Partnership Liquidation

Whether a schedule of safe payments or a cash priority program is used in distributing available cash, both will render the same priority.

• True
• False

If a partner is insolvent, his personal properties shall be distributed to partnership creditors only when debts owing to separate creditors had been settled with.

• True
• False

A cash priority program is usually prepared at the start of the dissolution process to help the partners project when they can expect to be included in the cash distribution.

• True

• False

The partner’s separate creditors shall have priority in payments over those of the creditors of the partnership as regards the partnership properties.

• True
• False

Between the schedule of safe payments and the cash priority program, the schedule of safe payments is a better method to be used if numerous installment distributions are to be made to partners.

• True
• False

Capital deficiency arises when there is an excess of a partner’s share in loss on realization over the partner’s capital credit balance.

• True
• False

The partner with the biggest capital exposure or loss absorption balance should be prioritized in a cash distribution.

• True
• False

Melly, Gelly, and Kelly are partners in a retail merchandising business, MGK Partnership. Initially, Melly contributed P600,000; Gelly, P400,000; Kelly, P200,000. On the date of dissolution, the remaining assets of the partnership amounted to P2,240,000, all accruing to outside creditors. Since the partnership assets is insufficient to fully settle the liabilities, Kelly paid the deficiency in full. What is the actual share of Kelly in the remaining liabilities of the partnership?

A partner’s unrestricted interest represents the portion of a partner’s interest which should remain available to absorb future losses.

• True
• False

The right of offset is the legal right of a partner to apply part or all of his loan account balance against his capital deficiency resulting from losses in the realization of the partnership assets.

• True
• False