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Question # 00005426 Posted By: spqr Updated on: 12/15/2013 12:27 PM Due on: 12/31/2013
Subject General Questions Topic General General Questions Tutorials:
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38. The BIG Partnership has decided to liquidate at December 31, 20X8. The capital and loan balances of the partners at December 31, 20X8, are provided

below:

If you were to calculate the Loss Absorption Power for each partner, how would the partners rank (from highest to lowest LAP)?

A. B, I, G

B. I, B, G

C. B, G, I

D. G, I, B

39. Partner A has a smaller capital balance than Partner L. Partner A, however, has a higher profit-and-loss-sharing percentage than Partner L. The LA partnership has decided to liquidate. As a result of the information given,

A. Partner L will have a smaller loss absorption power than A.

B. Partner L will receive cash only after A has received cash.

C. Partner A will have a smaller loss absorption power than L.

D. Partner A will never receive any cash from partnership liquidation.

40. Which of the following statements is (are) true?

I. In the calculation of the loss absorption power for a partner, a partner's loan balance (an amount that is owed by the partnership) should be added to the partner's capital balance.

II. In liquidation, a partner's loan balance (an amount that is owed by the partnership) should be paid to the partner as a creditor of the partnership after the outside creditors.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

41. When a partnership is liquidated on a piecemeal basis and cash has been distributed properly to all partners as noncash assets have been turned into cash, all future cash distributions should be made:

I. In the profit and loss ratio.

II. According to the balances in the partners' capital accounts.

A. I only

B. II only

C. Both I and II

D. Neither I nor II

42. The computation of a safe installment payment for the XYZ partnership resulted in only partner Z receiving cash. Which of the following statements is correct?

I. Partner Z lent the partnership cash, and the partnership had to pay back the loan to Z before distributing cash to X and Y.

II. After assuming all noncash assets were potentially worthless and that assumed capital deficits created in X's and Y's capital balances were losses to be allocated to Z; Z's capital balance was the only capital balance left with a credit.

A. I only

B. II only

C. Either I or II

D. Neither I nor II


43. The JKL partnership liquidated its business in 20X9. Due to an expected long liquidation period, a cash distribution plan was developed. The initial sale and realization of cash from noncash assets resulted

in partner K properly getting $24,000. No other partners received cash along with K. Based upon this information, which of the following statements is correct?

I. K's loss absorption power (LAP) was higher than J's LAP and L's LAP. II. K's capital balance was substantially larger than the balances of J and L.

A. I only

B. II only

C. Either I or II

D. Neither I nor II

44. A partnership may be involved in "Dissociation" or "Dissolution." Required:

Describe "Dissociation" and "Dissolution."

45. A personal statement of financial condition dated December 31, 2008, is to be prepared for Wilhelm Holz. He provides the following information for your use in preparing the statements. All amounts are as of December 31, 2008.

1) Cash on hand and in bank is $4,000.

2) Investments costing $30,000 have a market value of $78,000.

3) His personal residence cost $150,000 ten years ago, and is currently worth $320,000.

4) The payoff balance of his home mortgage is $80,000.

5) The fair value of his 401(k) retirement account is $700,000. All withdrawals from the account will be fully taxable.

6) Amounts due on credit card debt total $5,000.

7) Estimated income taxes on his calendar 2008 earnings amount to $15,000. Taxes withheld in 2008 were $14,000.

8) Assume an income tax rate of 30 percent.

Required: Prepare a statement of financial condition for Mr. Holz as of December 31, 2008. Assume any gain on subsequent sale of the residence will not be tax-exempt.


46. When Disney and Charles decided to incorporate their partnership, the trial balance was as

follows:

The partnership's books will be closed, and new books will be used for D & C Corporation. The following additional information is available:

1. The estimated fair values of the assets follow:

2. All assets and liabilities are transferred to the corporation.

3. The common stock is $5 par. Alice and Betty receive a total of 24,000 shares.

4. Disney and Charles share profits and losses in the ratio 6:4.

Required:

a. Prepare the entries on the partnership's books to record (1) the revaluation of assets, (2) the transfer of the assets to the D & C Corporation and the receipt of the common stock, and (3) the closing of the books.

b. Prepare the entries on D & C Corporation's books to record the assets and the issuance of the common stock.

47. Listen and Hear are thinking of dissolving their partnership. Listen has a friend who told him to complete a "lump-sum" liquidation. Hear wants to complete an "installment" liquidation. They have come to you for advice. What do you recommend and Why?


48. On March 1, 20X9, the ABC partnership decides to complete a lump-sum liquidation as soon as possible. The partnership balance sheet prepared on March 1 appears

below:

The partners share profits and losses in the ratio of 3:4:3. Partner B is personally insolvent, but partners A and C have sufficient personal assets to satisfy any capital deficits. On March 15, 20X9, the non-cash assets are sold for $550,000. Lump sum payments are made to the partners on March 16, immediately after the creditors have been paid.

Required:

Prepare a statement of partnership realization and liquidation.

49. The partnership of Rachel, Adams, and Nixon has the following trial balance on September 30,

2009:

The partners share profits and losses as follows: Rachel, 50 percent; Adams, 30 percent; and Nixon, 20 percent. The partners are considering an offer of $180,000 for the accounts receivable, inventory, and plant and equipment as of September 30. The $180,000 will be paid to creditors and the partners in installments, the number and amounts of which are to be negotiated.

Required:

Prepare a cash distribution plan as of September 30, 2009, showing how much cash each partner will receive if the offer to sell the assets is accepted.


50. Refer to the facts in Question 46. The partners have decided to liquidate their partnership by installments instead of accepting the offer of $180,000. Cash is distributed to the partners at the end of each month. A summary of the liquidation transactions follows:

October

1. $25,000 is collected on accounts receivable; balance is uncollectible.

2. $20,000 received for the entire inventory.

3. $1,500 liquidation expense paid.

4. $40,000 paid to creditors.

5. $10,000 cash retained in the business at the end of the month.

November

6. $2,000 in liquidation expenses paid.

7. As part payment of his capital, Nixon accepted an item of special equipment that he developed, which had a book value of $8,000. The partners agreed that a value of $12,000 should be placed on this item for liquidation purposes.

8. $4,000 cash retained in the business at the end of the month.

December

9. $150,000 received on sale of remaining plant and equipment.

10. $1,000 liquidation expenses paid. No cash retained in the business. Required:

Prepare a statement of partnership realization and liquidation with supporting schedules of safe payments to partners.


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  1. Tutorial # 00005266 Posted By: spqr Posted on: 12/15/2013 06:41 PM
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    result of the information given,A. Partner L will have ...
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