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Multiple Choice Questions: Partnership Liquidation

1) As of December 31,2008, the books of XYZ Partnership showed capital balance of: X
P60,000; P45,000 ; Z P15,000. They share profits and losses in the ratio of 4:4:2,
respectively. After some time, they decided to liquidate sold all non-cash assets of
P41,000. Liabilities were paid amounting to P16,000 and P33,000 each is available for
distribution. Assuming that any capital debit balance is uncollectible, the share of each
partner in the cash distribution would be:
a)
b)
c)
d)

X-P24,000 ; Y-P9,000 ; Z-NONE


X-P25,200 ; Y-P10,200; Z-P2,400
X-P34,800 ; Y-P34,800; Z-NONE
X-P17,400 ; Y-P10,200; Z-P1,200

2) Kit and Kat are partners sharing profits and losses equally. Their books of the
partnership showed capital balances of: Kit-P42,000 and Kat-P64,000. Cash, liabilities
and non-cash assets amounted to P16,000, P20,000 and P110,000, respectively. On
December 31,2008, the partnership is dissolved and liquidated of installments, and the
first realization of P30,000 cash is on the sale of non-cash asset of book value of P60,000.
After payment of liabilities, the available and shall be distributed to Kit and Kat as
follows:
a)
b)
c)
d)

Kit-P6,000 ; Kat-P22,000
Kit-P25,000; Kat-P25,000
Kit-P22,000; Kat-P 6,000
Kit-P2,000 ; Kat-P24,000

3) On October 31,2007, A,B, and C decided to dissolve the partnership. Their capital
balances and profits and losses ratio on this date are as follows:
Cash Balance

P/L Ratio

40,000

20%

70,000

50%

40,000

30%

Cash and Liabilities are P20,000 and P45,000, respectively. Net income form
January to October is P28,000.

How much must be realized from the sale f non-cash assets for B to receive
P32,500?
a)
b)
c)
d)

103,000
100,000
110,000
113,000

4) Ding and Dong are partners who share profits and losses in the ratio of 60:40,
respectively. They decided to liquidate and accordingly sold the non-cash assets with a
realization of P10,000 cash. Liabilities were paid for P3,000 and available cash is P9,000.
Their capital balance is Ding P3,000 and Dong P12,000. after the P9,000was divided, the
capital balance of each partner is:
a)
b)
c)
d)

450
9,600
9,000
600

5) R, S, and T are partners sharing profit and losses in the ratio of 2/6, 3/6 and 1/8,
respectively. The partners capital balances are: R-P25,800, S-P24,000, and T-P16,200.
The liabilities amount to P36,000 including a laon of 16,000 from S. The cash balance is
8,000. All partners are personally solvent. The partners plan to sell the assets by
installment. If T received 3,000 from the 1st distribution of each, how much did R and S
receive that time?
R

a)

9,800

3,300

b)

3,300

c)

3,300

d)

6) The partner most available to partnership losses on liquidation is:


a)
b)
c)
d)

R
R and S equally
S
T

7) D, E, and F, partners have capital balances of P9,800, P12,000 and P5,200 and
respectively and share profits in the ratio of 4:2:1. Prepare a schedule showing how avail
cash will be given to the partners as it becomes available. Who among the partners shall
be paid first with an available cash of P1,200?
a)
b)
c)
d)

D
E
F
D and F

8) After operating for 3 years, the books of Gigoy Partnership showed the following
balances:
Net Assets
Gig, Capital
Goy, Capital

130,000
20,000
50,000

If liquidation takes place at this point and net assets are realized at book value, the
partners are entitled to:
a)
b)
c)
d)

Gig-P20,000 ; Goy-P50,000
Gig-P42,850 ; Goy-P58,250
Gig-P96,400 ; Goy-P71,000
Gig-P91,450 ; Goy-P69,700

9) The balance sheet of the firm of JKL partnership shows the following?
ASSETS
Cash

20,000

Other Assets 90,000

LIABILITIES
Accounts Payable 25,000
J,Capital
K, Capital
L,Capital

Total Assets 110,000

Total
110,000

27,000
23,000
35,000
Liabilities

The partners decided to liquidate by installments the 1st sale of non-cash assets
with a book value of P40,000 realizes P25,000.

How much should each partner receive in the first installment?


a)
b)
c)
d)

J-P13,125 ; K-P21,875 ; L- None


J-P10,800 ; K-None ; L-P24,200
J-P12,000 ; K-P2,000 ; L-P25,000
J- None ; K-P17,500; L-P10,000

10) If P1,800 cash is withheld for possible liquidation expenses, how much cash should L
receive?
a)
b)
c)
d)

11,460
23,480
9,720
24,640

ANSWERS:
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)

A
D
B
D
D
C
B
A
B
B

SOLUTIONS:
1)
X

Balance before Liquidation


Loss on Realization
(33,000-120,000) 4:4:2
(17,400)

60,000

(34,800) (34,800)
(87,000)

Balance

25,200

Loss on possible insolvency


of Z 4:4

(1,200)

Cash Received

45,000

TOTAL

15,000

120,000

10,200

(2,400)

33,000

(1,200)

(2,400)

9,000

24,000

2)

KIT

KAT

Balance before liquidation


Loss on Realization
(60,000-30,000) 50:50

42,000

64,000

(15,000)

(15,000)

Balance

27,000

49,000

Loss on possible unrealization of


Non-cash assets (110,000-60,000)

(25,000)

(25,000)

Cash Received

2,000

24,000

3) Total Capital

P178,000

Total Liabilities

P 45,000

Total Assets

P 223,000

Less: Cash

P 20,000

Non-Cash Assets

P203, 000

33,000

Less: Loss on Realization


(32,500-84,000) / 50%

(P103, 000)

Proceeds from Sale


[70,000 + (28,000 x 50%]
4)

P100, 000
DING

DONG

TOTAL

Balance before liquidation


Loss on realization
( 9,000 15,000 )

3,000

12,000

15,000

3,600)

(2,400)

(6,000)

Balance

(600)

9,600

9,000

Loss for possible insolvency

600

(600)

9,000

9,000

Capital Balance after loss on realization

9,600

Less: Cash Received

(9,000)

Capital Balance after cash settlement

600

Cash Received

5)

Balance before Liquidation

25,800

Profit/Loss ratio

2/6

Loss Absorption Capacity

77,400

24,000 16,200
3/6
48,000

Priority I

Cash Payment
R (2/6)

48,000

(29,400)
48,000

I (1/6)

97,200
(3,300)

Priority 1

77,400
(29,400)

48,000

S (3/6)

1/6

(19,800)
77,400

Priority II

9,800

4,900

48,000

6) S is the most vulnerable partner since he has the lowest absorption capacity
meaning that his equity would be reduced to zero with a total partnership loss on
liquidation of P48,000.

7)

Cash Payment

Balance before liquidation

9,800

12,000

5,200

P/L Ratio

50%

30%

20%

Less: Absorption Capacity 19,600

40,000

26,000

Priority I

(14,000)
19,600

Priority II

19,600

4,200

Priority1

26,000

26,000

(6,400)

(6,400)

1,920

1,280

19,600

19,000

6,120

1,280

8) The partners are entitled to receive an amount equal to their capital balances since the
non-cash assets are realized at book value, meaning there is no gain or loss in selling the
assets.
9)

TOTAL

Balance before liquidation

27,000

23,000

35,000

85,000

Loss on realization
(90,000-40,000) 3:5:2

(15,000)

(25,000)

(10,000)

(50,000)

Balances

12,000

(2,000)

25,000

35,000

Loss for possible insolvency

(1,200)

2,000

(800)

Cash received

10,800

24,200

10)

Balance before liquidation

27,000

23,000

35,000

Loss on realization 3:5:4


[(9,000-4,000) +1,800]

(15,540)

(25,900)

(10,360)

35,000

Balance

11,460

(2,900)

24,640

Loss on possible insolvency 3:2

(1,740)

2,900

(1,160)

Cash received

9,720

23,480