PARTNERSHIP LIQUIDATION

I. MODIFIED TRUE OR FALSE. Write True if the statement is correct. Otherwise, explain why it is wrong.

1. The creditors of each partner shall be preferred to those of the partnership as regards the partnership property.
2. Liquidation of a partnership is the process of ending the business.
3. The cash settlement of all liabilities is referred to as realization.
4. In liquidation, partners are given back the assets that they originally invested.
5. Cash payments may be made in the profit and loss ratio only when installment payments have caused the ratio of the partners' capital account balances to be the same as the profit and loss ratio.
6. Partnership creditors will be prioritized next to the inside creditors as to partnership assets in case of liquidation.
7. A partner's interest can be obtained by simply adding the partner's capital account, loans to and from the partnership.
8. If liquidation of a partnership results in a negative balance in a partner's account, the partner must pay into the partnership the amount of the negative balance.
9. The use of safe payments schedule and cash priority program are alternatives which will yield the same ultimate cash distributions to the partners.
10. Partnership liquidation is the same as partnership dissolution.
11. The creditors of the partnership are preferred with respect to the separate or personal properties of the partners.
12. The right of offset is the legal right of a partner to apply part or all of his loan account balance against a capital deficiency resulting from losses in the realization of the partnership assets.
13. Liquidation expenses which are incurred in the realization of non-cash assets affect cash but not partners' capital.
14. The use of schedule of safe payments and cash priority program are methods that will yield at the same amount of distributed cash to the partners.
15. The partnership is said to be dissolved when business is terminated.