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CHAPTER 3

Partnership Liquidation

EXERCISES
Exercise 3 - 1

Aguilar Benito Casimiro David


Capital balances before liquidation P 11,000 P 10,300 P 13,700 P 9,000
Loan from partners 2,000
Total partners interest P 13,000 P 10,300 P 13,700 P 9,000
Loss on realization (P46,000 P12,000) (13,600) ( 10,200) ( 6,800) ( 3,400)
Balances P( 600) P 100 P 6,900 P 5,600
Additional loss to partners 600 ( 300) ( 200) ( 100)
Balances -------- P ( 200) P 6,700 P 5,500
Additional loss to partners 200 ( 133) ( 67)
Distribution of cash to partners --------- --------- 6,567 5,433

Exercise 3 - 2

Duque Espino Felipe Total


Original investments P 50,000 P 22,500 P 20,000 P 92,500
Net income for 2007 15,000 7,500 7,500 30,000
Drawings in 2007 ( 15,000) ( 10,000) ( 10,000) ( 35,000)
Total partners interest before dissolution P 50,000 P 20,000 P 17,500 P 87,500
Net assets distributed to partners ( 32,500) ( 16,250) ( 16,250) ( 65,000)
Balances P 17,500 P 3,750 P 1,250 P 22,500
Loss to partners distributed 2:1:1 ( 11,250) ( 5,625) ( 5,625) ( 22,500)
Cash settlement among partners P 6,250 P( 1,875) P( 4,375) ------

Exercise 3 - 3

1. Guarin, Capital 1,500


Receivable from Guarin 1,500
To offset receivable from Guarin against his capital.
2. Salary Payable to Henson 500
Henson, Capital 500
To include salary payable to Henson to his interest.
3. Henson, Capital (P24,500 x 40%) 9,800
Guarin, Capital (P24,500 x 60%) 14,700
Loss from Liquidation 24,500
To distribute loss from liquidation to partners.
4. Henson, Capital (P9,500 + P500 - P9,800) 200
Guarin, Capital (P18,000 - P1,500 - P14,700) 1,800
Cash 2,000
Exercise 3 - 4
1. Ibarra Javier Katindig
AA1 - Chapter 3 (2008 edition) page 2

Original investment P 60,000 P 54,000 P 16,000


Net loss for six months* (18,000) (12,000) ( 6,000)
Loss on realization (P121,000 - P49,000 = P72,000) (36,000) (24,000) (12,000)
Balances P 6,000 P 18,000 P( 2,000)
Additional loss to partners ( 1,200) ( 800) 2,000
Cash distribution to Ibarra ( 4,800)

* Total capital, March 1 (P60,000 + P54,000 + P16,000) P130,000


Net assets, Aug. 31 (P5,000 + P121,000 - P32,000) 94,000
Net loss P 36,000

2. Book value of other assets P121,000


Total loss on realization
Capital balance of Katindig after dist. of net loss P 10,000
Excess of personal liabilities over personal assets ( 5,000)
Maximum amount of loss that can be absorbed by Katindig P 5,000
Fractional share of Katindig 1/6__ ( 30,000)
Cash that must be realized on sale of other assets P 91,000

Exercise 3 5
1. Book value of other assets (P459,000 P3,000) P456,000
Cash realized:
Accounts receivable [P180,000 (P60,000 x 20%)] P168,000
Merchandise inventory 75,000
Prepaid advertising 2,400
Machinery and equipment (P120,000 x 60%) 72,000 317,400
Loss on realization P138,600

Lesaca Manalo Partnership


Statement of Liquidation
December 31, 2008

Other Liabilities Capital


Cash Assets AP NP Lesaca Manalo
Balances before liquidation P 3,000 P456,000 P60,000 P258,000 P90,000 P 51,000
Sale of assets and distribution 317,400 ( 456,000 ( 55,440) ( 83,160)
of loss )
Balances P320,400 P60,000 P258,000 P34,560 (P32,160)
Payment of liabilities ( 320,400 ( 59,400) ( 258,000 ( 1,200) ( 1,800)
) )
Balances P600 P33,360 (P33,960)
Additional investment by 12,000 12,000
Manalo
Balances P 12,000 P 600 P33,360 (P21,960)
Payment of liabilities ( 600) ( 600)
Balances P 11,400 P33,360 (P21,960)
Additional loss to Lesaca ( 21,960) 21,960
Payment to Lesaca P 11,400 P11,400

Exercise 3 6
Nocum Oliva Pascua Quinto
Capital balances before liquidation P180,000 P300,000 P240,000 (P 33,000)
Restricted interest possible loss
AA1 - Chapter 3 (2008 edition) page 3

Non-cash assets P600,000


Liquidation expenses 9,000
Unrecorded liabilities 15,000
Total P624,000 ( 156,000) ( 156,000) ( 156,000) ( 156,000)
Balances P 24,000 P144,000 P 84,000 (P189,000)
Restricted interest possible loss to
Nocum, Oliva and Pascua for the
deficiency of Quinto ( 63,000) ( 63,000) ( 63,000) 189,000
Balances (P 39,000) P 81,000 P 21,000 -
Restricted interest possible loss to
Oliva and Pascua for the deficiency of
Nocum 39,000 ( 19,500) ( 19,500)
Safe payment - P 61,500 P 1,500 -

Exercise 3 - 8
Rama, Sison and Toledo
Cash Priority Program

PAYMENTS
Rama Sison Toledo Rama Sison Toledo
Capital balances P30,000 P70,000 P40,000
AA1 - Chapter 3 (2008 edition) page 4

Add Loan balances 20,000 20,000 30,000


Total partners interest P50,000 P90,000 P70,000
Profit and loss ratio 40% 40% 20%
Loss absorption balance P125,000 P225,000 P350,000
Allocation I Cash to Toledo
reducing LAB to an amount
reported for Sison
(P125,000 x 20%) (125,000) P25,000
Balances P125,000 P225,000 P225,000
Allocation II - Cash to Sison &
Toledo reducing LAB to an amount
reported for Rama
P100,000 x 40% (100,000) P40,000
P100,000 x 20% (100,000) 20,000
Balances P125,000 P125,000 P125,000 P40,000 P45,000
Allocation III - Further cash
distribution may be made in the
P & L ratio

Exercise 3-9
1. Julian, Lagman and Magno
Cash Priority Program
January 1, 2008
PAYMENTS
Julian Lagman Magno Julian Lagman Magno
Capital balances before liquidation P 36,000 P 54,000 P18,000
Add Note payable to Magno 14,000
Total partners interest P 36,000 P 54,000 P 32,000
Profit and loss ratio 3/10 3/10 4/10
Loss absorption balances P120,000 P180,000 P80,000
Allocation I Cash to Lagman reducing
LAB to an amount reported for Julian
(P60,000 x 3/10) (60,000) P18,000
Balances P120,000 P120,000 P80,000
Allocation II Cash to Julian & Lagman
reducing LAB to an amount reported
for Magno (P40,000 x 3/10) ( 40,000) (40,000) P12,000 12,000
Balances P80,000 P80,000 P80,000 P12,000 P20,000 -
Allocation III Further cash distributions
may be made in the P & L ratio

2. Julian, Lagman and Magno


Statement of Liquidation
January to March, 2008
Other NP to PAYMENTS
Cash Assets Liabilities Magno Julian Lagman Magno
Balances before liquidation P12,000 P146,000 P36,000 P14,000 P36,000 P54,000 P18,000
January:
Sale of assets and dist. Of
loss 30,000 ( 38,000) ( 2,400) ( 2,400) ( 3,200)
AA1 - Chapter 3 (2008 edition) page 5

Payment of liquidation
expenses ( 3,600) ( 1,080) (1,080 (1,440)
Payment of liabilities ( 36,000) (36,000)
Distribution of cash to
partners (sch. 1) ( 2,400) (2,400)
Balances P108,000 P14,000 P32,520 P48,120 P13,360
February:
Sale of assets and
distribution of gain 44,000 (35,000) 2,700 2,700 3,600
Payment of liquidation
expenses (8,400) (2,520) (2,520) (3,360)
Distribution of cash to
partners (sch. 2) (35,600) (10,000) (25,600)
Balances P73,000 P14,000 P22,700 P22,700 P13,600
March:
Sale of assets and
distribution of loss 36,000 (73,000) (11,100) (11,100) (14,800)
Balances P36,000 P14,000 P11,600 P11,600 P(1,200)
Offset of loan against
deficiency ( 1,200) 1,200
Final payment to partners (P36,000) (P12,800) (P11,600 (P11,600
) )

Schedule 1
Installment Liquidation
January 31, 2008

Amount Julian Lagman Mango


Cash available P2,400
Allocation I Payable to Lagman P2,400 P2,400

Schedule 2
Installment Liquidation
February 29, 2008

Amount Julian Lagman Mango


Cash available P2,400
Allocation I Balance
Payable to Lagman P2,400 P2,400
Allocation II Payable to Julian and
Lagman P20,000 P10,000 10,000
P10,000 P25,600 -

3. Journal entries
January Cash 30,000
Julian, Capital 2,400
Lagman, Capital 2,400
Magno, Capital 3,200
Other Asset 38,000

Julian, Capital 1,080


Lagman, Capital 1,080
Magno, Capital 1,440
Cash 3,600
AA1 - Chapter 3 (2008 edition) page 6

Liabilities 36,000
Cash 36,000

Lagman, Capital 2,400


Cash 2,400

February Cash 44,000


Other assets 35,000
Julian, Capital 2,700
Lagman, Capital 2,700
Magno, Capital 3,600

Julian, Capital 2,520


Lagman, Capital 2,520
Magno, Capital 3,360
Cash 8,400

Julian. Capital 10,000


Lagman, Capital 25,600
Cash 35,600

March Cash 36,000


Julian, Capital 11,100
Lagman, Capital 11,100
Magno, Capital 14,800
Other assets 73,000

Note Payable to Magno 1,200


Magno, Capital 1,200

Note Payable to Magno 12,800


Julian, Capital 11,600
Lagman, Capital 11,600
Cash 36,000

Exercise 3 - 10
U, V and W Co.
Cash Priority Program
PAYMENTS
Urbe Villa Waldo Urbe Villa Waldo
Capital balances P 11,200 P13,000 P 5,800
Profit and loss ratio 4/7 2/7 1/7
Loss absorption balance P 19,600 P 45,500 P 40,600
Allocation I - Cash to Villa reducing
LAB to an amount reported for
Waldo (P4,900 x 2/7) ( 4,900) P 1,400
Balances P 19,600 P 40,600 P 40,600
Allocation II - Cash to Villa & Waldo
reducing LAB to an amount
reported for Urbe
AA1 - Chapter 3 (2008 edition) page 7

P21,000 x 2/7 ( 21,000) 6,000


P21,000 x 1/7 (21,000) P 3,000
Balances P 19,600 P 19,600 P 19,600 P 7,400 P 3,000
Allocation III - Further cash distribution
may be made in the P & L ratio

2. Book value of assets P 30,000


Loss on realization:
Capital balance of Urbe prior to realization P 11,200
Cash to be received by Urbe 10,000
Share of Urbe in the loss on realization P 1,200
Fractional share of Urbe 4/7_ 2,100
Cash to be realized of the sale of assets P 27,900

3. Allocation III - P3,200 4/7 = P5,600 x 1/7 P 800


Allocation II 3,000
Total cash received by Waldo P 3,800

4. Book value of assets P 30,000


Total cash available
Allocation I P 1,400
Allocation II - P1,800 - P1,400 = P400 2/3 600 2,000
Loss on liquidation P 28,000

Exercise 3 11
Partnership Books
1. Inventories 90,000
Capital Adjustment Account 90,000

2. Accumulated Depreciation 160,000


Equipment 80,000
Capital Adjustment Account 80,000

3. Goodwill 56,000
Capital Adjustment Account 56,000
P980,000 P924,000 = P56,000

4. Capital Adjustment Account 226,000


Belen, Capital (3/4) 169,500
Bgnes, Capital (1/4) 56,500

5. Colored Co. Stocks 980,000


Allowance for Uncollectible Accounts 12,000
Accounts Payable 104,000
Accounts Receivable 124,000
Inventories 296,000
Equipment 520,000
Goodwill 156,000

6. Belen, Capital 563,500


Bagnes, Capital 458,500
Cash 42,000
Colored Co. Stocks 980,000
AA1 - Chapter 3 (2008 edition) page 8

New Corporations Books


1. Authorized to issue 50,000 shares of P50 par value Ordinary Share Capital.

2. Cash 700,000
Ordinary Share Capital 500,000
PIC in Excess of Par 200,000

3. Accounts Receivable 124,000


Inventories 296,000
Equipment 520,000
Goodwill 156,000
Allowance for Doubtful Accounts 12,000
Accounts Payable 104,000
Ordinary Share Capital 700,000
PIC in Excess of Par 280,000

Problem 3 2 (Case 3 cont.)

Calma, Daza and Esteban


Schedule of Cash Distribution to Partners

Calma Daza Esteban


Capital balances before cash distribution P 27,000 P ( 3,000) P 46,000
Add loan balance 8,000
Total partners interest P 27,000 P ( 3,000) P 54,000
Restricted interest - possible loss to Calma and Esteban
in the ratio of 2:1 if Daza fails to pay his deficiency ( 2,000) 3,000 ( 1,000)
Free interests - amounts to be paid to partners P 25,000 - P 53,000
Payment to apply on:
Loan P 8,000
Capital P 25,000 45,000
Cash distribution P 25,000 - P 53,000
AA1 - Chapter 3 Partnership Liquidation (2005)
Suggested Answers page

Problem 3 2 (Case 4 cont.)

Calma, Daza and Esteban


Schedule of Cash Distribution to Partners

Calma Daza Esteban


Capital balances before cash distribution P 9,000 P (21,000) P 37,000
Add loan balance 8,000
Total partners interest P 9,000 P (21,000) P 45,000
Restricted interest - possible loss to Calm and Esteban in
the ratio of 2:1 if Daza fails to pay his deficiency (14,000) 21,000 ( 7,000)

Balances P( 5,000) - P 38,000


Restricted interest - possible loss to Esteban if Calma fails
to pay his deficiency 5,000 - ( 5,000)
Free interests - amounts to be paid to partners - - -
Payment to apply on:
Loan P 8,000
Capital 25,000
Cash distribution - - P 33,000
Chapter 3 Partnership Liquidation
Suggested Answers page

Problem 3 - 3

1. a. Cash 48,000
Accumulated Depreciation 25,000
Fuentes, Capital (P72,000 x 5/15) 24,000
Goco, Capital (P72,000 x 5/15) 24,000
Herrera, Capital (P72,000 x 3/15) 14,400
Isla, Capital (P72,000 x 2/15) 9,600
Merchandise Inventory 55,000
Accounts Receivable 60,000
Store Fixtures 30,000

b. Accounts Payable 76,000


Cash (P28,000 + P48,000) 76,000

c. Fuentes, Capital 4,500


Herrera, Capital 2,700
Isla, Capital 1,800
Goco, Capital 9,000

d. Fuentes, Capital 1,500


Isla, Capital 600
Herrera, Capital 2,100

e. Fuentes, Loan 2,000


Isla, Loan 3,000
Fuentes, Capital 2,000
Isla, Capital 3,000

f. Cash 6,000
Fuentes, Capital 1,000
Herrera, Capital 5,000

g. Accounts Payable 4,000


Cash 4,000

h. Isla, Loan 2,000


Cash 2,000

2. a. Accounts Payable 4,000


Fuentes, Capital 4,000

b. Isla, Loan 2,000


Fuentes, Capital 3,000
Herrera, Capital 5,000

Problem 3 3 (cont.)

3. a. Accounts Payable 4,000


Chapter 3 Partnership Liquidation
Suggested Answers page

Herrera, Capital 4,000

b. Isla, Capital 2,000


Fuentes, Capital 1,000
Herrera, Capital 1,000

Schedule to support the entries in Requirement 1

L O A N C A P I T A L
Fuentes Isla Fuentes Goco Herrera Isla
Balances before liquidation P 2,000 P 5,000 P27,000 P15,000 P10,000 P 9,000
Distribution of loss ( 24,000) ( 24,000) ( 14,400) ( 9,600)
Balances P 2,000 P 5,000 P 3,000 P( 9,000) P( 4,400) P( 600)
Additional loss for the
deficiency of Goco ( 4,500) 9,000 ( 2,700) ( 1,800)
Balances P 2,000 P 5,000 P( 1,500) - P( 7,100) P( 2,400)
Additional loss for the
deficiency of Herrera ( 1,500) 2,100 ( 600)
Balances P 2,000 P 5,000 P( 3,000) - P( 5,000) P( 3,000)
Offset against debit balance
in capital account ( 2,000) ( 3,000) 2,000 - 3,000
Balances - P 2,000 P( 1,000) P( 5,000) -
Additional investment by
partners 1,000 5,000
Payment to Isla - P 2,000 - - - -
Chapter 3 Partnership Liquidation
Suggested Answers page

Problem 3 -5

JKLM Trading Co.


Schedule To Accompany Statement of Liquidation
Amounts to be Paid to Partners
February 28, 2008

Jocson Kaimo Legarda Manabat


Capital balances before dist. of cash P 19,128 P 88,992 P 101,532 P 22,878
Add Loan balances 15,000
Total partners interest P 34,128 P 88,992 P 101,532 P 22,878
Restricted interest - possible loss if
nothing is realized on remaining assets ( 25,494) ( 38,241) ( 38,241) ( 25,494)
Balances P 8,634 P 50,751 P 63,291 P( 2,616)
Restricted interest - additional possible
loss if Manabat is unable to pay his
deficiency (20:30:30) ( 654) ( 981) ( 981) 2,616
Free interest - payments to partners P 7,980 P 49,770 P 62,310 -

Payment to apply on
Loan P 7,980
Capital P 49,770 P 62,310 -
Total cash distribution P 7,980 P 49,770 P 62,310 -

JKLM Trading Co.


Schedule To Accompany Statement of Liquidation
Amounts to be Paid to Partners
March 31, 2008

Jocson Kaimo Legarda Manabat


Capital balances before dist. of cash P 18,348 P 38,052 P 38,052 P 22,098
Add Loan balance 7,020
Total partners interest P 25,368 P 38,052 P 38,052 P 22,098
Restricted interest - possible loss if
nothing is realized on remaining assets ( 16,524) ( 24,786) ( 24,786) (16,524)
Free interest - payment to partners P 8,844 P 13,266 P 13,266 P 5,574

Payment to apply on:


Loan P 7,020
Capital 1,824 P 13,266 P 13,266 P 5,574
Total cash distribution P 8,844 P 13,266 P 13,266 P 5,574
AA1 -Chapter 3 Partnership Liquidation
Suggested Answers page

Problem 3 6
QRS Partnership
Schedule to Accompany Statement of Liquidation
Amounts to be Paid to Partners
July 31, 2008
Quizon Roman Silva
Balances before cash distribution P116,250 P159,750 P151,500
Add Loan balance 150,000
Total partners interest P116,250 P309,750 P151,500
Restricted interest possible loss of P480,000
on remaining unsold assets and cash
withheld of P30,000 ( 255,000) ( 153,000) ( 102,000)
Balances ( P138,750) P156,750 P 49,500
Restricted interest possible loss of P138,750
to Roman and Silva 138,750 ( 83,250) ( 55,500)
Balances - P 73,500 (P 6,000)
Restricted interest possible loss to Roman ( 6,000) 6,000
Payment to Roman to apply on loan P 67,500

QRS Partnership
Schedule to Accompany Statement of Liquidation
Amounts to be Paid to Partners
August 31, 2008
Quizon Roman Silva
Balances before cash distribution P 93,000 P145,800 P142,200
Add Loan balance 82,500
Total partners interest P 93,000 P228,300 P142,200
Restricted interest possible loss of P375,000
on remaining unsold assets and cash
withheld of P30,000 ( 202,500) ( 121,500) ( 81,000)
Balances ( P109,500) P106,800 P 61,200
Restricted interest possible loss of P109,500
to Roman and Silva 109,500 ( 65,700) ( 43,800)
Payment to Roman to apply on loan and to Silva
to apply on capital - P 41,100 P 17,400

Problem 3 - 7
Requirement 1
Tabora, Ureta and Veloso
AA1 -Chapter 3 Partnership Liquidation
Suggested Answers page

Cash Priority Program


January 1, 2008
PAYMENTS
Tabora Ureta Veloso Tabora Ureta Veloso
Capital balances P120,000 P 90,000 P 40,000
Loan balances 45,000 30,000 13,000
Total partners interest P165,000 P120,000 P 53,000
Profit and loss ratio 50% 30% 20%
Loss absorption balance P330,000 P400,000 P265,000
Allocation I - Cash to Ureta to
reduce LAB to amount
reported for Tabora ( 70,000) P21,000
Balances P330,000 P330,000 P265,000
Allocation II - Cash to Tabora
and Ureta to reduce LAB to
amount reported for Veloso ( 65,000) ( 65,000) P32,500 19,500
Balances P265,000 P265,000 P265,000 P32,500 P40,500
Allocation III - Further cash
distribution may be made
based on P & L ratio

Requirement 2
Amount Tabora Ureta Veloso
January:
Cash available P15,000
Allocation I - payable to Ureta 15,000 P15,000
February:
Cash available P40,000
Allocation I - Bal. payable to Ureta 6,000 P 6,000
Allocation II - Payable to Tabora and
Ureta in the ratio of 50:30 P34,000 P21,250 12,750
P21,250 P18,750
March:
Cash available P90,000
Allocation II - Balance 18,000 P11,250 P 6,750
Allocation III - Based on P & L ratio P72,000 36,000 21,600 P14,400
P47,250 P28,350 P14,400
April:
Cash available P30,000
Allocation III - Based on P & L ratio 30,000 P15,000 P 9,000 P 6,000

Problem 3 8 (cont.)
Requirement 1
January: a. Cash 112,000
Accounts Receivable 112,000

b. Neri, Capital 2,200


AA1 -Chapter 3 Partnership Liquidation
Suggested Answers page

Ordan, Capital 1,100


Pacia, Capital 1,100
Cash 4,400

c. Accounts Payable 38,000


Cash 38,000

d. Pacia, Loan 9,000


Pacia, Capital 7,000
Cash 16,000

February: a. Cash 36,000


Accounts Receivable 36,000

b. Neri, Capital 1,400


Ordan, Capital 700
Pacia, Capital 700
Cash 2,800

c. Accounts Payable 39,000


Cash 38,000
Neri, Capital 500
Ordan, Capital 250
Pacia, Capital 250

d. Salary Payable to Neri 6,000


Neri, Capital 1,400
Ordan, Capital 3,700
Pacia, Capital 8,700
Cash 19,800

March: a. Cash 35,000


Neri, Capital 4,000
Ordan, Capital 2,000
Pacia, Capital 2,000
Accounts Receivable 43,000

b. Neri, Capital 2,000


Ordan, Capital 1,000
Pacia, Capital 1,000
Cash 4,000
c. Neri, Capital 39,500
Ordan, Capital 19,750
Pacia, Capital 19,750
Cash 79,000

Problem 3 - 9

Requirement 1 Wilson, Yuson and Zapata


AA1 -Chapter 3 Partnership Liquidation
Suggested Answers page

Cash Distribution Schedule


June 30, 2008
P AY M E N T S
Wilson Yuson Zapata Wilson Yuson Zapata
Capital balances P 67,000 P 45,000 P 31,500
Receivable from partners 12,000 7,500
Total partners interest P 55,000 P 45,000 P 24,000
Profit and loss ratio 50% 30% 20%
Loss absorption balance P110,000 P150,000 P120,000
Allocation I - Cash to
Yuson to reduce LAB
to amt. reported for Zapata 30,000 P 9,000
Balances P110,000 P120,000 P120,000
Allocation II - Cash to Zapata
and Yuson to reduce LAB
to amt. reported for Wilson 10,000 10,000 3,000 P 2,000
Balances P110,000 P110,000 P110,000
Allocation III - Based on P & L
ratio (P6,000 + P100,000 -
P17,000 = P89,000 - P37,500 22,500 15,000
P14,000)
TOTALS P37,500 P 34,500 P17,000

Problem 3 9 Requirement No 2
Wilson, Yuson and Zapata
Cash Distribution Schedule
July 1 - September 30, 2008

Liabilities Wilson Yuson Zapata


Capital balances before liquidation P 17,000 P 55,000 P 45,000 P 24,000
July - Dist. of loss on sale of assets (1) (4,750) (2,850) (1,900)
Liquidation expenses (500) (300) (200)
Payment of liabilities (17,000)
AA1 -Chapter 3 Partnership Liquidation
Suggested Answers page

Payment to partners (2) (6,500)


Balances - P 49,750 P 35,350 P 21,900
Aug.- Liquidation expenses (750) (450) (300)
Equipment taken by Zapata (10,000)
Gain on transfer of eqt. to Zapata (3,000) (1,800) (1,200)
Payment to Yuson (3) (4,000)
Balances - P 52,000 P 32,700 P 12,800
Sept- Dist. of loss on sale of assets (4) (10,000) (6,000) (4,000)
Liquidation expenses (500) (300) (200)
Final distribution to partners - P41,500 P26,400 P8,600

(1) (P22,000 + P14,000) - (P16,500 + P10,000) = P9,500 loss on sale of assets


(2) (P6,000 + P26,500 - P1,000 - P17,000) - P8,000 cash withheld = P6,500 cash dist. Req. 1
(3) schedule of cash distribution below8,000 1,500 2,500 +4,000
(4) (P99,000 - P4,000 BV of equipment taken by Zapata) - P75,000 = P20,000 loss on sale

Schedule of Cash Distribution


August 31, 20068
Wilson Yuson Zapata Wilson Yuson Zapata
Capital balances after dist.
of equipment to Zapata P 52,000 P 36,700 P 12,800
Profit and loss ratio 50% 30% 20%
Loss absorption balance P104,000 P122,333 P 64,000
Allocation I - Cash to
Yuson to reduce LAB to
amt. reported for Wilson 18,333 P 5,500
Balances P104,000 P104,000 P 64,000
Allocation II - Cash to Wilson
& Yuson to reduce LAB to
amount reported for Zapata 40,000 40,000 P20,000 12,000
Balances P 64,000 P 64,000 P 64,000 P20,000 P 17,500
Allocation III P & L ratio

Problem 3 - 9 - Requirement 3
Amount Wilson Yuson Zapata
Cash available in September P76,500
Allocation I Balance 1,500 P 1,500
Allocation II 32,000 P 20,000 12,000
Balance - Allocation III P43,000 21,500 12,900 P 8,600
P 41.500 P 26,400 P 8,600
Problem 3 -10
Arceo, Basco and Cervo
Statement of Changes in Partners Capital
For the Period January 1, 2006 to May 31, 2008

Arceo Basco Cervo Total


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2006:
Original investment P50,000 P30,000 P 80,000
Distribution of net income (sch. 1) 15,200 12,800 28,000
Drawings (7,000) (6,000) (13,000)
Balance, December 31 P58,200 P36,800 P 95,000
2007:
Investment of Cervo (sch. 2) (9,100) (4,900) P54,000 40,000
Distribution of net loss 4,200 3,000 4,800 12,000
Drawings (4,900) (3,900) (4,200) (13,000)
Balances, December 31 P40,000 P25,000 P45,000 P110,000
2008:
Distribution of cash in Feb. (sch. 3) (5,000) (5,000) (10,000)
Distribution of cash in April (sch. 4) (7,000) (5,000) (8,000) (20,000)
Balances P28,000 P20,000 P32,000 P 80,000
Sale of assets & distribution of loss
in May (sch. 5) (17,500) (12,500) (20,000) (50,000)
Final cash distribution P 10,500 P 7,500 P 12,000 P 30,000

Schedule 1 - Distribution of 2006 net income


Arceo Basco Total
Salaries P10,000 P10,000 P20,000
Remainder 65%:35% 5,200 2,800 8,000
Total P15,200 P12,800 P28,000

Schedule 2 - Admission of Cervo


Total capital before admission of Cervo P 95,000
Investment of Cervo 40,000
Total capital P135,000
Interest acquired by Cervo 40%
Capital credit of Cervo P 54,000
Investment of Cervo 40,000
Bonus to Cervo from old partners (shared 65%:35%) P 14,000
Schedule 3 - Cash distribution in February

Arceo Basco Cervo


Capital balances before dist. of cash P40,000 P25,000 P45,000
Restricted interest - possible loss if nothing
is realized on remaining assets (P100,000) 35,000 25,000 40,000
Free interest - amount to be paid to partners P 5,000 P ------ P 5,000

Schedule 4 - Cash distribution in April

Arceo Basco Cervo


Capital balances before dist. of cash P 35,000 P25,000 P40,000
Restricted interest - possible loss if nothing
is realized on remaining assets (P80,000) 28,000 20,000 32,000
Free interest - amount to be paid to partners P 7,000 P 5,000 P 8,000
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Schedule 5 - Loss on realization of assets in May

Capital balances equal to net assets P80,000


Cash realized on sale of assets 30,000
Loss on realization P50,000

Problem 3-11
Partnership Books
1. Inventories 60,000
Prepaid Expenses 3,000
Goodwill 243,000
Accrued Expenses 6,000
Leony, Capital 200,000
Espie, Capital 100,000

2. Rover Corp. Stocks 4,500,000


Accounts Payable 600,000
Accrued Expenses 6,000
Allowance for Uncollectible Accounts 120,000
Cash 450,000
Accounts Receivable 660,000
Inventories 1,350,000
Prepaid Expenses 3,000
Furniture and Equipment 2,520,000
Goodwill 243,000

3. Leony, Capital 2,600,000


Espie, Capital 1,900,000
Rover Corp. Stocks 4,500,000

Corporations Books
1. Cash 450,000
Accounts Receivable 660,000
Inventories 1,350,000
Prepaid Expense 3,000
Furniture and Equipment 2,520,000
Goodwill 243,000
Allowance for Uncollectible Accounts 120,000
Accounts Payable 600,000
Accrued Expenses 6,000
Ordinary Share Capital 4,500,000

2. Land 3,600,000
Cash 1,500,000
Pre-Operating Expenses 450,000
Ordinary Share Capital 4,800,000
PIC in Excess of Par 750,000
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Rover Corporation
Statement of Financial Position
July 1, 2008

Assets Liabilities and Shareholders Equity


Cash P 1,950,000 Accounts Payable P 600,000
Accounts Receivable (net of Allow Accrued Expenses 6,000
of P120,000) 540,000 Total Liabilities P 606,000
Inventories 1,350,000 Shareholders Equity
Prepaid Expenses 3,000 Ordinary Share Capital P9,300,000
Land 3,600,000 PIC in Excess of Par 750,000
Furniture and Equipment 2,520,000 Retained Earnings (deficit) (450,000)
Goodwill 243,000 Total Shareholders Equity P9,600,000
Total Assets P10,206,000 Total liabilities and SH equity P10,206,000

MULTIPLE CHOICE

1. D
2. D
3. C
4. C Share on loss on realization
(P39,000 + P4,800 P33,000) P10,800
Percentage ownership of Imperial 20%
Total loss on realization P54,000

5. A Total capital P70,000


Cash available 28,000
Loss on realization P42,000

6. B Gueco Tiangco Bacelon


Capital bal. before liquidation P 40,000 P 25,000 P 5,000
Loss on realization ( 21,000) (14,000) ( 7,000)
Balances P 19,000 P 11,000 P( 2,000)
Addl loss to Gueco & Tiangco
for the deficiency of Barcelon ( 1,200) ( 800) 2,000
Cash distribution to partners P 17,800 P 10,200 P ---0---

7. D Total capital (P360,000 + P72,000) P432,000


Total liabilities 84,000
Total loss on liquidation P516,000

8. A Alarcon Baretto Coronel


Capital balances P 100,000 P 80,000 P 300,000
Drawing ( 60,000) ( 40,000) (20,000)
Distribution of net income 24,000 24,000 24,000
Loss on liquidation (172,000) (172,000) (172,000)
Balances P(108,000 P(108,000) P 132,000
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Additional loss to partners 108,000 ( 54,000) ( 54,000)


Cash to be distributed to P 78,000
Coronel

9. C Total capital P40,000


Loans from partners 7,500
Total partners interest P47,500
Cash available to partners (P37,500 P28,500) 9,000
Total loss on realization P38,500

10 C Doria Elma
Capital balances before liquidation P 24,500 P 15,500
Loan balances 4,000 3,500
Total partners interest P 28,500 P 19,000
Loss on realization ( 23,100) ( 15,400)
Balances cash to be paid to partners P 5,400 P 3,600

11 C Total assets = Total capital + Total liabilities


= P60,000 + P 3,000 P 63,000
Less Cash = P3,000 + P22,200 P23,200 ___2,000
Book value of noncash assets P 61,000

12 C P61,000 P23,200 = P37,800 x 3/21 P 5,400

13 B Jurado Katindig Lazaro Marcelo


Capital balances P 1,000 P25,000 P25,000 P 9,000
Loss on realization ( 5,400) ( 7,200) ( 10,800) ( 14,400)
P( 4,400) P(17,800) P14,200 P( 5,400)
Additional loss 4,400 3,920 ( 5,880) 5,400
Payment to Lazaro P 8,320

14 C Total credits equal debits (P130,000 + P44,000 +


P90,000) P264,000
Less Cash 40,000
Book value of other assets P224,000
Loss on realization [(P50,000 + P17,600 P55,200)/40%] 31,000
Cash received from sale of other assets P193,000

15 A
16 A
17 B Esper Ester Ethel Elmer
Capital balances P 50,000 P50,000 P50,000 P 75,000
Loss on realization (112,000) ( 56,000) ( 56,000) ( 56,000)
P(62,000) P(6,000) P(6,000) P19,000
Additional loss (3,000) 6,000 ( 1,500) (1,500)
Amt to be rec.from the part. P 17,500
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200,00
0
P217,500

18 D Urbe Viray
Initial investment P 137,500,000 P 137,500,000
Purchases ( 1,237,500,000) ( 495,000,000)
Sales 1,339,250,000 462,000,000
Interest ( 2,200,000) ( 1.375,000)
Dividends 1,100,000 2,750,000
Cash held P 238,150,000 P 105,875,000
Equal share 172,012,500 172,012,500
Cash received (paid) (P 66,137,500) P 66,137,500

19 C Delia Erma Flora


Capital balances before liquidation P480,000 P135,000 P165,000
Loss on liquidation (P180,000) ( 72,000) ( 90,000) ( 18,000)
Cash to be received by Delia P408,000

20 A Delia Erma Flora


Capital balances before liquidation P480,000 P135,000 P165,000
Loss on liquidation (P540,000) ( 216,000) ( 270,000)( 54,000)
P264,000 (P135,000)P111,000
Addl loss to Delia & Flora ( 108,000) 135,000 ( 27,000)
Cash to be received by Flora P 84,000
21 D Delia Erma Flora
Capital balances before liquidation P480,000 P135,000 P165,000
Loss on liquidation (P180,000) ( 72,000) ( 90,000) ( 18,000)
Balances P408,000 P 45,000 P147,000
Possible loss if remaining
inventories are not sold (192,000) ( 240,000) ( 48,000)
Balances P216,000 (P P 99,000
195,000)
Add loss to Delia & Flora ( 156,000) 195,000 ( 39,000)
Distribution of cash to partners P 60,000 - P 60,000
22 D
23 B
24 A Estrada Fortuna Gener
Balances before liquidation P 40,000 P 65,000 P 48,000
Loss on sale of assets - P40,000 ( 16,000) (16,000) ( 8,000)
Possible loss if nothing is realized
on remaining assets - P90,000 ( 36,000) (36,000) (18,000)
Balances P( 12,000) P 13,000 P 22,000
Addl possible loss to Fortuna and
Gener for deficiency of Estrada 12,000 ( 8,000) ( 4,000)
Balances - cash to be distributed P --------- P 5,000 P 18,000
25 B Capital balance of Gener before distribution of cash P 18,000
Share in the cash to be withheld for possible liquidation
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expenses - P3,000 x 20%/60% (shared by Fortuna


& Gener) ( 1,000)
Cash to be received by Gener P 17,000
26 D The remaining cash will be distributed according to profit and loss ratio. Thus
the P14,000 will be distributed as follows:
Estrada - P14,000 x 40% = P5,600
Fortuna - P14,000 x 40% = P5,600
Gener - P14,000 x 20% = P2,800
27 C Total capital before drawing and net loss P 135,000
Drawing ( 10,000)
Net loss for the year ( 20,000)
Total liabilities 5,000
Total assets P 110,000
Cash on hand ( 700)
Amount of noncash assets before liquidation P 109,300
28 C Capital balance of Aguila before dist. of net loss P 25,000
Share in net loss (P20,000 x 60%) ( 12,000)
Capital balance of Aguila before liquidation P 13,000
Cash to be received by Aguila 19,000
Share of Aguila in the gain on sale of other assets P 6,000
Percentage share of Aguila 60%
Total gain on sale of other assets P 10,000
Book value of other assets 109,300
Cash to be realized from sale of other assets P 119,300
PAYMENTS
29 D Aguila Balweg Corpuz Aguila Balweg Corpuz
Capital balances P 25,000 P 50,000 P 60,000
Drawing (10,000)
Net loss ( 12,000) ( 5,000) ( 3,000)
Total partners interest P 13,000 P 45,000 P 47,000
Profit and loss ratio 60% 25% 15%
Loss absorption bal. P 21,667 P180,000 P313,333
Alloc. I - Cash to Corpuz (133,333) P 20,000
Balances P 21,667 P180,000 P180,000
Alloc. II -Cash to Balweg
and Corpuz (158,333) (158,333) P 39,583 23,750
Balances P 21,667 P 21,667 P 21,667 P 39,583 P43,750
Alloc. III - Based on
P & L ratio
Cash received by Corpuz P 33,000
Cash received from Allocation I ( 20,000)
Cash received from Allocation Ii P 13,000
Fractional share (B 25% and C -15%) 15/40
Total cash distributed P 34,667
Fractional share of Balingit x 25/40
Cash received by Balingit P 21,667
30 B Vulnerability
Ranking
Nera - P450,000 / 30% = P150,000 3
Ochoa - P250,000 / 50% = P 50,000 1
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Perez - P250,000 / 20% = P125,000 2

31 D Priority Nera Ochoa Perez Perez


Creditors Capital Capital Loan Capital
1st P500,000 100%
next P75,000 100%
next P375,000 60% 26.67% 13.33%
Remainder 30% 50% 20.00%

32 A Nera Ochoa Perez Total


Equities P450,000 P250,000 P250,000 P950,000
Loss to absorb Ochoa ( 150,000) ( 250,000) ( 100,000) ( 500,000)
Balances P300,000 ------ P150,000 P450,000
Loss to absorb Perez ( 225,000) (150,000) ( 375,000)
Balance P 75,000 ------ ---- P 75,000
33 C Reyes (20%) Santos (40%) Torres (40%)
Net capital balances P100,000 P440,000 P310,000
Possible loss of P700,000 ( 140,000) (280,000) ( 280,000)
Balances (P 40,000) P160,000 P 30,000
Possible loss from Reyes debit balance 40,000 ( 20,000) ( 20,000)`
Cash distribution ------ P140,000 P 10,000

34 D Roger Sergio Tito Roger Sergio Tito


35 C Capital balances P108,000 P120,000 P129,000
Add Loan 30,000
Total partners interest P108,000 P150,000 P129,000
Divided by P & L ratio 30% 50% 20%
Loss absorption capacity P360,000 P300,000 P645,000
Allocation 1 ( 285,000) P57,000
Balances P360,000 P300,000 P360,000
Allocation II ( 60,000) ( 60,000) P18,000 12,000
P300,000 P300,000 P300,000 P18,000 - P69,000
Allocation III P & L ratio

36 B Roger Sergio Tito


Amount available P72,000
Allocation 1 to Tito 57,000 P57,000
Allocation II 30%, 20% P15,000 P9,000 6,000
P9,000 P63,000

37 A Roger Sergio Tito


Amount available P120,000
Allocation II Balance 15,000 P 9,000 P 6,000
Allocation III P105,000 31,500 P52,500 21,000
P40,500 P52,500 P27,000

38 D Jacinto Mapa Magno


Capital balances P400,000 P600,000 P1,000,000
Revaluation of assets 200,000 200,000 200,000
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Adjusted capital P600,000 P800,000 P1,200,000


Par of capital stock P100 P100 P100
Shares of stock to be recd by partners 6,000 sh. 8,000 sh 12,000 sh

39 C Capital balances P260,000


Adjustment in assets (P20,000 P10,000 P3,000) 7,000
Adjusted capital P267,000

40 B Total capital (P94,800 + P214,200) P309,000


Adjustments in assets (P6,600 P20,000 P22,000) ( 35,400)
Adjusted capital P273,600
Ordinary Share Capital (720 x 2 x P10) 14,400
Preference Share Capital P259,200

Ordinary shares (P14,400 / P10) 1,440 sh..


Preference shares (P259,200 / P100) 2,592 sh.

41 C Roldan Moises
Capital balances before incorporation P94,800 P214,200
Adjustment in assets ( 11,800) ( 23,600)
Adjusted capital P83,000 P190,600
Ordinary Share Capital (720 @P10) 7,200 7,200
Preference Share Capital P75,800 P183,400

Preference shares 758 1,834


Ordinary shares 720 720