AFAR Quiz 1 (B42)
AFAR Quiz 1 (B42)
AFAR Quiz 1 (B42)
1. The condensed balance sheet of the partnership of China and Japan as of December 31, 2021 showed the
following:
Total assets P200,000
Total liabilities 40,000
China, capital 80,000
Japan, capital 80,000
On this date, the partnership was dissolved and its net assets were transferred to a newly-formed corporation.
The fair value of the assets was P24,000 more than the carrying value on the firm’s books. Each of the partners
was issued 10,000 shares of the corporation’s P1 par common stock. Immediately after affecting the transfer
of the net assets, and the issuance of stocks, the corporation’s additional paid-in capital account would be
credited for:
D a. P136,000 c. P154,000
b. P140,000 d. P164,000
Solution:
Unadjusted capital (P80,000 + P80,000) or (P200,000 – P40,000) P 160,000
Add: Excess of fair value over book value 24,000
Adjusted capital P 184,000
Less: Shares issued at par value (10,000 x 2 x P1) 20,000
Additional paid-in capital P 164,000
2. The following data were taken from the statement of affairs for Liquo Company:
Asset pledged for fully secured liabilities
(fair value, P75,000) P90,000
Asset pledged to partially secured
Liabilities fair value, P52,000) 74,000
Free assets (fair value, P40,000) 70,000
Unsecured Liabilities with priority 7,000
Fully secured liabilities 30,000
Partially secured liabilities 60,000
Unsecured liabilities without priority 112,000
Total estimated deficiency to unsecured creditors amounted to:
D a. P27,000 c. P35,000
b. P34,000 d. P42,000
Solution:
Free Assets on Assets Pledged to Fully Secured Assets (P75,000 – P30,000) P 45,000
Free Assets 40,000
Total Free Assets P 85,000
Less: Unsecured Creditors with Priority 7,000
Net free assets P 78,000
Unsecured Creditors:
Partially Secured Creditors (P 60,000 – P52,000) P 8,000
Unsecured Creditors without Priority 112,000 120,000
Estimated deficiency to unsecured creditors P 42,000
Page 1 of 12 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 42 – October 2021 Batch)
3. Bowen and Monita are partners in a retail business and divide profits 60% to Bowen and 40% to Monita.
Their capital balances at December 31, 2021 are as follows:
Bowen capital P180,000
Monita capital 180,000
Total capital P360,000
Partnership assets and liabilities have book values equal to fair values. The partners agree to admit Johnson
into the partnership. Johnson purchase a one-third interest in partnership capital and profits directly from
Bowen and Monita (one-third of each of their capital accounts) for P150,000. Determine the capital of Bowen
after the admission of Johnson assuming net assets are revalued?
C a. P120,000 c. P156,000
b. P132,000 d. P180,000
Solution:
Bowen, capital: [P180,000 + (P90,000* x 60%)] x 2/ 3 P 156,000
4. A balance sheet at December 31, 2021 for the BB, DD, and LL Partnership is summarized as follows:
Page 2 of 12 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 42 – October 2021 Batch)
XX and YY agreed to form a partnership contributing their respective assets and equities subject to the
following adjustments:
• Accounts receivable of P20,000 in XX’s books and P40,000 in YY’s books are uncollectible.
• Inventories of P6,000 and P7,000 are worthless in XX’s and YY’s respective books.
• Other assets of P2,000 and P3,000 in XX’s and YY’s respective books are to be written-off.
• Accrued expenses of P1,000 and P2,000 in XX’s and YY’s books are not yet recorded.
The capital accounts of the partners after adjustments will be:
C a. XX, P598,000 and YY, P748,000 c. XX, P591,000 and YY, P748,000
b. XX, P591,000 and YY, P754,300 d. XX, P599,000 and YY, P699,000
Solution:
XX YY
Unadjusted capital 620,000 800,000
Add(deduct): Adjustments
A/R written-off ( 20,000) ( 40,000)
Inventories worthless ( 6,000) ( 7,000)
Other assets written-off ( 2,000) ( 3,000)
Accrued expenses ( 1,000) ( 2,000)
Adjusted capital 591,000 748,000
6. The assets and equities and Queenie, Rose, and Sarah partnership at the end of its fiscal year on October 31,
2021 are as follows:
Assets Equities
Cash P 15,000 Liabilities P50,000
Receivables – net 20,000 Loan from Sarah 10,000
Inventory 40,000 Queenie, capital-30% 45,000
Plant assets – net 70,000 Rose, capital – 50% 30,000
Loan to Rose 5,000 Sarah, capital – 20% 15,000
P 150,000 P150,000
If the total amount of P7,500 is available for distribution to partners after all non-partner liabilities are paid,
it should paid as follows:
Queenie Rose Sarah Queenie Rose Sarah
A a. P7,500 P-0- P-0- c. P2,250 P3,750 P1,500
b. P-0- P3,750 P3,750 d. P2,500 P2,500 P2,500
Solution:
Queenie Rose Sarah Total
Balances before realization:
Loans (to) from (5,000) 10,000 5,000
Capitals 45,000 30,000 15,000 90,000
Total Interest 45,000 25,000 25,000 95,000
Reduction in Interest (26,250) (43,750) (17,500) (87,500)
Balances 18,750 (18,750) 7,500 7,500*
Possible loss due to insolvency (3:2) (11,250) 18,750 ( 7,500) -
Balances before payment to partners 7,500 7,500
Payment to partners (7,500) (7,500)
*Cash available for payment to partners.
7. The capital accounts of the KK and BB partnership on September 30, 2008 were:
KK, capital (75% profit percentage) P 140,000
BB, capital (25% profit percentage) 60,000
P 200,000
The partnership assets and liabilities have book values equal to their fair values. On October 1, 2021, RR was
admitted to a 40% interest in the partnership, when he purchased 40% of each existing partner’s capital for
P120,000, paid directly to KK and BB. The capital balance of each partner after RR’s admission assuming
that revaluation is recorded should be:
A a. KK, P129,000; BB, P51,000; RR, P120,000
b. KK, P 66,667; BB, P66,667; RR, P 66,667
c. KK, P 84,000; BB, P36,000; RR, P 80,000
d. KK, P 84,000; BB, P51,000; RR, P 80,000
Page 3 of 12 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 42 – October 2021 Batch)
Solution:
Amount paid P120,000
Less: Book value of interest acquired (P200,000 x 40%) 80,000
Excess P 40,000
Divided by: Capitalized at 40%
Revaluation adjustment P100,000
8. Bart, Carter, and Donna are partners sharing profits 40%, 35%, and 25%. Partners’ original capitals were in
this ratio, but on June 30, 2021, capital balances are as follows: Bart, P60,000; Carter, P50,000, and Donna,
P50,000. Partners want to bring capital balances into the profit and loss ratio. Assuming that the capital
balances are to be brought into the profit and loss ratio by payments outside of the firm among partners, the
total firm capital remain the same, what cash transfers are required between partners?
D a. Donna should pay P4,000 to Bart and P6,000 to Carter.
b. No payments.
c. Investments of P4,000 and P6,000 by Bart and Carter, respectively.
d. Payments of P4,000 and P6,000 should be made to Donna by Bart and Carter.
Solution:
Bart Carter Donna Total
Balances before settlement 60,000 50,000 50,000 160,000
Cash settlement 4,000 6,000 (10,000) -0-
Capital balances after settlement 64,000 56,000 40,000 160,000
Profit and loss ratio 40% 35% 25% 100%
Incidentally, the entry would be:
D, capital…………………………………………………… 10,000
B, capital…………………………………………. 4,000
C, capital…………………………………………. 6,000
Therefore, the payment should be made to Donna by Bart and Carter.
9. CC, PP, and AA, accountants agree to form a partnership and to share profits in the ratio of 5:3:2. They also
agreed that AA is to be allowed a salary of P28,000, and that PP is to be guaranteed P21,000 as his share of
the profits. During the first year of operation, income from fees are P180,000, while expenses total, P96,000.
What amount of net income should be credited to each partner’s capital account?
B a. CC, P28,000; PP, P16,800; AA, P11,200
b. CC, P25,000; PP, P21,000; AA, P38,000
c. CC, P24,000; PP, P22,000; AA, P38,000
d. CC, P25,000; PP, P21,000; AA, P39,000
Solution:
CC PP AA Total
Salary P28,000 P28,000
Balance (P84,000-P28,000), 5:3:2 P28,000 P16,800 11,200 56,000
Additional profit to PP (P21,000 – P16,800) ( 3,000) 4,200 ( 1,200) -0-
P25,000 P21,000 P38,000 P84,000*
*Net Income would be:
Fees……………………………………………………………………………………..P 180,000
Less: Expenses……………………………………………………………………… 96,000
Net Income…………………………………………………………………………… P 84,000
Page 4 of 12 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 42 – October 2021 Batch)
10. XX, YY and ZZ formed a partnership on January 1, 2021. Each contributed P120,000. Salaries were to be
allocated as follows:
XX…………………………………………………………………P 30,000
YY……………………………………………………………………30,000
ZZ…………………………………………………………………… 45,000
Drawings were equal to salaries and be taken out evenly throughout the year. With sufficient partnership net
income, XX and YY could split a bonus equal to 25% of partnership net income after salaries and bonus (in
no event could the bonus go below zero). Remaining profits were to be split as follows: 30% for XX; 30%
for YY; and 40% for ZZ. For the year, partnership net income was P120,000. Compute the ending capital for
each partner:
C a. XX, P155,100; YY, P155,100; ZZ, P169,800
b. XX, P126,000; YY, P126,000; ZZ, P124,500
c. XX, P125,100; YY, P125,100; ZZ, P124,800
d. XX, P125,500; YY, P125,500; ZZ, P124,000
Solution:
XX YY ZZ Total
Capital, beginning balances P120,000 P120,000 P120,000 P360,000
Add: Net income………… 35,100 35,100 49,800 120,000
Less: Personal withdrawals 30,000 30,000 45,000 105,000
Capital, ending balances… P125,100 P125,100 P124,800 P375,000
11. The partnership of Alice, Rhea, and Merly became insolvent during 2021, and the partnership ledgers shows
the following balances after all partnership assets have been converted into cash and all available cash
distributed:
Debit Credit
Accounts payable P 30,000
Alice capital 20,000
Rhea capital P120,000
Merly capital _ 70,000
P120,000 P120,000
Profit and loss sharing percentages for the three partners are Alice, 30%; Rhea, 40%; and Merly, 30%. The
personal assets and liabilities of the partners are as follows:
Alice Rhea Merly
Personal assets P60,000 P110,000 60,000
Personal liabilities 50,000 60,000 40,000
If the partnership creditors recover P30,000 from Rhea, compute the amount to be received by Merly.
C a. P70,000 c. P30,000
b. P35,000 d. P20,000
Page 5 of 12 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 42 – October 2021 Batch)
Solution:
Alice Rhea Merly
Balances before realization 20,000 (120,000) 70,000
Additional investment to pay balance to
Creditors 30,000 ________
Balances 20,000 ( 90,000) 70,000
Additional investment (P110,000-P30,000-P60,000) _______ 20,000 ________
Balances 20,000 ( 70,000) 70,000
Additional loss for possible insolvency ( 35,000) 70,000 ( 35,000)
Balances ( 15,000) -0- 35,000
Additional investment (P60,000-P50,000) 10,000 ________ _________
Balances ( 5,,000) -0- 35,000
Additional loss for possible insolvency 5,000 ( 5,000)
Balance _0- -0- 30,000
12. The partnership of UU, VV, and WW was dissolved on June 30, 2021 and account balances after non-cash
assets were converted into cash on September 1, 2021 are:
Cash P 50,000 Accounts payable P120,000
UU, capital (30%) 90,000
VV, capital (30%) ( 60,000)
WW, capital (40%) (100,000)
Page 6 of 12 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 42 – October 2021 Batch)
13. AJD Company recognizes construction revenue and expenses using the percentage of completion method.
During 20x4, a single long-term project was begun which continued through 20x5. Information on the project
were as follows:
20x4 20x5
Accounts Receivable from construction contract P 200,000 P 600,000
Construction expenses 210,000 384,000
Construction in progress 244,000 728,000
Partial billings on 200,000 840,000
The profit recognize from the long-term construction contract should amount to:
20x4 20x5 20x4 20x5
D a. P44,000 P456,000 c. P34,000 P256,000
b. P44,000 P200,000 d. P34,000 P100,000
Solution:
Under the percentage of completion method, the Construction-In-Progress account is used for cost incurred
during the year and any realized gross profit (loss). The following T-account is prepared:
Construction-In-Progress
CI in 2004 210,000
RGP in 20x4 (?) 34,000
End of 20x4 244,000
CI in 20x5 384,000
RGP in 20x5 (?) 100,000
14. The estimated costs to complete the project at December 31, 20x5:
B a. P 850,000 c. P2,300,000
b. P1,700,000 d. P2,550,000
Solution:
20x4 20x5 20x6
Contract price………………………….. P5,000,000 P5,000,000 P5,000,000
Cost incurred each year………………. P2,050,000
Add: Cost incurred in prior year……… 900,000 2,550,000
Costs incurred to date………………… P 900,000 P2,550,000 P4,600,000
Add: Estimated costs to complete 1,700,000 -0-
Total estimated costs…………………. P4,250,000 P4,600,000
Estimated gross profit………………… P 750,000 P 400,000
Multiply by: percentage of completion. 60% 100%
Recognized gross profit to date……… P 100,000 P 450,000 P 400,000
Less: Recognized gross profit in prior years -0- 100,000 450,000
Recognized gross profit each year…. P 100,000 P 350,000 P( 50,000)
15. The actual costs incurred during the year 20x6.
D a. P2,550,000 c. P2,200,000
b. P2,300,000 d. P2,050,000
Solution: Refer to No. 14
Page 7 of 12 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 42 – October 2021 Batch)
16. Fred Esquillo, Inc. charges an initial franchise fee of P90,000 broken down as follows:
Rights to trade name, market area, and proprietary know-how. … P40,000
Training services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …. 11,500
Equipment (cost of P10,800) . . . . . . . . . .. . . . . . .. . . . .. . . …. 38,500
Total initial franchise fee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . P90,000
Upon signing of the agreement, a payment of P40,000 is due. Thereafter, two annual payments of P30,000
are required. The credit rating of the franchisee is such that it would have to pay interest of 8% to borrow
money. The franchise agreement is signed on August 1, 20x7, and the franchise commences operation on
November 1, 20x7. Assuming that no future services are required by the franchisor once the franchise begins
operations, the entry on November 1, 20x7 would include:
D a. a credit to Unearned Franchise Revenue for P40,000.
b. a debit to Service Revenue for P11,500.
c. a debit to Sales Revenue for P38,500.
d. a debit to Unearned Franchise Revenue for P41,555.
Solution:
Recognition of Franchise Rights Revenue Over Time
Depending on the economic substance of the rights, the franchisor may be providing access to the right rather
than transferring control of the franchise rights. In this case, the franchise revenue is recognized over time,
rather than at a point in time (November 1, 20x7), therefore, the P41,555 is unearned franchise revenue
while training (as service) and equipment (sales of equipment) are separately classified but not as an
unearned franchise revenue (in contrast to PAS 18)
November 1, 20x4: Date of Opening/Franchise Opens: - Rights to trade name (to record revenue from
delivery of franchise rights – point in time/right of use)
Unearned Franchise Revenue ........................... . . . . . . . . . . 41,555
Franchise revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,555
Cash/down-payment..............................................................P 40,000
PV of Installment payment for two (2) periods:
P30,000 x 1.78326 (PV of an annuity of P1 for 2 periods) 53,498
Total............................................................................................P 93,498
The PV of the elements of revenue of P93,498 should be allocated to:
Rights to trade name: P93,498 x (40,000/90,000)............P 41,555
Training services: P93,498 x (11,500/90,000).................... 11,947
Equipment: P93,498 x (38,500/90,000)............................ 39,996
Total..................................................................................... P 93,498
Franchises often include a license (right of use-point in time), as well as goods and services transferred at the
start of the franchise as well as over the life (right of access-over time) of the franchise.
A license is said to transfer a right of use if the seller’s activities during the license period are not expected to
affect the intellectual property being licensed to the customer. In that case revenue is recognized at the start of
the license period, that is, when the right is transferred.
17. On August 5, 20x5, Famous Furniture shipped 20 dining sets on consignment to Furniture Outlet, Inc. The
cost of each dining set was P350 each. The cost of shipping the dining sets amounted to P1,800 and was
paid for by Famous Furniture. On December 30, 20x5, the consignee reported the sale of 15 dining sets at
P850 each. The consignee remitted payment for the amount due after deducting a 6% commission,
advertising expense of P300, and installation and setup costs of P390. The total profit on units sold for the
consignor is:
D a. P11,295 c. P6,045
b. P9,945 d. P4,695
Page 8 of 12 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 42 – October 2021 Batch)
Solution:
Charges Related to
Total Consignment Inventory on
Charges Sales Consignment
(20) (15) (5)
Consignor’s charges:
Cost, P350 per set P 7,000 P 5,250 P 1,750
Freight, P1,800 1,800 1,350 450
Consignee’s charges:
Commission (6% x P12,750) 765 765
Advertising 300 300
Delivery and installation 390 390 _______
Total P10,255 P 8,065 P 2,200
Sales price, P850 per set 12,750
Profit on Consignment P 4,695
Note: If question No. 17 might be given in the CPA Licensure Examination:
1. The official answer of this problem in an official textbook (previous edition before 2020) is letter c,
P6.045 but the CORRECT ANSWER is P4,695 (the issue is about the freight charges (freight-in, there
should be an allocation). Take note the term “delivery is also freight-out” and no delivery
expense/freight-out allocation should be charged to unsold units).
2. Your official answer in the board exam should be P4,695. The book author officially acknowledged
when we have a communication thru email messaged and acknowledged the erroneous answer and
agreed that the answer should be P4,695.
3. Please message me at 09178511345, in the event this problem came out in the licensure
examinations (because normally in the board exam the official answer in the book (before 2020
edition) will also be the official answer they might use. Also, if you have some other topical issues
or concerns you encounter in the review or in the board exam (just text me).
18. The following data were taken from the records of JJ Corporation of Manila and its Bacolod branch for 2021:
Manila Bacolod
Office Branch
Sales P530,000 P157,500
Inventory, January 1 57,500 22,250
Purchases 410,000
Shipment to branch 105,000
Shipments from home office 126,000
Inventory, December 31 71,250 29,250
Expenses 191,000 50,750
In 2021, Manila office billed the Bacolod branch at 120% of cost which was lower by 5% than last year.
The combined net income of the home office and the branch is:
D a. P48,325 c. P49,650
b. P48,575 d. P56,075
Solution:
Sales (P530,000 + P157,500) P 687,500
Less: Cost of goods sold
Merchandise inventory, beg. [P57,500 + (P22,250 / 1.25)] P 75,300
Add: Purchases 410,000
Cost of Goods Available for Sale P485,300
Less: MI, ending [P71,250 + (P29,250 / 1.20)] 95,625 389,675
Gross profit .P 297,825
Less: Expenses (P191,000 + P50,750) 241,750
Net Income P 56,075
Page 9 of 12 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 42 – October 2021 Batch)
All sales, collections, and expenses are handled at the branch. All cash received from sales and collections are
sent directly to the Home Office. Expenses are paid by the branch from the imprest fund and immediately
reimbursed by the Home Office and credited to the Home Office account. All expenses paid by the branch are
recorded in the books of the branch.
19. A Compute the balance of the Home Office account in the books of Branch on January 1, 20x4:
A B A B
D a. P163, 000 P67,000 c. P139,000 P111,000
b. P 64,000 P78,000 d. P 78,000 P 64,000
Assets:
Inventory, January 1 P 21,000 P 19,000
Imprest branch fund 2,000 1,500
Accounts receivable, January 1 55,000 43,500
Total Assets P 78,000 P 64,000
Less: Liabilities _____-0- _____-0-
Home Office Current Account P 78,000 P 64,000
20. Compute the balance of the Home Office account on December 31, 20x4.
A B A B
B a. P110,000 P152,000 c. P64,000 P78,000
b. P 91,000 P 67,000 d. P78,000 P64,000
Solution:
Branch A Branch B
Assets:
Inventory, December 31 P 19,000 P 12,000
Imprest branch fund 2,000 1,500
Accounts receivable, December 31 70,000 53,500
Total Assets P 91,000 P 67,000
Less: Liabilities _____-0- _____-0-
Home Office Current Account P 91,000 P 67,000
21. When property other than cash is invested in a partnership, at what amount should the noncash property be
credited to the contributing partner’s capital account?
A a. Fair value at the date of contribution c. Assessed valuation for property tax purposes
b. Contributing partner’s original cost d. Contributing partner’s tax basis
22. On July 1, 20x4, JS and ST formed a partnership. JS contributed cash. ST, previously a sole proprietor,
contributed property other than cash, including realty subject to a mortgage, which the partnership assumed.
ST’s capital account at July 1, 20x4, should be recorded at:
C a. ST’s book value of the property at July 1, 20x4.
b. ST’s book value of the property less the mortgage payable at July 1, 20x4.
c. The fair value of the property less the mortgage payable at July 1, 20x4.
d. The fair value of the property at July 1, 20x4.
Page 10 of 12 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 42 – October 2021 Batch)
23. Drawings
D a. are advances to a partnership. c. are a function of interest on partnership average capital.
b. are loans to a partnership. d. are the same nature as withdrawals.
24. Which of the following is not a withdrawal that may be found in a partnership’s drawing account?
D a. Removal of cash by a partner
b. Payment of a partner’s speeding ticket by the partnership
c. Removal of inventory by a partner
d. All of the above may be found in a drawing account
25. Which of the following statements is correct with regard to drawing accounts that may be used by a
partnership?
A a. Drawing accounts are closed to the partners’ capital accounts at the end of the accounting
period
b. Drawing accounts establish the amount that may be taken from the partnership by a partner in
a given time period
c. Drawing accounts are similar to Retained Earnings in a corporation
d. Drawing accounts appear on the balance sheet as a contra-equity account
26. A partnership agreement calls for allocation of profits and losses by salary allocations, a bonus allocation,
interest on capital, with any remainder to be allocated by preset ratios. If a partnership has a loss to allocate,
generally which of the following procedures would be applied?
C a. Any loss would be allocated equally to all partners.
b. Any salary allocation criteria would not be used.
c. The bonus criteria would not be used.
d. The loss would be allocated using the profit and loss ratios, only.
27. Which of the following forms of new partner admission will not result in a change in the partnership’s net
assets?
B a. Purchase of an ownership interest directly from the partnership
b. Purchase of an ownership interest directly from an existing partner
c. Either of the above
d. Neither of the above
28. When a new partner joins a partnership by investing assets into the partnership, what method may be used to
record the admission of the new partner?
D a. Revaluation of existing assets c. Application of the bonus method
b. Recognition of goodwill d. Any of the three or a combination may be applied
29. Which of the following is a reason to not revalue partnership assets at the date a new partner is admitted to
the partnership?
C a. There has been a change in ownership
b. A new legal entity exists
c. The partnership has not ceased operations
d. All three are reasons to not revalue partnership assets at the date of a new partner’s admission
30. Which of the following is not a part of the partnership liquidation process?
D a. Allocation of any remaining profit or loss to partners' capital accounts
b. Liquidation of noncash assets
c. Closing of the accounting records
d. Recognition of market value adjustments of assets and liabilities
31. Which of the following describes a partnership LUMP-SUM liquidation?
B a. Keeping the partnership assets and liabilities separate from the partners’ personal assets and
liabilities
b. The sale of all noncash assets and payment of liabilities before a single distribution to partners
c. A series of interim distributions to partners while the sale of noncash assets and the payment
of liabilities is occurring
d. The combining of a partner’s capital account with loans to/from the partnership
32. Which of the following describes partnership INSTALLMENT liquidation?
C a. Keeping the partnership assets and liabilities separate from the partners’ personal assets and
liabilities
b. The sale of all noncash assets and payment of liabilities before a single distribution to partners
c. A series of interim distributions to partners while the sale of noncash assets and the payment
of liabilities is occurring
d. The combining of a partner’s capital account with loans to/from the partnership
Page 11 of 12 pages
ReSA - The Review School of Accountancy AFAR Quiz 1
Coverage: AFAR – 01 to 07 (ReSA Batch 42 – October 2021 Batch)
END
Page 12 of 12 pages