Concept explainers
Installment liquidation: It typically requires several months to complete liquidation, it includes installment, payments to partners during liquidation period because they require funds for the personal purposes. Most liquidations take place over an extended period in order to obtain the large possible amount from the realization of the assets. Some
Installment liquidations involve distributing cash to partners before complete liquidation of assets occurs. To ensure fairness in making cash distributions a schedule of safe payments to partners and the cash distribution plan is followed.
To choose:Correct answer and show how final cash distribution to the partners is done.
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Advanced Financial Accounting
- When a partnership dissolves, the first step in the dissolution process is to ________. A. allocate the gain or loss on sale based on income sharing ratio B. pay off liabilities C. sell noncash assets D. divide the remaining cash among the partnersarrow_forwardWhen a partnership dissolves, the last step in the dissolution process is to ________. A. allocate the gain or loss on sale based on income sharing ratio B. pay off liabilities C. sell noncash assets D. divide the remaining cash among the partnersarrow_forwardWhen a partnership is liquidated, any gains or losses realized by the sale of noncash assets are allocated to the partners based on their income sharing ratio. Why?arrow_forward
- Which one of the following would not be considered in the development of a partnership agreement? A. profit and loss levels B. processing disputes C. stock options D. asset contributionsarrow_forwardIn accounting for the lump-sum liquidation of a partnership, cash payments to partners after all non-partner creditors' claims have been satisfied, but before the final cash distribution should be according toa. the final balances in partner capital accounts.b. the partners' relative share of the gain or loss on liquidation.c. the partners' relative profit and loss sharing ratio.d. safe payment computations.arrow_forwardIn partnership liquidation the first cash distribution to the partner should be made in accordance with the        Select one: a. Ratio of the capital contribution by partners b.   Balances of partners' capital accounts c. Partners profit &loss ratios d. Safe payment schedulearrow_forward
- Which of the following is correct with regards to partnership liquidation? a. All creditors must be paid in full before distributions can be made to partners b. Partners’ capital contributions and undistributed partnership income are viewed as distinct in the Uniform Partnership Act c. All creditors are equal with regards to priority claim against partnership assets d. Loans from partners to the partnership have same priority claim against partnership assets as to creditor claims from other entitiesarrow_forward1. Which of the following statement is correct concerning liquidation of a partnership? I. Assets must be liquidated solely through sale transaction II. Assets can be sold at distress prices in a single transaction to an interested party III. All assets can be sold at fair value in a single transaction to a competitor or to others who wish to continue the business. [A] I only [B] I and II only [C] II and III only [D] I, II and III  2. S1: Lump-sum liquidation refers to a series of interim distributions to partners while the sale of noncash assets and the payment of liabilities is occurring. S2: Installment liquidation refers to the sale of noncash assets and payment of liabilities before single distribution to partners.  [A] Both statements are correct [B] Both statements are incorrect [C] Only S1 is correct [D] Only S1 is incorrectarrow_forward
- Individual Income TaxesAccountingISBN:9780357109731Author:HoffmanPublisher:CENGAGE LEARNING - CONSIGNMENT