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    Midterm Exam Parcor 2020

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    John Alfred Castino
    1. A partnership can be dissolved without being liquidated. When liquidating a partnership, any negative balances in a partner's capital account must be paid by that partner. Creditors of the partnership have priority over separate creditors when distributing partnership assets. 2. The problem provides account balances for the partnership of Kim and Chui, who share profits and losses in an 8:2 ratio. They decide to liquidate over 2 months. Half the inventory is sold in month 1 for $40,000, paying $10,000 of accounts payable. The rest is sold in month 2 for $30,000, paying the remaining accounts payable. Cash is distributed each month. 3. The assistant is asked

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    Midterm Exam Parcor 2020

    Uploaded by

    John Alfred Castino
    411 views1 page
    1. A partnership can be dissolved without being liquidated. When liquidating a partnership, any negative balances in a partner's capital account must be paid by that partner. Creditors of the partnership have priority over separate creditors when distributing partnership assets. 2. The problem provides account balances for the partnership of Kim and Chui, who share profits and losses in an 8:2 ratio. They decide to liquidate over 2 months. Half the inventory is sold in month 1 for $40,000, paying $10,000 of accounts payable. The rest is sold in month 2 for $30,000, paying the remaining accounts payable. Cash is distributed each month. 3. The assistant is asked

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    1. A partnership can be dissolved without being liquidated. When liquidating a partnership, any negative balances in a partner's capital account must be paid by that partner. Creditors of the partnership have priority over separate creditors when distributing partnership assets. 2. The problem provides account balances for the partnership of Kim and Chui, who share profits and losses in an 8:2 ratio. They decide to liquidate over 2 months. Half the inventory is sold in month 1 for $40,000, paying $10,000 of accounts payable. The rest is sold in month 2 for $30,000, paying the remaining accounts payable. Cash is distributed each month. 3. The assistant is asked

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    411 views1 page

    Midterm Exam Parcor 2020

    Uploaded by

    John Alfred Castino
    1. A partnership can be dissolved without being liquidated. When liquidating a partnership, any negative balances in a partner's capital account must be paid by that partner. Creditors of the partnership have priority over separate creditors when distributing partnership assets. 2. The problem provides account balances for the partnership of Kim and Chui, who share profits and losses in an 8:2 ratio. They decide to liquidate over 2 months. Half the inventory is sold in month 1 for $40,000, paying $10,000 of accounts payable. The rest is sold in month 2 for $30,000, paying the remaining accounts payable. Cash is distributed each month. 3. The assistant is asked

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    Midterm Exam

    True or False
    1. A partnership may be dissolved without being liquidated.
    2. If liquidation of a partnership results in a negative balance in a partner’s account, the
    partner must pay into the partnership the amount of the negative balance.
    3. A partner’s inability to meet his obligations at the time of liquidation relieves that
    individual of his liabilities to the other partners.
    4. In partnership liquidation, one partner may have to make up for the deficit in another
    partner’s account.
    5. When a partner goes out of business, all the remaining non-cash assets will be declared as
    a total loss. This loss on liquidation shall be divided among the partners in their profit or
    loss ratio.
    6. The creditors of the partnership shall have priority in payments over those of the partners’
    separate creditors as regards the partnership properties.
    7. When cash is sufficient to fully satisfy the cash requirement in a particular priority, then
    the available cash will be distributed using the profit or loss ratio.
    8. Partnership liquidation is the same as partnership dissolution.
    9. Cash payments may be made in the profit or loss ratio only when installment payments
    have caused the ratio of the partners’ capital account balances to be the same as the profit
    or loss ratio.
    10. The cash settlement of all liabilities is referred to as realization.

    Problem
    Partners Kim and Chui have decided to liquidate their business. The ledger shows the following
    account balances:
    Cash ₱25,000 Accounts Payable ₱15,000
    Inventory 120,000 Chui, Loan (12%) 60,000
    Kim, Capital 65,000
    Chui, Capital 5,000

    Kim and Chui share profit and losses in a 8:2 ratio. The 12 percent note payable to Chui contains
    a provision that interest ceases accruing at the date the business terminates as a going concern.
    During the first month of liquidation, half of the inventory is sold for ₱40,000 and ₱10,000 of the
    accounts payable is paid. During the second month, the rest of the inventory is sold for ₱30,000
    and the remaining accounts payable are paid. Cash is distributed at the end of each month, and
    the liquidation is completed at the end of the second month.
    Required:
    1. Prepare a statement of partnership realization and liquidation with a schedule of safe
    payments for the 2-month liquidation period.
    2. Prepare necessary journal entries.

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