Partnerships Dissolution (Part II)

Question 1

Dissolution always immediately causes the termination of the firm. True or False?

Answer 1

False. Liquidation causes the termination of the firm.

Question 2

Partnership assets are not affected whenever the admission of a new partner is through purchase of interest of an existing partner. True or False?

Answer 2

True

Question 3

Asset revaluation affects the capital balances of not just the existing partners, but also the incoming new partner. True or False?

Answer 3

False

Question 4

ABC Partners whose capital balances amounted to P400,000 decided to admit D who invested P100,000 cash for a 20% interest. Using bonus method, the accountant should recognize

A. Bonus to D
B. Bonus to A, B, C
C. Asset Revaluation for A, B, C
D. No bonus nor asset revaluation

Answer 4

D. No bonus nor asset revaluation

Question 5

A, one of the partners in the ABC Partnership, decided to buy the share of B in the partnership. Which of the following statements is NOT true?

A. Partnership assets will remain the same.
B. There is no need to revise the partners’ equity.
C. Partners’ equity in total amount will not change.
D. Partnership profit and loss will change.

Answer 5

B. There is no need to revise the partners’ equity.

Question 6

When total agreed capital (TAC) is greater than total contributed capital (TCC), we assume that the partners are using the BONUS method with the admission of the new partner. True or False?

Answer 6

False. We assume that the partners are using ASSET REVALUATION method

Question 7

Insolvency, insanity, or incapacity of a partner to perform may cause the dissolution of the firm. True or False?

Answer 7

True

Question 8

Upon the admission of a new partner under the BONUS method, the new partner will be the one to receive the bonus when his/her share in the agreed capital exceeds his contribution. True or False?

Answer 8

True

Question 9

ABC Partners, whose capital balance totaled P400,000, decided to admit D who invested P100,000 for a 25% interest in the partnership. The effect of this transaction is a/an:

A. increase in partners’ assets, and increase in partners’ equity
B. increase in partnership assets but no increase in partners equity
C. increase in capital with no corresponding increase in assets
D. increase in partnership assets and increase in partners’ equity

Answer 9

D. increase in partnership assets and increase in partners’ equity

Question 10

An admission of a new partner causes a change in ownership interest of the original partners. True or False?

Answer 10

True