Test bank advanced financial accounting 8th chap016

To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation Chapter 16 Partnerships: Liquidation Multiple Choice Questions The capital balances, prior to the liquidation of the XYZ partnership, were as follows: X, Y, and Z share profits and losses in the ratio of 5:3:2 As a result of a loan, the partnership owes Y $80,000 Using the information above, which partner has the highest Loss Absorption Power (LAP) prior to liquidation? A X B Y C Z D Both X and Y The balance sheet given below is presented for the partnership of Janet, Anton, and Millet: The partners share profits and losses in the ratio of 5:3:2, respectively The partners agreed to dissolve the partnership after selling the other assets for $50,000 On dissolution of the partnership, Janet should receive: A $0 B $80,000 C $10,000 D $30,000 16-1 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation On December 1, 2009, the partners of Tim, Williams, and Levin, who share profits and losses in the ratio of 4:4:2, decided to liquidate their partnership On this date the partnership condensed balance sheet was as follows: On December 11, 2009, the first cash sale of other assets with a carrying amount of $200,000 realized $140,000 Safe installment payments to the partners were made on the same date How much cash should be distributed to each partner? A Option A B Option B C Option C D Option D Tom, Dick, and Harry are partners in an equipment leasing business that has not been able to generate the type of revenue expected by the partners They share profits and losses in a ratio of 5:3:2 They have decided to liquidate the business and have sold all the assets except for one piece of heavy machinery All partnership liabilities have been settled and all the partners are personally insolvent The machinery has a book value of $85,000, and the partners have capital account balances as follows: Each of the following are independent cases 16-2 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation Refer to the information given above What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for 65,000 dollars? A Option A B Option B C Option C D Option D Refer to the information given above What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for 33,000 dollars? A Option A B Option B C Option C D Option D Refer to the information given above What amount of cash will each partner receive as a liquidating distribution if the machinery is sold for 21,100 dollars? A Option A B Option B C Option C D Option D 16-3 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation Partners Dennis and Lilly have decided to liquidate their business The following information is available: Dennis and Lilly share profits and losses in a 3:2 ratio During the first month of liquidation, half the inventory is sold for $60,000, and $60,000 of the accounts payable is paid During the second month, the rest of the inventory is sold for $45,000, 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 Refer to the information provided above Using a safe payments schedule, how much cash will be distributed to Dennis at the end of the first month? A $64,000 B $60,000 C $24,000 D $36,000 Refer to the information provided above Using a safe payments schedule, how much cash will be distributed to Lilly at the end of the first month? A $24,000 B $40,000 C $16,000 D $64,000 Refer to the information provided above Using a safe payments schedule, how much cash will be distributed to Dennis at the end of the second month? A $18,000 B $27,000 C $36,000 D $60,000 16-4 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 10 Refer to the information provided above Using a safe payments schedule, how much cash will be distributed to Lilly at the end of the second month? A $27,000 B $36,000 C $18,000 D $0 11 Refer to the information provided Assume instead that the remaining inventory was sold for $10,000 in the second month What payments will be made to Dennis and Lilly at the end of the second month? A Option A B Option B C Option C D Option D 12 In the computation of a partner's Loss Absorption Power (LAP), the individual partner's capital balance and profit-and-loss percentage are used in which of the following ways? A Option A B Option B C Option C D Option D 16-5 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 13 During the liquidation of the FGH partnership, a cash distribution was made to all the partners, who share profits and losses 60 percent, 20 percent, and 20 percent, respectively Assuming that the cash distribution referred to was made properly, how much would G receive if an additional $60,000 was distributed? A $60,000 B $20,000 C $17,000 D $12,000 14 Which of the following items are important in the determination of safe installment payments to partners? I Deficits created in capital accounts are distributed to the remaining partners II All unsold noncash assets are assumed to be worthless A I only B II only C Both I and II D Neither I nor II 15 In the computation of a partner's Loss Absorption Power (LAP), which of the following statements is incorrect? I The computation of LAPs for all partners allows cash to be distributed before all partnership assets have been sold and all creditors have been paid II The computation of LAPs for all partners indicates the relative strength of each partner's net capital position so that available cash is distributed in respective loss-sharing ratios A I B II C Both I and II D Neither I nor II 16-6 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 16 The BIG Partnership has decided to liquidate at December 31, 2008 The capital and loan balances of the partners at December 31, 2008, 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 17 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 18 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: I Added to the partner's capital balance II Paid to the partner as a creditor of the partnership A I only B II only C Both I and II D Neither I nor II 16-7 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 19 On a partner's personal statement of financial condition, how should liabilities be valued? I Present value II Lower of present value or cash settlement amount A I B II C Both I and II D Neither I nor II 20 On a partner's personal statement of financial condition, assets and liabilities are presented: I As current and noncurrent II In order of liquidity and maturity A I B II C Both I and II D Neither I nor II 21 The personal financial statements of a partner include which of the following? I Statement of financial condition II Statement of changes in net worth III Statement of cash flows A I and II B I and III C II and III D I, II, and III 22 On a partner's personal statement of financial condition, how are assets valued? A Historical cost B Book value C Discounted value D Estimated current value 16-8 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 23 On a partner's personal statement of changes in net worth, what type(s) of income is (are) recognized? I Realized II Unrealized A I only B II only C Both I and II D Neither I nor II Bill, Page, Larry, and Scott have decided to terminate their partnership The partnership's balance sheet at the time they decide to wind up is as follows: During the winding up of the partnership, the other assets are sold for $150,000 and the accounts payable are paid Page and Larry are personally solvent, but Bill and Scott are personally insolvent The partners share profits and losses in the ratio of 4:2:1:3 24 Based on the preceding information, what amount will be paid out to Bill upon liquidation of the partnership? A $0 B $25,000 C $11,667 D $2,500 16-9 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 25 Based on the preceding information, what amount will be paid out to Scott upon liquidation of the partnership? A $0 B $2,500 C $25,000 D $65,000 26 Based on the preceding information, what amount will be distributed to Page and Larry upon liquidation of the partnership? A Option A B Option B C Option C D Option D Bill, Page, Larry, and Scott have decided to terminate their partnership The partnership's balance sheet at the time they decide to wind up is as follows: During the winding up of the partnership, the other assets are sold for $150,000 and the accounts payable are paid Page and Larry are personally solvent, but Bill and Scott are personally insolvent The partners share profits and losses in the ratio of 3:2:1:4 16-10 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation The trial balance of WM Partnership is as follows: Wilfred and Mike decides to incorporate their partnership The partnership's books will be closed, and new books will be used for W & M Corporation The following additional information is available: The estimated fair values of the assets follow: All assets and liabilities are transferred to the corporation The common stock is $10 par Wilfred and Mike receive a total of 10,000 shares The partners share profits and losses in the ratio 7:3 35 Based on the preceding information, the journal entry on the partnership's books to record the Investment in W&M Corporation Stock will be debited for: A $181,000 B $131,000 C $200,000 D $150,000 AACSB: Analytic AICPA: Measurement 16-40 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 36 Based on the preceding information, the journal entry on the partnership's books to record distribution of stock to prior partners will include a debit to Wilfred, Capital for: A $140,000 B $91,700 C $86,700 D $126,700 AACSB: Analytic AICPA: Measurement 37 Based on the preceding information, the journal entry on the partnership's books to record distribution of stock to prior partners will include a debit to Mike, Capital for: A $38,010 B $31,500 C $42,000 D $44,300 AACSB: Analytic AICPA: Measurement 38 Based on the preceding information, the journal entry on W & M Corporation's books to record the assets and the issuance of the common stock will include a credit to Additional Paid-In Capital for: A $0 B $81,000 C $31,000 D $50,000 AACSB: Analytic AICPA: Measurement 16-41 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation The following condensed balance sheet is presented for the partnership of D, E, and F who share profits and losses in the ratio of 5:3:2, respectively: The partners agreed to liquidate the partnership after selling the other assets 39 Refer to the above information If the other assets are sold for $280,000, how much should F receive upon liquidation? A $44,000 B $50,000 C $76,000 D $90,000 AACSB: Analytic AICPA: Measurement 40 Refer to the above information If the other assets are sold for $80,000, and all partners are personally insolvent, how much should E receive upon liquidation? A $0 B $6,000 C $10,000 D $20,000 AACSB: Analytic AICPA: Measurement 16-42 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 41 The CRT partnership has decided to terminate operations and to liquidate the partnership assets There are no partner loans, and all partners have positive capital balances Gains and losses on liquidation and cash distributions to partners should be allocated as follows: A Option A B Option B C Option C D Option D AACSB: Reflective Thinking AICPA: Decision Making Essay Questions 16-43 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 42 A partnership may be involved in "Dissociation" or "Dissolution" Required: Describe "Dissociation" and "Dissolution." Dissociation is the legal description of the withdrawal of a partner including the following: i Partner's death ii Partner's voluntary withdrawal, i.e retirement iii Judicial determination Not all dissociations result in a partnership's liquidation Many partner dissociations involve only a buyout of the withdrawing partner's interest rather than a winding up and liquidation of the partnership's business Dissolution involves dissolving of the partnership and winding up of the partnership business Dissolutions can occur: i In a partnership at will A partnership agreement can avoid this situation ii In a partnership for a definite term or specific undertaking iii By an event that makes it unlawful to carry on the partnership business iv By a judicial determination A "Dissociation" that results in liquidation has the same end result as "Dissolution" AACSB: Communication AICPA: Decision Making 43 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 you recommend and Why? A "Lump-sum" liquidation and ‘Installment" liquidation does not represent a choice in procedures They represent different points in time A ‘Lump-Sum" liquidation takes place when all of the affairs of the partnership can be ended at the same time and all of the resulting cash can be distributed to the partners at that time "Installment" liquidation is what normally occurs because the partners want access to some cash as soon as possible, and all of the partnership assets have to be sold and liabilities paid The preparation of a "Safe-Payments Schedule" can allow this to happen in an orderly manner AACSB: Communication AICPA: Critical Thinking 16-44 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 44 On March 1, 2009, the ABC partnership decides to complete a lump-sum liquidation as soon as possible The partnership balance sheet prepared on March 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, 2009, 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 AACSB: Analytic AICPA: Measurement 16-45 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 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 16-46 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 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 AACSB: Analytic AICPA: Measurement 16-47 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 46 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 16-48 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 16-49 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation AACSB: Analytic AICPA: Measurement 47 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 $25,000 is collected on accounts receivable; balance is uncollectible $20,000 received for the entire inventory $1,500 liquidation expense paid $40,000 paid to creditors $10,000 cash retained in the business at the end of the month November $2,000 in liquidation expenses paid 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 $4,000 cash retained in the business at the end of the month December $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 16-50 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 16-51 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation AACSB: Analytic AICPA: Measurement 16-52 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 48 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: The estimated fair values of the assets follow: All assets and liabilities are transferred to the corporation The common stock is $5 par Alice and Betty receive a total of 24,000 shares 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 16-53 To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation a) b) AACSB: Analytic AICPA: Measurement 16-54 ... more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 19 On a partner's personal statement of financial condition, how should... download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.com Chapter 16 - Partnerships: Liquidation 45 A personal statement of financial condition dated December 31,... 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 16-19 To download more slides, ebook, solutions and test bank,