Professional Documents
Culture Documents
Problem I
1.
A, B, C and D Partnership
Statement of Liquidation
January 1, 20x4 to May 31, 20x4
Cash
Balances before
Liquidation
January
- Realization
- Payment of
expenses
- Payment
of liabilities
Balances after Jan
February
- Realization
- Payment of
expenses
- Payment
of liabilities
Balances before
payment to
partners
Payment to
Partners (Sch. 1)
Balances after
February
March
- Realization
- Payment of
expenses
Balances before
payment to
partners
Payment to
Partners (Sch. 2)
Balances after
March
April
- Realization
- Payment of
expenses
Balances before
payment to
partners
Payment to
Partners (Note 1)
Balances after
April
May
- Realization
- Payment of
expenses
Balances before
Offsetting
Offset deficit vs.
Loan
Balances before
payment
Payment to
Partners (Note 2)
NonCash
Assets
181,800
72,000
Liabilities
A, loan
84,000
6,000
D, loan
3,000
(90,000)
(1,200)
(66,000)
4,800
______
91,800
(66,000)
18,000
_____
6,000
_____
3,000
A,
capital
(40%)
B,
capital
(20%)
C,
capital
(20%)
D,
capital
(20%)
26,400
25,800
20,400
16,200
(7,200)
(3,600)
(3,600)
(3,600)
( 480)
( 240)
( 240)
( 240)
______
18,720
______
21,960
______
16,560
______
12,360
(1,680)
(1,680)
(1,680)
( 264)
______
( 264)
______
(30,000)
21,600
(3,360)
(1,320)
( 528)
( 264)
(18,000)
______
_
7,080
61,800
( 5,280)
(18,000)
_____
_
______
______
______
_
3,000
14,832
20,016
14,616
10,416
______
6,000
_____
_
_____
______
(5,280)
______
_____
1,800
61,800
6,000
3,000
14,832
14,736
14,616
10,416
19,200
(24,000)
(1,920)
( 960)
( 960)
( 960)
( 1,440)
______
_____
_
19,560
31,500
6,000
3,000
(18,360)
______
(2,736)
(3,000)
1,200
37,800
3,264
6,000
(19,800)
(5,520)
(2, 760)
(2,760)
(2,760)
(4,800)
______
(1,920)
( 960)
( 960)
( 960)
2,000
15,000
3,264
4,896
4,080
4,080
4,080
(1,500)
______
( 720)
( 360)
( 360)
( 360)
500
18,000
2,554
4,896
3,720
3,720
3,720
2,400
(18,000)
(6,240)
(3,120)
(3,120)
(3,120)
_____
( 576)
( 288)
( 288)
( 288)
12,336
13,488
13,368
9,168
(5,688)
(5,568)
(1,368)
12,336
7,800
7,800
7,800
( 960)
_____
( 384)
( 192)
( 192)
( 192)
1,440
2,554
( 1,728)
408
408
408
______
(1,728)
1,728
_____
______
_____
2,040
816
408
408
408
(2,040)
(816)
(408)
(408)
(408)
2.
A, B, C and D Partnership
Schedule of Safe Payments
Schedule 1 February 28, 20x4
Computation of Distribution of Cash on February 28, 20x4
P 61,800
1,800
P 63,600
A,
capital
(40%)
B,
capital
(20%)
C,
capital
(20%)
D,
capital
(20%)
6,000
14,832
20,832
20,016
20,016
14,616
14,616
3,000
10,416
13,416
(12,720)
7,296
(1,536)
5,760
( 420)
5,340
( 60)
5,280
(12,720)
1,896
(1,536)
360
( 420)
( 60)
60
(12,720)
696
(1,536)
( 840)
840
(25,440)
( 4,608)
4,608
-05,280
5,280
P 37,800
1,200
P 39,000
Applied to:
Loans
Capital
A,
capital
(40%)
B,
capital
(20%)
C,
capital
(20%)
D,
capital
(20%)
6,000
12,336
18,336
13,488
13,488
13,488
13,488
3,000
9,168
12,168
(15,600)
2,736
( 7,800)
5,688
( 7,800)
5,568
( 7,800)
4,368
2,736
___-02,736
-05,688
5,688
-05,568
5,568
3,000
1,368
4,368
3.
T, U, V and W Partnership
Cash Payment Priority Program*
January 31, 20x4
Interests
Balances
before
liquidat
ion:
Loans
Capital
Total
T, capital
(40%)
U, capital
(20%)
6,000
26,400
32,400
25,800
25,800
V, capital
(20%)
20,400
20,400
W, capital
(20%)
3,000
16,200
19,200
T, capital
(40%)
U, capital
(20%)
Payments
V, capital
(20%)
W, capital
(20%)
Total
Interests
Divided
by: P & L
%
Loss
Absorptio
n
Abilitie
s
Priority I
__40%
___20%
__20%
__20%
81,000
129,000
102,000
96,000
______
(27,000)
_______
_______
81,000
102,000
102,000
96,000
Priority II
______
( 6,000)
( 6,000)
_______
81,000
96,000
96,000
96,000
Priority III
______
(15,000)
(15,000)
(15,000)
_______
81,000
81,000
81,000
81,000
____-0*also known as Schedule of Cash Distribution Plan / Pre-distribution Plan.
5,400
5,400
1,200
1,200
3,000
9,600
3,000
4,200
2,400
3,000
3,000
9,000
16,800
4.
Total Interests
Divided by: P & L %
Loss Absorption
Abilities
Order of Cash Distribution
Vulnerability Rankings (1
Is most vulnerable)
T, capital
(40%)
P 32,400
____40%
U, capital
(20%)
P 25,800
____20%
V, capital
(20%)
P 20,400
____20%
W, capital
(20%)
P 19,200
____20%
P 81,000
(4)
P129,000
(1)
P 102,000
(2)
P 96,000
(3)
(1)
(4)
(3)
(2)
The vulnerability ranks indicate that partner T is most vulnerable to losses because his equity were
reduced to zero with a partnership liquidation loss of P81,000. Partner U is least vulnerable because
his equity is sufficient to absorb his share of liquidation losses up to P129,000. This interpretation
helps explain why partner U received all the cash distributed to partner on the first installment
distribution (August 20x4).
Incidentally, the cash priority program developed will yield the same cash payment as the process of
computing safe payments each time cash is available. The cash distribution under the cash priority
program is as follows:
Order of Cash Distribution
1. First P70,000
2. Next P 4,500
3. Next P2,000
4. Next P7,500
5. Remainder
Creditors
100%
40%
100%
50%
33 1/3%
20%
50%
33 1/3%
20%
33 1/3%
20%
The first P84,000 available is, of course paid to the creditors. Cash may be held back from
distribution if it is anticipated that additional expenses will be incurred and unrecorded liabilities will
be discovered. The distribution of cash in excess of the reserve amount proceeds as determined.
Partner U will receive all of an additional ash up to P5,400. Additional cash in excess of P5,400 and
up to P7,800 is distributed 50:50 to partners U and V. Any amount in excess of P7,800up to P16,800
is distributed 1: 1: 1 to partners U, V, and W, respectively. After P16,800 (P5,400 + P2,400 + P9,000)
has been distributed to the partners, the capital accounts are in the desired profit and loss ratio of
4:2:2:2. Any further distributions to the partners are made in accordance with the profit and loss ratio.
Even though both methods produce the same results, the cash payment priority program is more
informative to both personal and partnership creditors, and to the partners. Interested parties now
know the order in which the individual partners will receive cash and the amounts that each may
receive at each period of the distribution process.
One requirement that must be satisfied in the development of the advance plan is that the partners
must share income in the same ratio that they share losses. If this were not the case the potential
amount of a new loss would need to be computed after every allocation to the partners capital
accounts. This occurs because the allocation of liquidation gain alters the order of cash distribution
computed in the priority program.
Problem II
ABC Partnership
Statement of Partnership Realization and Liquidation
For the period from January 1, 20x4, through March 31, 20x4
Capital Balances
Other
Accounts
AA
BB
Cash
Assets
Payable
50%
30%
Balances before Liquidation,
18,000
307,000
(53,000)
(88,000)
(110,000)
January 1,20x4
January transactions:
1 Collection of accounts
.
receivable at a loss
of P15,000
51,000
(66,000)
7,500
4,500
2 Sale of inventory at a loss
38,000
(52,000)
7,000
4,200
.
of P14,000
3 Liquidation expenses paid
(2,000)
1,000
600
.
4 Share of credit memorandum
3,000
(1,500)
(900)
.
5 Payments to creditors
(50,000)
50,000
.
55,000
189,000
-0(74,000)
(101,600)
Safe payments to partners
(Schedule 1)
(45,000)
__
26,600
10,000
189,000
-0(74,000)
(75,000)
February transactions:
6 Liquidation expenses paid
.
(4,000)
__
2,000
1,200
6,000
189,000
-0(72,000)
(73,800)
Safe payments to partners
(Schedule 2)
-0__
___ -0-06,000
189,000
-0(72,000)
(73,800)
March transactions:
8 Sale of M&Eq. at a loss of
146,000
(189,000)
21,500
12,900
.
P43,000
9 Liquidation expenses paid
.
(5,000)
2,500
1,500
147,000
-0-0(48,000)
(59,400)
10. Payments to partners
(147,000)
48,000
59,400
Balances at end of liquidation,
March 31, 20x4
-0-
-0-
-0-
-0-
-0-
CC
20%
(74,000)
3,000
2,800
400
(600)
(68,400)
18,400
(50,000)
800
(49,200)
-0(49,200)
8,600
1,000
(39,600)
39,600
-0-
ABC Partnership
Schedules of Safe Payments to Partners
AA
BB
CC
Schedule 1:
January 31,
20x4
Capital
balances
Possible
loss:
Other
assets
(P189,000)
and
possible
liquidatio
n
costs
(P10,000)
Absorption
of
AAs
potential
deficit
balance
BB:
(P25,500 x
3/5
=
P15,300)
CC:
(P25,500 x
2/5
=
P10,200)
Safe
payment,
January 31,
20x4
Schedule 2:
February
27, 20x4
Capital
balances
Possible
loss:
Other
assets
(P189,000)
and
possible
liquidatio
n
costs
(P6,000)
Absorption
of
AAs
potential
deficit
50%
30%
20%
(74,000)
(101,600)
(68,400)
99,500
59,700
39,800
25,500
(25,500)
(41,900)
(28,600)
15,300
10,200
-0-
(26,600)
(18,400)
(72,000)
(73,800)
(49,200)
97,500
58,500
39,000
25,500
(25,500)
(15,300)
(10,200)
balance:
BB:
(P25,500 x
3/5
=
P15,300)
CC:
(P25,500 x
2/5
=
P10,200)
Safe
payment,
February
27, 20x4
15,300
10,200
-0-
-0-
-0-
Note that the computation of safe payments on February 27, 20x4, resulted in no payments to partners. This is
due to the large book value of Other Assets still unrealized and the reservation of the $6,000 cash on hand for
possible future liquidation expenses.
PET Partnership
Cash Distribution Plan
June 30, 20x4
EE
Capital Accounts
TT
PP
50%
Preliquidation
capital balances
Loss absorption
Power (Capital
balances /
Loss percent)
(110,000)
(150,000)
(120,000)
(110,000)
30,000
(120,000)
(120,000)
Decrease LAPs
to next highest:
EE
(P10,000 x .30)
TT
(P10,000 x .20)
(110,000)
30%
20%
(45,000)
(24,000)
(55,000)
9,000
(36,000)
(24,000)
3,000
10,000
(110,000)
(55,000)
TT
(55,000)
10,000
(110,000)
EE
2,000
(22,000)
(33,000)
EE
TT
Payable
Cash available
First
Next
Next
Additional paid
in P&L ratio
P106,000
(17,000)
(9,000)
(5,000)
(75,000)
P
-0-
50%
30%
20%
P 9,000
3,000
P 2,000
22,500
P34,500
15,000
P17,000
P17,000
______
P17,000
P37,500
P37,500
Problem IV
PET Partnership
Statement of Partnership Liquidation and Realization
From July 1, 20x4, through September 30, 20x4
Preliquidation balances
July:
Assets Realized
Paid liquidation costs
Paid creditors
Safe Payments (Sch. 1)
Cash
Noncash
Assets
Accounts
Payable
6,000
135,000
(17,000)
26,500
(1,000)
(17,000)
14,500
(6,500)
(36,000)
8,000
August:
Equipment withdrawn
(allocate P6,000 gain)
Paid liquidation costs
Safe Payments (Sch. 2)
September:
Assets Realized
Paid liquidation costs
Payments to partners
Postliquidation balances
99,000
99,000
75,000
(1,000)
76,500
(76,500)
-0-
Capital
EE
30%
TT
20%
50%
(55,000)
(45,000)
(24,000)
4,750
500
2,850
300
1,900
200
17,000
-0-
(49,750)
(41,850)
6,500
(21,900)
-0-
(49,750)
(35,350)
(21,900)
(3,000)
(1,800)
8,800
300
(12,800)
4,000
200
(8.600)
8,600
-0-
(4,000)
(1,500)
6,500
(4,000)
2,500
PP
95,000
-0-
750
(52,000)
95,000
-0-
(52,000)
450
(36,700)
4,000
(32,700)
-0-
-0-
-0-
-0-
10,000
500
(41,500)
41,500
-0-
6,000
300
(26,400)
26,400
-0-
(95.000)
PET Partnership
Schedules of Safe Payments to Partners
PP
Schedule 1: July 31, 20x4
50%
Capital balances
(49,750)
Possible loss on noncash assets (P99,000)
49,500
Cash retained (P8,000)
4,000
3,750
Absorption of Pen's potential deficit
(3,750)
EE: P3,750 x .30/.50
TT: P3,750 x .20/.50
-0-
EE
30%
(41,850)
29,700
2,400
(9,750)
(12,800)
TT
20%
(21,900)
19,800
1,600
(500)
2,250
(7,500)
1,500
1,000
(1,000)
-0-
1,000
(6,500)
(52,000)
47,500
1,250
(3,250)
(36,700)
28,500
750
(7,450)
-0-
(12,800)
19,000
500
6,700
(6,700)
4,188
938
(938)
-0-
2,512
(4,938)
-0-
938
(4,000)
-0-
Problem V
DSV Partnership
Statement of Partnership Realization and Liquidation Installment Liquidation
From July 1, 20x4, through September 30, 20x4
Capital Balances
Noncash
D
S
V
Cash
Assets
Liabilities
50%
30%
20%
Preliquidation balances, 6/30
50,000
670,000
(405,000)
(100,000)
(140,000)
(75,000)
July, 20x4: Sale of assets and
distribution of P120,000 loss
Liquidation expenses
Payment to creditors
Payments to partners (Sch. 1)
August, 20x4: Sale of assets &
distribution of P13,000 loss
Liquidation expenses
Payments to partners (Sch. 2)
September, 20x4: Sale of assets
distribution of P70,000 loss
(510,000)
390,000
440,000
(2,500)
437,500
(405,000)
32,500
(22,500)
10,000
Payments to partners
Postliquidation balances
Schedule 1,
July 31, 20x4:
D
50%
36,000
24,000
(40,000)
1,250
(38,750)
(104,000)
750
(103,250)
(51,000)
500
(50,500)
(38,750)
(103,250)
22,500
(80,750)
(50,500)
3,900
(76,850)
750
(76,100)
13,700
(62,400)
2,600
(47,900)
500
(47,400)
5,800
(41,600)
21,000
(41,400)
2,400
(39,000)
1,500
(37,500)
37,500
-0-
14,000
(27,600)
1,600
(26,000)
1,000
(25,000)
25,000
-0-
160,000
(405,000)
160,000
160,000
(405,000)
405,000
-0-
160,000
-0-
22,000
32,000
(2,500)
29,500
(19,500)
10,000
(35,000)
125,000
-0-
125,000
-0-
6,500
(32,250)
1,250
(31,000)
125,000
-0-
(31,000)
55,000
65,000
(125,000)
-0-
-0-
65,000
(2,500)
62,500
(62,500)
-0-
-0-
-0-
-0-
-0-
-0-
-0-
60,000
DSV Partnership
Schedule of Safe Payments to Partners
S
30%
(38,750)
35,000
4,000
(4,000)
-0-0-0-0-
(50,500)
V
20%
Capital
balances, July
31,
Before cash
distribution
Assume
full
loss
of
P160,000 on
remaining
noncash
assets and
P10,000 in
possible
future
liquidation
expenses
Assume D's
potential
deficit
must be
absorbed by S
and V:
30/50 x
P46,250
20/50 x
P46,250
(38,750)
(103,250)
(50,500)
85,000
51,000
34,000
46,250
(52,250)
(16,500)
(46,250)
27,750
18,500
-0-
Assume
V's
potential
deficit
must be
absorbed by S
completely
Safe
payments to
partners
on July 31,
20x4
Schedule 2,
August
31,
20x4:
Capital
balances,
August 31,
before cash
distribution
Assume
full
loss
of
P125,000 on
remaining
noncash
assets and
P10,000 in
possible
liquidation
expenses
Assume
potential
deficit
D's
(24,500)
2,000
2,000
(2,000)
-0-
(22,500)
-0-
(31,000)
(76,100)
(47,400)
67,500
36,500
40,500
(35,600)
27,000
(20,400)
must be
absorbed by S
and V:
30/50 x
P36,500
20/50 x
P36,500
Safe
payments to
partners
(36,500)
21,900
14,600
-0-
(13,700)
(5,800)
Problem VI: Cash Distribution Plan (or better use the format presented in the discussion)
DSV Partnership
Cash Distribution Plan
June 30, 20x4
Loss Absorption Power
D
Profit and loss sharing ratio
Preliquidation capital balances
Loss absorption power (LAP)
capital accounts /
loss sharing percentage
(200,000)
(466,667)
50%
(100,000)
30%
(140,000)
20%
(75,000)
(100,000)
27,500
(112,500)
(75,000)
(375,000)
(375,000)
(375,000)
175,000
52,500
175,000
35,000
(200,000)
(200,000)
(200,000)
50%
30%
20%
First P405,000
Next P10,000
Next P27,500
Next P87,500
Any additional distributions
in the partners' profit
and loss ratio
50%
(100,000)
(60,000)
100%
60%
40%
30%
20%
10
91,667
(200,000)
1.
2.
3.
4.
5.
Capital Accounts
S
30%
(140,000)
V
20%
(75,000)
(40,000)
61,250
(38,750)
36,750
(103,250)
24,500
(50,500)
(38,750)
22,500
(80,750)
(50,500)
7,750
(31,000)
4,650
(76,100)
3,100
(47,400)
5,000
8,700
(31,000)
(62,400)
5,800
(41,600)
36,250
5,250
(5,250)
-0-
21,750
(40,650)
3,150
(37,500)
14,500
(27,100)
2,100
(25,000)
37,500
-0-
-0-
25,000
-0-
Schedule 1, July 31, 20x4: Computation of P22,500 of cash available to be distributed to partners on July
31, 20x4:
Cash balance, July 1, 20x4
P 50,000
Cash from sale of noncash assets
390,000
Less: Payment of actual liquidation expenses
(2,500)
Less: Payments to creditors
(405,000)
Less: Amount held for possible
future liquidation expenses
(10,000)
Cash available to partners, July 31, 20x4
P 22,500
Schedule 2, August 31, 20x4: Computation of P19,500 of cash available to be distributed to partners on
August 31, 20x4:
Cash balance, August 1, 20x4
Cash from sale of noncash assets
Less: Payment of actual liquidation expenses
Less: Amount held for possible
future liquidation expenses
Cash available to partners, August 31, 20x4
P10,000
22,000
(2,500)
(10,000)
P 19,500
Schedule 3, September 30, 20x4: Computation of P62,500 of cash available to be distributed to partners on
September 30, 20x4:
Cash balance, September 1, 20x4
Cash received from sale of noncash assets
Less: Payment of actual liquidation expenses
P10,000
55,000
(2,500)
P62,500
Problem VII
1. d
12
JJ
CC
TT
Total
Prior capital
Loss on sale
of inventory
Possible loss
of remaining
inventory
Allocate Charles'
potential
capital deficit:
2. a
Capital balances
Loss on sale of assets
(475,000 600,000) 4:4:2
Possible loss for unrealized
assets
P1,000,000 P600,000 =
400,000
3.
4.
Safe payments
6.
(45,000)
(55,000)
(260,000)
24,000
(136,000)
30,000
(15,000)
6,000
(49,000)
60,000
(200,000)
64,000
(72,000)
80,000
65,000
16,000
(33,000)
160,000
(40,000)
52,000
(20,000)
(65,000)
13,000
(20,000)
(40,000)
Peter
300,000
Paul
350,000
Mary
400,000
Total
1,050,000
(50,000)
(25,000)
(125,000)
300,000
375,000
925,000
160,000
160,000
80,000
400,000
(90,000
140,000
295,000
525,000
( 50,000)
250,000
-0-
5.
(160,000)
CC
5/10
80,000
(15,000)
DD
3/10
90,000
(9,000)
EE
2/10
70,000
(6,000)
65,000
( 50,000
)
15,000
81,000
(30,000)
64,000
(20,000)
51,000
44,000
Total
10/10
240,000
( 30,000
)
210,000
( 20,000
)
190,000
b
d
Capital balances
Divided by: Profit and loss ratio
AA
37,000
40%
BB
65,000
40%
92,500
162,500
92,500
162,500
0
%
CC
48,00
20
240,00
0
77,500
162,500
70,000
92,500
70,000
92,500
92,500
8.
a If all partners received cash after the second sale, then the remaining 12,000 is
distributed in the loss ratio.
9.
AE
40%
(40,000)
40,000
-0-
BT
30%
(180,000)
30,000
(150,000)
KT
30%
(30,000)
30,000
-0-
Laurel
Ezzard
60,00
Tillman
(52,800)
7,200
67,000
Total
( 26,400
)
40,600
17,000
96,000
240,000
(26,400
)
( 9,400
)
(26,400)
(132,000
)
108,000
69,600
Capital balances
Divided by: Profit and loss ratio
Loss absorption power
D
72,00
0
40
)
Loss to reduce H and J:
14
20%
180,00
0
160,00
0
180,00
0
160,00
0
Capital balances
R
32,00
H
20,00
0
(5,882
14,118
J
22,00
(4,118)
17,882
0
%
N
52,00
20
260,00
0
-0-
J
0
%
80,000
180,000
S
(10,000
10,000
0
24,00
20
120,00
0
____0
120,00
0
Total
32,00
0
32,000
(50:35)
Balances
(8,011)
6,107
(5,607)
12,275
(13,618)
13,382
Note:
1. Regardless there is a forthcoming contribution to be made by Sandy, it is assumed that the P10,000 deficit may
not be recovered for purposes of distribution of cash.
2. The P13,382 cannot be distributed in accordance with profit and loss ratio for reason that the capital balances of Harding
and Jones is not the same with the P&L ratio (H: 20/42 =48%; J: 22/42 = 52%)
Capital balances
Additional contribution
Capital balances
Divided by: Profit and loss ratio
Loss absorption power
Loss to reduce JJ to HH:
(19,428 x 35/85 = 8,000)
Balances
34,00
0
Cash available
Less: Priority I to Jones (P19,428 x 35/85)
P10,382
Less: P& L (50:35)
(10,382) P 6,107
H
20,00
0
0
20,000
50/85
34,00
0
J
22,00
0
22,000
35/85
53,429
S
(10,000
10,000
19,428
34,000
P18,382
P 8,000
8,000
4,275
P6,107
P 12,275
13. b
Gonda
Herron
60,00
Morse
70,000
(15,000)
( 22,500
)
47,500
45,000
Total
40,000
(12,500)
170,00
0
(50,000)
27,500
120,000
14. a
Since the partnership currently has total capital of P350,000, the P150,000 that is available would
indicate maximum potential losses of P200,000 that is hypothetically split among the partners.
White
Sands
Luke
Total
50,00
100,000
(60,000)
( 40,000
)
60,000
(2,857)
(10,000)
10,000
200,000
(100,000
)
100,000
(7,143)
150,000
350,00
0
(200,000
)
150,000
0
Capital balances
40,000
______
40,000
(35,000)
55,00
1/3
120,00
0
Loss to reduce E to D:
(45,000 x 1/3 = 15,000)
Balances
90,00
1/3
165,00
0
30,00
______
30,00
1/3
90,000
(45,000)
120,00
0
120,00
0
____0
90,000
16. c
S
Capital
Loan
Total interests
Loss on sale (5:3:2) - [90,000
26,000]
40,00
Total
5,000
60,000
_______
_______
5,000
5,000
40,000
(32,000)
15,000
( 19,200
)
( 4,200)
( 1,050)
10,000
(12,800
)
( 2,800)
2,800
65,000
(64,000)
8,000
(1,750)
15,000
6,250
( 5,250)
Additional investment
5,250
1,000
0
1,000
_______
5,250
6,250
6,250
17. d [(P240,000 P96,000) /30% = P480,000]
18. b - (P13,000 P1,000 share of gain = P12,000, refer to entries below)
Revaluation entry:
Accumulated depreciation
3,000
Gym, capital
1,000
Hob, capital
1,000
Ing, capital
1,000
Withdrawal of equipment:
Accumulated depreciation (8,000 3,000)
5,000
Hob, capital
13,000
Equipment
18,000
19. b
16
37,00
(16,000)
65,000
( 16,000
Total
48,00
0
( 8,000)
150,000
(40,000)
21,000
(36,000)
20,000
15,000
)
49,000
(36,000
)
40,000
(18,000)
(10,000)
( 5,000)
110,000
90,000
17,000
20. b
A
(16,000)
(37,200)
(16,200)
11,800
21,400
Possible insolvency loss (2:1)
17,000
16,200
16,000
65,000
Total
48,00
0
( 8,000)
(40,000)
40,000
110,000
(37,200
)
(18,600)
93,000
(10,800)
( 5,400)
( 16,000
)
49,000
21,000
1,000
37,00
150,000
17,000
21. d - Since the partnership currently has total capital of P400,000, the P30,000 that is available would
indicate maximum potential losses of P370,000.
Reported balances
Anticipated loss (P370,000) split on
a 2:3:5 basis
Potential balances
Potential loss from C's deficit (split 2:3)
Current cash distribution
22. c
Capital balances
Divided by: Profit and loss ratio
Loss absorption power
Loss to reduce CC to BB:
(170,000 x .10 = 17,000)
Balances
23. c
Capital balances
Divided by: Profit and loss ratio
K
59,00
0
40
A
P100,000
B
P120,000
C
P180,000
(74,000)
P 26,000
( 2,000)
P 24,000
(111,000)
P 9,000
(3,000)
P 6,000
(185,000)
P (5,000)
5,000
P
-0-
M
39,00
30%
147,50
0
130,00
0
147,50
0
130,00
0
C
60,00
0
40
P
27,00
30%
0
%
B
34,00
10
340,00
0
J
0
%
170,000
170,000
H
43,00
20
34,00
20
170,00
0
____0
170,00
0
M
20,00
10
150,00
0
90,000
150,00
0
90,000
215,00
0
15,000
200,000
200,00
0
____0
200,00
0
24. c - the P16,000 available cash can be distributed but should be done under the assumption that all
deficit balances will be total losses. After offsetting JJ loan, the two deficits total P4,000. FF and RR, the
two partners with positive capital balances, share profits in a 30:20 relationship (the equivalent of a
60%:40% ratio). FF would absorb P2,400 of the potential loss with RR being allocated P1,600. The
remaining capital balances (P10,600 and P5,400) are safe capital balances and those amounts can be
immediately distributed.
or, alternatively:
W
(2,000
)
______
Capital balances
Loan
Total interests
Potential insolvency loss (3:2)
J
(5,000
3,000
(2,000)
2,000
25. b
(2,000)
2,000
A
(5,000
)
5,000
Capital balances
Potential loss from A deficit (5:3)
0
_
)
F
13,00
R
7,000
______
__
13,000
( 2,400
7,000
(1,600)
10,600
5,400
B
18,000
C
6,000
(3,125)
14,875
(1,875)
4,125
(8,750)
6,125
(5,250)
(1,125)
(1,125)
1,125
Total
19,00
0
19,000
(14,000)
5,000
0
5,000
26. c
70,00
20,000
90,000
(15,000)
75,000
30,000
______
30,000
( 15,000
)
15,000
Total
50,00
0
______
50,000
(15,000)
150,000
20,000
170,000
(45,000)
35,000
125,000
27. b liabilities should be paid first, then the balance of P30,000 should be given to Able since he is the
one entitled to the first priority.
INTERESTS
PAYMENTS______
A
B
C
A
B
C
Total
Balances before realization
18
Loans.. P 20,000
Capital...
70,000 P 30,000 P 50,000
Total interests... P 90,000 P 30,000 P 50,000
Divided by: P&L ratio
1/3
1/3
1/3
Loss absorption ability.. P270,000 P 90,000 P150,000
Priority I. 120,000
_______ P40,000
P150,000 P90,000 P150,000
Priority II
60,000
0
60,000 20,000
P 90,000 P90,000 P 90,000 P60,000 P
P40,000
0 P20,000 40,000
0 P20,000 P80,000
28. d
A
Loan
Total interests
Loss on sale (240,000 195,000)
70,00
20,000
90,000
(15,000)
______
30,000
( 15,000
)
15,000
______
75,000
(20,000)
30,000
50,00
0
______
50,000
(15,000)
35,000
_____
Total
150,000
20,000
170,000
(45,000)
125,000
(20,000)
55,000
15,000
35,000
105,000
Asset received
______
______
(30,000)
(30,000)
Payment to partners after payment of loan 55,000
15,000
5,000
75,000
Note: The requirement is payment to partners after outside creditors and loans to partners had been paid, therefore, the payment
to partners is in so far as capital is concerned.
29. d
D
Balances before realization
Loans.. P
0
Capital... 170,000
Total interests... P170,000
Divided by: P&L ratio
50%
Loss absorption abilities.. P340,000
Priority I.
P340,000
Priority II
P340,000
INTERESTS
R
P 10,000
170,000
P180,000
30%
P600,000
(200,000)
P400,000
(60,000)
P340,000
P(20,000)
100,000
P 80,000
20%
P400,000
0
P400,000
(60,000)
P340,000
PAYMENTS
R
Total
P60,000
___
P60,000
18,000
18,000 36,000
P P 78,000 P18,000 P 96,000
P 60,000
250,000
5,000
10,000
(120,000)
P205,000
30. b
T
Balances before realization
Loans.. P
0
Capital...
22,000
Total interests... P 22,000
Divided by: P&L ratio
2/4
Loss absorption abilities.. P 44,000
Priority I.
-
INTERESTS
N
D
P
0 P
0
15,500
14,000
P15,500 P 14,000
1/4
1/4
P62,000 P 56,000
( 6,000)
0
PAYMENTS
D
Total
P 1,500
___
P1,500
Priority II
__
P
6,250
2/4
P 12,500
7,500
P 20,000
31. d
Cash, beginning
Add (deduct):
Proceeds from sale of certain assets
Liquidation expenses paid
Payment of liabilities
Payment to partners (refer to No. 30)
Cash withheld
P 12,000
32,000
( 1,000)
( 5,400)
( 20,000)
P 17,600
INTERESTS
Q
R
PAYMENTS______
Q
R
Total
P 2,000 P 2,000
P6,000
P P6,000
34. d
Priority
Creditors
First P300,000. P300,000
Next P80,000 (7:3)
Next P70,000 (3:4)
Remainder*..
P300,000
Mattews
Norell
P56,000
30,000
22,000
P108,000
P24,000
34,000
P58,000
1
.
2
.
3
.
20
Reams
6. d
11. e
16.
7. d
12. a
17. a
8. a
13. a
18. b
P40,000
44,000
P84,000
Total
P300,000
80,000
70,000
100,000
P550,000 (d)
4
.
5
.
9. d
14. c
19. c
10 b
,
15, d
20. d