If at the time of partnership liquidation, a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency, then that partner is entitled to share in the final distribution of cash.

26. Assets invested by a partner into a partnership become the property of the business.

TRUE

AACSB: Communication
AICPA: BB Industry
AICPA: BB Legal
AICPA: FN Decision Making
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-P1 Prepare entries for partnership formation.
Learning Objective: 12-P3 Account for the admission and withdrawal of partners.
Topic: Admission and Withdrawal of Partners
Topic: Organizing a Partnership

27. Admitting a partner by accepting assets is a personal transaction between one or more current partners and the new partner.

FALSE

AACSB: Communication
AICPA: BB Industry
AICPA: BB Legal
AICPA: FN Decision Making
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 12-P3 Account for the admission and withdrawal of partners.
Topic: Admission and Withdrawal of Partners

28. Current partners usually require any new partner to pay a bonus for the privilege of joining when the current value of a partnership is greater than the recorded amounts of equity.

TRUE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Decision Making
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 12-P3 Account for the admission and withdrawal of partners.
Topic: Admission and Withdrawal of Partners

29. When a partner leaves a partnership, the withdrawing partner is entitled to a bonus if the recorded equity is overstated.

FALSE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Decision Making
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 12-P3 Account for the admission and withdrawal of partners.
Topic: Admission and Withdrawal of Partners

30. When a partnership is liquidated, its business is ended.

TRUE

AACSB: Communication
AICPA: BB Industry
AICPA: BB Legal
AICPA: FN Decision Making
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-P4 Prepare entries for partnership liquidation.
Topic: Liquidation of a Partnership

31. A capital deficiency exists when at least one partner has a debit balance in his or her capital account at the point of final cash distribution during liquidation.

TRUE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
Learning Objective: 12-P4 Prepare entries for partnership liquidation.
Topic: Liquidation of a Partnership

32. A capital deficiency can arise from liquidation losses, excessive withdrawals before liquidation, or recurring losses in prior periods.

TRUE

AACSB: Communication
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-P4 Prepare entries for partnership liquidation.
Topic: Liquidation of a Partnership

33. If a partner is unable to cover a deficiency and the other partners absorb the deficiency, then the partner with the deficiency is thus relieved of all liability.

FALSE

AACSB: Communication
AICPA: BB Industry
AICPA: BB Legal
AICPA: FN Decision Making
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 12-P4 Prepare entries for partnership liquidation.
Topic: Liquidation of a Partnership

34. If at the time of partnership liquidation, a partner has a $5,000 capital deficiency and pays the partnership $5,000 out of personal assets to cover the deficiency, then that partner is entitled to share in the final distribution of cash.

FALSE

AACSB: Analytical Thinking
AICPA: BB Industry
AICPA: FN Measurement
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 12-P4 Prepare entries for partnership liquidation.
Topic: Liquidation of a Partnership