Torres, Capital 86,000
P320,000 P320,000

The partners desire to prepare a cash priority program showing how cash would be distributed to partners as assets are
realized. In the cash priority program, the loss absorption capacity of each partner would be

Donato Munoz Torres

a. P240,000 P160,000 P430,000
b. 200,000 400,000 150,000
c. 300,000 350,000 250,000
d. 240,000 200,000 430,000

28. Based on information in No. 27, the schedule of possible losses on capita balances would indicate that the first cash
distribution, after the payment of outside creditors, would be distributed to and in the amount of
a. Donato in the amount of P32,000
b. Munoz in the amount of P40,000
c. Torres in the amount of P38,000
d. Torres in the amount of P20,000

29. Using the information in No. 27 and assuming the first sale of assets with a book value of P100,000 realized P30,000 an all
available cash is distributed, the respective partners would receive:

Donato Munoz Torres

a. -0- P12,000 P36,000
b. 6,000 -0- 42,000
c. 16,000 16,000 16,000
d. 42,000 -0- 6,000

30. Using the information in No. 27 and No. 29, and assuming the second sale of other assets with a book value of P60,000
realized P80,000 and all available cash is distributed, the respective partners would receive

Donato Munoz Torres

a. P27,000 P35,000 P18,000
b. 12,000 -0- 8,000
c. 6,000 10,000 8,000
d. P6,000 -0- 4,000