300382N Partnerships 2I

Question 1

The following condensed balance sheet is presented for the partnership of Alfa and Beda, who share profits and losses in the ratio of 60:40, respectively:

Cash $ 45,000
Other assets 625,000
Beda (loan) 30,000
$700,000
========
Accounts payable $120,000
Alfa (capital) 348,000
Beda (capital) 232,000
$700,000
========

Instead of admitting a new partner, Alfa and Beda decide to liquidate the partnership. If the other assets are sold for $500,000, what amount of the available cash should be distributed to Alfa?

$327,000

$273,000

$255,000

$348,000

Answer 1

$273,000

Question 2

General Partnership

Answer 2

A general partnership is an association of two or more persons or entities to carry on as co-owners a business for profit. A general partnership is formed when two or more persons or entities enter into an agreement to carry on a trade or business with a sharing of the profits and losses between the partners. All partners in a general partnership are referred to as general partners. All of the general partners are jointly and severally personally liable for the debts and obligations of the partnership, unlike a limited partnership, where not all partners are personally liable.

Question 3

Partnership

Answer 3

A partnership is an association of two or more persons to carry on as co-owners of a business for profit. Partnerships are governed in the various states of the United States by the Uniform Partnership Act (UPA). A partnership may be general, limited, or joint venture.

Characteristics of a partnership include the following:

• Voluntary association of persons as individuals (the partnership has no separate legal identity under common law, but under the UPA it is now an entity for most purposes)
• Simple agreement without governmental sanction
• A fiduciary relationship (mutual agency—each partner is an agent for the others and for the partnership)
• Co-ownership
• Mutual agency of partners
• Joint and several liability

A partnership does not pay income tax. It is a pass-through entity, so profits and losses of the partnership pass through to its partners. A partnership does file an informational tax return using IRS Form 1065, U.S. Return of Partnership Income.

Question 4

2296.20

Answer 4

The steps in the liquidation of a partnership are summarized as follows:

Step 1: Sale of assets with recognition of gains or losses in partners’ capital accounts

Step 2: Payment of liabilities

Step 3: If a partner’s account is negative, either (a) absorption of deficit by other partners or (b) additional asset contribution by partner

Step 4: Final distribution to partners

Question 5

2296.21
PARTNERSHIP LIQUIDATION

PARTNERSIP LIQUIDATION

Answer 5