ADVANCED FINANCIAL ACCOUNTING
Professor: Jose Cintron
Q16- 1 What are the majorcauses of a dissolution? What are the accounting implications of a dissolution?
The death of a partner, or wrongful disassociation.
At least half or all of the remaining partners decide to wind upthe partnership business.
When the term or specific undertaking has expired or been completed.
A judicial determination that:( a) the economic purpose of the partnership is unlikely to be achieved,(b) engagement of partner conduct which makes impracticable the carry on the partnership business.
To guide and summarized the partnership liquidation process a statement of partnership realizationand liquidation. The statement, often called a “statement of liquidation,” is a basis of the journal entries made to record the liquidation. It presents, in work paper form, the effects of theliquidation on the balance sheet account of the partnership. The statement shows the conversion of assets into cash, the allocation of any gains or losses to the partners, and the distribution of cash tocreditors and partners. This statement is a basic feature of accounting for partnership liquidation.
Q16- 3 X, Y and Z are partners. The partnership is liquidating, and Partner Z is personallyinsolvent. What implications may this have for Partners X and Y?
The UPA 1997 requires cash for this liquidating distribution. If Z fails to make a required contribution to remedy his capital deficit X,and Y must contribute in the proportion in which they share partnership losses, which will be an amount necessary to pay the partnership’s obligation.
Q16- 5 Contrast a lump-sum liquidation withan installment liquidation?
A lump-sum-sum liquidation of partnership is one in which all assets a, and are converted into cash within a very short period of time, creditors are paid, and a single...