[2] QUIZ 3 - ACCCOB1 Textbook Exercises_Chapter 4 - Partnership Dissolution Without Liquidation

It occurs every time a new partner is admitted to a partnership or an existing partner leaves the partnership.

a) Liquidation
b) Dissolution
c) Operation
d) Formation

b) Dissolution

It is the new proportion of the partnership's book value.

a) Agreed Value
b) Aggregate Value
c) Fair Market Value
d) Depreciated Value

a) Agreed Value

This is a type of dissolution where the capital balances of the old partners will remain unchanged if the old partners sold capital interest to a new partner.

a) Admission by Purchase
b) Admission with Asset Revaluation
c) Admission with Bonus
d) Admission by Investment

a) Admission by Purchase

This is a type of dissolution where the new partner is investing cash or resources to be accepted as a new partner.

a) Admission with Asset Revaluation
b) Admission with Bonus
c) Admission by Investment
d) Admission by Purchase

c) Admission by Investment

This is a structure where it ends the association of individuals for their original purpose but does not necessarily mean the termination of the business or an interruption in its operation.

a) Dissolution
b) Operation
c) Formation
d) Liquidation

a) Dissolution

This is the amount of capital or equity by one partner transferred to another, with no cash consideration, for the good reputation, industry, and/or business advantage of the latter.

a) Bonus
b) Gratuity
c) Asset Revaluation
d) Reward

a) Bonus

This is a mode of dissolution where a partner is withdrawing from the firm.

a) Seclusion
b) Death
c) Retreat
d) Retirement

d) Retirement

This is a type of asset revaluation where a new partner's capital balance is more than their investment.

a) Diminished Asset
b) Misprized Asset
c) Undervalued Asset
d) Overvalued Asset

c) Undervalued Asset

This is a type of asset revaluation where a new partner's capital balance is less than their investment.

a) Magnified Asset
b) Undervalued Asset
c) Overvalued Asset
d) Exaggerated Asset

c) Overvalued Asset

This is the amount provided to a retiring partner to settle their capital interest.

a) Remuneration
b) Liquidation
c) Cash Settlement
d) Recompense

c) Cash Settlement

Identify: It is the change in the relation of the partners caused by any partner being disassociated from the business.

Dissolution

Identify: In admission by investment, this is the scenario where the total agreed capital is greater than the total contributed capital.

Undervaluation of asset

Identify: Withdrawal of a partner from the partnership with the consent of other partners or as per the provisions of the partnership deed or by giving notice of retirement.

Retirement of one partner

Identify: In admission by investment, this is the scenario where the total agreed capital is less than the total contributed capital.

Overvaluation of asset

Identify: In admission by investment, this is being used as a basis to distribute a bonus to the old partners.

Profit and Loss Ratio

Identify: A new partner may be admitted when he purchases part or all of the interest of one or more of the existing partners.

Admission by Purchase of Interest

Identify: It is the total capital of the partnership after considering the capital credits given to each of the partners.

Total Agreed Capital

Identify: In admission by investment, this is the scenario where the total agreed capital is equal to the total contributed capital.

Bonus

Identify: It refers to termination of the business activities carried on by the partnership and the winding up of partnership affairs preparatory to going out of the business.

Liquidation

Identify: A new partner may be admitted by investing directly into the business instead of purchasing interest from the existing partners.

Admission by Investment

True or False: Liquidation takes place when there is an admission of a new partner.

False - Dissolution takes place when there is an admission of a new partner.

True or False: When a new partner is admitted to a partnership by the purchase of interest, the price paid is relevant to the partnership accounting records.

False - The price paid by a new partner in a partnership by the purchase of interest is irrelevant.

True or False: Dissolution takes place when a partner withdraws from the partnership.

True

True or False: When a new partner is admitted into the partnership by the purchase of interest, the price paid is recorded in the partnership books.

False - The price paid by a new partner in a partnership by the purchase of interest is not recorded.

True or False: When the fair market value of the assets contributed by an incoming partner exceeds the amount to be credited to his capital account, the difference is a bonus to the new partner.

False - The bonus is to the old partners instead of the new partner.

True or False: Upon the admission of a new partner, profit and loss sharing and other consideration should be drawn because dissolution of the original partnership cancels the old agreement.

True

True or False: Retirement of a partner causes dissolution of partnership.

True

True or False: Dissolution dissolves the old partnership but the business continues under new partnership agreement.

True

True or False: Dissolution may be affected through purchase of interest of the exiting partner by existing partner/s or another incoming partner.

True

True or False: During partnership dissolution, the partnership operation continues.

True

Which of the following results in dissolution of a partnership?

a) withdrawal of a partner from a partnership
b) partnership borrowed cash from the managing partner
c) contribution of additional assets to the partnership by an existing partner
d) winding up of the partnership and the distribution of remaining assets to the partners

a) withdrawal of a partner from a partnership

The admission of a new partner under the bonus method will result in a bonus to

a) new partner only
b) either the new partner or the old partners, but not both.
c) none from the choices
d) old partners only.

b) either the new partner or the old partners, but not both.

If a bonus is traceable to the previous partners rather than an incoming partner, it is allocated among the partners according to the

a) capital percentages of the new partnership.
b) profit-sharing percentages of the previous partnership.
c) profit-sharing percentages of the new partnership.
d) capital percentages of the previous partners.

b) profit-sharing percentages of the previous partnership.

If an existing partner withdraws from a partnership,

a) all of the choices
b) may result bonus to exiting partner.
c) may result bonus to remaining partners.
d) his or her interest may be sold to the partnership or an individual partner.

a) all of the choices

When a new partner is admitted into a partnership and the new partner receives a capital credit less than the assets contributed, which of the following explains the difference?

I. The new partner received a bonus.
II. The old partners received a bonus from the new partner.

a) Either I or II
b) I only
c) II only
d) Neither I nor II

c) II only