Partnership and Corporation – Partnership Installment Liquidation

ARAS
On Jan. 3, 2009, the owners of QUAD-A Enterprises decided to dissolve the partnership due to
successive losses during the previous years. Capital balances on Dec 31, 2008 before adjustment:
Allan, 112,000; Adrian, 58,200; Arianne, 75,000; Aleli, 84,400. Withdrawals made by them were
12000, 1500, 3000, 5000 respectively. Adriann made an additional investment in March
amounting to 9200. Their profits and losses ratio is 1:4:1:2. All partners are solvent except for
Aleli. Adrian could only invest more up to 10,000 in case of capital deficiency. Certain amount of
cash is to be withheld for the unpaid and unrecognized liabilities and liquidation expenses.

Partnership assets and liabilities on Jan. 2, 2009

Cash 9,000
Inventory, net 451,500
Accounts Receivable 245,000
Loan to Arianne 12,000
Equipment 182,000
Liabilities ????????
Loan from Allan 20,000

Loss from operation in 2008 amounted to 32,000

JANUARY Inventory and Equipment with carrying amount of 280,000 and 100,000
respectively were sold at 75% of their book value. Cash in excess of the liabilities and expenses
were distributed to partners. One-fourth of the accounts receivable were collected.

FEBRUARY The remaining accounts receivable were collected at 20% loss. Inventory of
100,000 were sold at 40,000 gain and liquidation expenses of 7,000 were paid. Unrecorded
liabilities of 11,000 were discovered. Cash in excess of the liabilities and expenses were
distributed to partners.

MARCH sold all the remaining noncash assets for 200,000 and paid the outstanding
liabilities; Distributed cash to partners.

Compute:
1) Amount due to outside creditors before liquidation
2) Full settlement of Adrian’s interest
3) Cash received by Aleli in January
4) Cash received by Allan in February
5) Cash received by Arianne in March
6) Share of Adrian in the maximum possible loss in January
7) Book value of Equipment sold in January if Aleli received 2000 in February

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Partnership and Corporation – Partnership Installment Liquidation

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8) Share of Arianne in the gain (loss) on realization of the Equipment in number 7
9) Cash withheld in February assuming only 1/4 of the cash in excess of the liabilities was
distributed to partners
10) Total gain (loss) incurred by the partners during the liquidation
11) Full settlement of Allan’s interest if Adrian received nothing during liquidation
12) Share of Aleli in the total gain (loss) during liquidation if Arianne received 41,000 in
March
13) Gain (loss) on realization of the inventory in January if Allan received 26,000 in
February
14) Cash distributed in March if Adrian received 21,450 in settlement of his interest
15) Total partners’ interest after the distribution of cash in February

Answer key:
1) 594,200
2) 18,275
3) 0
4) 30,050
5) 48,093.75
6) 218,625
7) 199,400
8) 6,231.25
9) 22,537.50
10) (63,250)
11) 103,525
12) 30,000
13) 74,050
14) 206,350
15) 153,500

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