CHAPTER 6

Partnership Liquidation – Lump-sum

Exercise 6-1
E2 Partnership
Statement of Liquidation
June 1 - 3! "1#
Non-cash CAPITAL
Cash Assets Liabilities Encabo Elorde
Profit and loss ratio 2255!! 2"55!!
#alances before liquidation P 25$!!! P%!!$!!! P&25$!!! P225$!!! P2"5$!!!
Sale of non-cash assets and distribution of loss '5!$!!! ( %!!$!!!) ( &&2$5!!) (&'"$5!!)
#alances P'"5$!!! P&25$!!! P &&2$5!! P&'"$5!!
Pa*ment of liabilities ( &25$!!!) ( &25$!!!)
#alances P25!$!!! P &&2$5!! P&'"$5!!
Pa*ment to partners ( 25!$!!!) ( &&2$5!!) (&'"$5!!)

Exercise 6-"

&+
Elias$ Enrico and Ener 
Statement of Liquidation
,anuar* &  '&$ 2!&5
 Non-cash
 Non-cash C A P I T A L
Cash Assets Liabilities Elias Enrico Ener  
Profit and loss ratio '. '. 2.
#alances before liquidation P .!
.!$!!! P.&!$!!! P2"!$!!! P%!$!!! P2/!$!!! P2"!$!!!
Sale of non-cash assets and distribution of loss %'0$!!! (.&!$!!!) (%%$!!!) ( %%$!!!) ( 00$!!!)
Pa*ment of liquidation e1penses ( 20$!!!) ( /$!!!) ( /$!!!) ( %$!!!)
#alances P%/!$!!! P2"!$!!! (P&5$!!!) P2&5$!!! P22!$!!!
Pa*ment of liabilities (2"!$!!!) (2"!$!!!)
#alances P02!$!!! (P&5$!!!) P2&5$!!! P22!$!!!
Additional inestment of Elias &5$!!! &5$!!!
#alances P0'5$!!! P2&5$!!! P22!$!!!
Pa*ment to partners ( 0'5$!!!) ( 2&5$!!!) ( 22!$!!!)

2+
 Elias $ Enrico  and Ener 
Statement of Liquidation
,anuar* &  '&$ 2!&5
 Non-cash
 Non-cash Note Pa*able
Pa*able C A P I T A L
Cash Assets to Elias Liabilities Elias Enrico Eer  
Profit and loss ratio '. '. 2.
#alances before liquidation P .!$!!! P.&!$!!! P"!$!!! P2!!$!!! P%!$!!! P2/!$!!! P2"!$!!!
Sale of non-cash assets and distribution of loss %'0$!!! (.&!$!!!) (%%$!!!) ( %%$!!!) ( 00$!!!)
Pa*ment of liquidation e1penses (20$!!!) ( /$!!!) ( /$!!!) ( %$!!!)
#alances P%/!$!!! P"!$!!! P2!!$!!! (P&5$!!!) P2&5$!!! P22!$!!!
Pa*ment of liabilities (2!!$!!!) (2!!$!!!)
#alances P0/!$!!! P"!$!!! (P&5$!!!) P2&5$!!! P22!$!!!
3ffset of loan a4ainst debit balance in the
capital balance of Elias ( &5$!!!) &5$!!!
#alances P0/!$!!! P55$!!! P2&5$!!! P22!$!!!
Pa*ment to partners (0/!$!!!) ( 55$!!!) ( 2&5$!!!) ( 22!$!!!)

'+ Elias $ Enrico  and Ener 

Statement of Liquidation
,anuar* &  '&$ 2!&5
 N from Non-cash
Non-cash NP C A P I T A L
Cash Enrico Assets to Elias Liabilities  El
 Elias Enrico Eer  
Profit and loss ratio '. '. 2.
#alances before liquidation P .!$!!! P&&!$!!! P"!!$!!! P"!$!!! P2!!$!!! P%!$!!! P2/!$!!! P2"!$!!!
Sale of non-cash assets and distribution of loss %'0$!!! ("!!$!!!) (20$"5!) ( 20$"5!) ( &%$5!!)
Pa*ment of liquidation e1penses (20$!!!) ( /$!!!) ( /$!!!) ( %$!!!)
#alances P%/!$!!! P&&!$!!! P"!$!!! P2!!$!!! P2%$25! P25%$25! P20"$5!!
Pa*ment of liabilities (2!!$!!!) (2!!$!!!)
#alances P0/!$!!! P&&!$!!! P"!$!!! P2%$25! P25%$25! P20"$5!!
3ffset of receiable a4ainst credit balance in
the capital of Enrico (&&!$!!!) ( &&!$!!!)
#alances P0/!$!!! P"!$!!! P2%$25! P&0%$25! P20"$5!!
Pa*ment to partners (0/!$!!!) ( "!$!!!) ( 2%$25!) ( &0%$25!) ( 20"$5!!)
Exercise 6-3
Case &
 Enten4 and Estrel
Statement of Liquidation
,anuar* &  '&$ 2!&5
3ther Loans6666666 Capital666666  
Cash Assets Liabilities Enten4 Estrel Enten4 (/!7) Estrel (&!7)
#alances before liquidation P 0!$!!! P 0!!$!!! P 2%0$!!! P '%$!!! P 0!$!!! P .!$!!! P 2!$!!!
Sale of other assets 8 dist+ of loss 2%.$!!! (0!!$!!!) (&&.$.!!) ( &'$2!!)
#alances P '!.$!!! P 2%0$!!! P '%$!!! P 0!$!!! (P '.$.!!) P %$.!!
Pa*ment of liabilities (2%0$!!!) (2%0$!!!)
#alances P 00$!!! P '%$!!! P 0!$!!! (P '.$.!!) P %$.!!
3ffset of loan a4ainst debit balance in
the capital of Enten4 ( '%$!!!) '%$!!!
#alances P 00$!!! P 0!$!!! (P 2$.!!) P %$.!!
Additional loss to Estrel for the 2$.!! ( 2$.!!)
deficienc* of Enten4
#alances P 00$!!! P 0!$!!! P 0$!!!
Pa*ment to partners ( 00$!!!) ( 0!$!!!) ( 0$!!!)

&+ Cash 2%.$!!! 0+ Estrel$ Capital 2$.!!

Enten4$ Capital &&.$.!! Enten4$ Capital 2$.!!
Estrel$ Capital &'$2!!
3ther Assets 0!!$!!!

2+ Liabilities 2%0$!!! 5+ Estrel$ Loan 0!$!!!

Cash 2%0$!!! Estrel$ Capital 0$!!!
  Cash 00$!!!

'+ Enten4$ Loan '%$!!!

Enten4$ Capital '%$!!!

Case 2

Enten4 and Estrel

Statement of Liquidation
 ,anuar* &  '&$ 2!&5

3ther Loans6666666 Capital666666  

Cash Assets Liabilities Enten4 Estrel Enten4 Estrel
#alances before liquidation P 0!$!!! P 0!!$!!! P 2%0$!!! P '%$!!! P 0!$!!! P .!$!!! P 2!$!!!
Sale of other assets and distribution of loss 2%.$!!! (0!!$!!!) ( /2$0!!) ( '/$%!!)
#alances P '!.$!!! P 2%0$!!! P '%$!!! P 0!$!!! (P &2$0!!) (P &/$%!!)
Pa*ment of liabilities (2%0$!!!) ( 2%0$!!!)
#alances P 00$!!! P '%$!!! P 0!$!!! (P &2$0!!) (P &/$%!!)
3ffset of loan a4ainst debit
 balance in capital account (&2$0!!) ( &/$%!!) &2$0!! &/$%!!
#alances P 00$!!! P 2'$%!! P 2!$0!!
Pa*ment to partners ( 00$!!!) ( 2'$%!!) ( 2!$0!!)

&+ Cash 2%.$!!! '+ Enten4$ Loan &2$0!!

Enten4$ Capital /2$0!! Estrel$ Loan &/$%!!
Estrel$ Capital '/$%!! Enten4$ Capital &2$0!!
3ther Assets 0!!$!!! Estrel$ Capital &/$%!!

2+ Liabilities 2%0$!!! 0+ Enten4$ Loan 2'$%!!

Cash 2%0$!!! Estrel$ Loan 2!$0!!
  Cash 00$!!!

Case '

Enten4 and Estrel

Statement of Liquidation
,anuar* &- '&$ 2!&5
 3ther Loans6666666 Capital666666  
Cash Assets Liabilities Enten4 Estrel Enten4 Estrel
#alances before liquidation P 0!$!!! P 0!!$!!! P 2%0$!!! P '%$!!! P 0!$!!! P .!$!!! P 2!$!!!
Sale of other assets 8 distribution of loss 2%.$!!! (0!!$!!!) ( %%$!!!) ( %%$!!!)
#alances P '!.$!!! P 2%0$!!! P '%$!!! P 0!$!!! P &0$!!! (P 0%$!!!)
Pa*ment of liabilities (2%0$!!!) ( 2%0$!!!)
#alances P 00$!!! P '%$!!! P 0!$!!! P &0$!!! (P 0%$!!!)
3ffset of loan a4ainst debit balance
in the capital of Estrel (0!$!!!) 0!$!!!
#alances P 00$!!! P '%$!!! P &0$!!! P ( %$!!!)
Additional loss to Enten4 for the deficienc* of Estrel ( %$!!!) %$!!!
#alances P 00$!!! P '%$!!! P .$!!!
Pa*ment to partners ( 00$!!!) ( '%$!!!) ( .$!!!)

&+ Cash 2%.$!!! 0$ Enten4$ Capital %$!!!

Enten4$ Capital %%$!!! Estrel$ Capital %$!!!
Estrel$ Capital %%$!!!
3ther Assets 0!!$!!!

2+ Liabilities 2%0$!!! 5+ Enten4$ Loan '%$!!!

Cash 2%0$!!! Enten4$ Capital .$!!!
  Cash 00$!!!
'+ Estrel$ Loan 0!$!!!
Estrel$ Capital 0!$!!!
Exercise 6-#

Es4uerra Esteban Estrada Eu4enio

Capital balances before liquidation P &&$!!! P &!$'!! P &'$"!! P /$!!!
Loan from partners 2$!!!
Total partners9 interest P &'$!!! P &!$'!! P &'$"!! P /$!!!
Loss on reali:ation (P0%$!!!  P&2$!!!) ( & '$%!!) ( & !$2!!) ( % $.!!) ( '$0!!)
#alances (P %!!) P &!! P %$/!! P 5$%!!
Additional loss to partners %!! ( '!!) ( 2!!) ( &!!)
#alances -------- (P 2!!) P %$"!! P 5$5!!
Additional loss to partners 2!! ( &'') ( %")
;istribution of cash to partners --------- --------- P %$5%" P 5$0''
Pro$%em 6-1

Ester$ Edna$ Emma$ and Ea

Statement of Liquidation
3ctober &-'&$2!&0

3ther ec<l from Ea$ C A P I T A L

Cash Assets Ester Liabilities Loan Ester (0) Edna (2) Emma (&) Ea (&)
#alances before liquidation P 5!$!!! P/5!$!!! P%2$5!! P 05!$!!! P'"$5!! P'.&$25! P /'$"5! P5!$!!! P5!$!!!
Sale of asset and distribution of loss 5!!$!!! ( /5!$!!!) ( 225$!!!) ( &&2$5!!) ( 5%$25!) ( 5%$25!)
#alances P 55!$!!! P%2$5!! P 05!$!!! P'"$5!! P&5%$25! (P &.$"5!) (P %$25!) (P %$25!)
Pa*ment of liabilities ( 05!$!!!) ( 05!$!!!)
#alances P &!!$!!! P%2$5!! P'"$5!! P&5%$25! (P &.$"5!) (P %$25!) (P %$25!)
3ffset of receiable a4ainst
credit balance in the
capital account of Ester (%2$5!!) ( %2$5!!)
#alances P &!!$!!! P'"$5!! P /'$"5! (P &.$"5!) (P %$25!) (P %$25!)
Additional loss to the partners
for the deficienc* of Edna
shared 0=&=& ( &2$5!!) &.$"5! ( '$&25) ( '$&25)
#alances P &!!$!!! P'"$5!! P .&$25! (P /$'"5) (P /$'"5)
3ffset of loan a4ainst debit
 balance in the capital
account of Ea ( /$'"5) /$'"5
#alances P &!!$!!! P2.$&25 P .&$25! (P /$'"5)
Pa*ment to partners ( &!!$!!!) (2%$25!) ( "'$"5!)
#alances P &$."5 P "$5!! (P /$'"5)
Additional inestment b* Emma /$'"5 /$'"5
#alances P /$'"5 P &$."5 P "$5!!
Pa*ment to partners ( /$'"5) ( &$."5) ( "$5!!)
,ournal entries to record the liquidation of the partnership

  &+ Cash 5!!$!!!

Ester$ Capital 225$!!!
Edna$ Capital &&2$5!!
Emma$ Capital 5%$25!
Ea$ Capital 5%$25!
3ther Assets /5!$!!!

2+ Liabilities 05!$!!!
  Cash 05!$!!!

'+ Esters$ Capital %2$5!!

eceiable from Ester %2$5!!

0+ Ester$ Capital &2$5!!

Emma$ Capital '$&25
Ea$ Capital '$&25
Edna$ Capital &.$"5!

5+ Ea$ Loan /$'"5

Ea$ Capital /$'"5

%+ Ea$ Loan 2%$25!

Ester$ Capital "'$"5!
  Cash &!!$!!!

"+ Cash /$'"5

Emma$ Capital /$'"5

.+ Ea$ Loan &$."5

Ester$ Capital "$5!!
Cash /$'"5
Pro$%em 6-"

&+ Esteban$ Capital P &00$!!! '+ a+ Cash 0%'$!!!

Esteban$ ;ra>in4 ( &2$!!!) Eu4enio$ Capital 52$5!!
Total interest of Esteban P &'2$!!! Earisto$ Capital '&$5!!
Cash receied b* Esteban &&&$!!! Esteban$ Capital 2&$!!!
Share of Esteban in the loss on liquidation P 2&$!!! 3ther Assets 5%.$!!!
?ractional share of Esteban  2&!
Total loss on liquidation P &!5$!!! b+ Liabilities 2!!$!!!
  Cash 2!!$!!!

c+ Earisto$ Loan 0!$!!!

Eu4enio$ Capital "/$5!!
Earisto$ Capital &!2$5!!
Esteban$ Capital &&&$!!!
  Cash '''$!!!

2+
Eu4enio $ Earisto and Esteban
Statement of Liquidation
,anuar* &  '&$ 2!&5

C AP I TAL
3ther  Earisto$ Eu4enio Earisto Esteban
Cash Assets Liabilities Loan (5&!) ('&!) (2&!)
#alances before liquidation P "!$!!! P 5%.$!!! P 2!!$!!! P 0!$!!! P &'2$!!! P &'0$!!! P&'2$!!!
Sale of other assets 8 distribution of loss 0%'$!!! ( 5%.$!!!) ( 52$5!!) ( '&$5!!) ( 2&$!!!)
#alances P 5''$!!! P 2!!$!!! P 0!$!!! P "/$5!! P &!2$5!! P &&&$!!!
Pa*ment of liabilities (2!!$!!!) ( 2!!$!!!)
#alances P '''$!!! P 0!$!!! P "/$5!! P &!2$5!! P &&&$!!!
Pa*ment to partners ( '''$!!!) ( 0!$!!!) ( "/$5!!) (&!2$5!!) ( &&&$!!!)

Pro$%em 6-3
Case &
Estrella$ Espino and Espiritu
Statement of Liquidation
,anuar* &- '&$ 2!&5
3ther L 3 A N C A P I T A L
Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (&)
#alances before liquidation P 2!$!!! P '0!$!!! P &&2$!!! P 5$!!! P .$!!! P /5$!!! P %!$!!! P .!$!!!
Sale of assets 8 distr ibution of loss 25!$!!! ( '0!$!!!) ('%$!!!) ('%$!!!) (&.$!!!)
#alances P 2"!$!!! P &&2$!!! P 5$!!! P .$!!! P 5/$!!! P 20$!!! P %2$!!!
Pa*ment of liabilities ( &&2$!!!) (&&2$!!!)
#alances P &5.$!!! P 5$!!! P .$!!! P 5/$!!! P 20$!!! P %2$!!!
Pa*ment to partners ( &5.$!!!) (5$!!!) (.$!!!) (5/$!!!) ( 20$!!!) (%2$!!!)

Case 2
Estrella$ Espino and Espiritu
Statement of Liquidation
,anuar* & - '&$ 2!&5

3ther L 3 A N C A P I TA L
Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (&)
#alances before liquidation P 2!$!!! P '0!$!!! P &&2$!!! P 5$!!! P .$!!! P /5$!!! P %!$!!! P .!$!!!
Sale of assets 8 distribution of loss &.5$!!! ('0!$!!!) (%2$!!!) ( %2$!!!) ('&$!!!)
#alances P 2!5$!!! P &&2$!!! P 5$!!! P .$!!! P ''$!!! (P 2$!!!) P 0/$!!!
Pa*ment of liabilities (&&2$!!!) (&&2$!!!)
#alances P /'$!!! P 5$!!! P .$!!! P ''$!!! (P 2$!!!) P 0/$!!!
3ffset of loan a4ainst debit balance in
the capital of Espino ( 2$!!!) 2$!!!
#alances P /'$!!! P '$!!! P .$!!! P ''$!!! P 0/$!!!
Pa*ment to partners ( /'$!!!) ('$!!!) (.$!!!) (''$!!!) (0/$!!!)

Case '

Estrella$ Espino and Espiritu

Statement of Liquidation
 ,anuar* & -'&$ 2!&5

3ther L 3 A N C A P I T A L
Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (&)
#alances before liquidation P 2!$!!! P '0!$!!! P &&2$!!! P 5$!!! P .$!!! P /5$!!! P %!$!!! P .!$!!!
Sale of assets 8 distribution of loss &"!$!!! ('0!$!!!) (%.$!!!) ( %.$!!!) ('0$!!!)
#alances P &/!$!!! P &&2$!!! P 5$!!! P .$!!! P 2"$!!! (P .$!!!) P 0%$!!!
Pa*ment of liabilities ( &&2$!!!) (&&2$!!!)
#alances P ".$!!! P 5$!!! P .$!!! P 2"$!!! (P .$!!!) P 0%$!!!
3ffset of loan a4ainst debit
 balance in the capital of 
Espino ( 5$!!!) 5$!!!
#alances P ".$!!! P .$!!! P 2"$!!! (P '$!!!) P 0%$!!!
Pa*ment to partners ( ".$!!!) ( .$!!!) ( 25$!!!) ( 05$!!!)
#alances P 2$!!! (P '$!!!) P &$!!!
Additional inestment b*
Espino '$!!! '$!!!
#alances P '$!!! P 2$!!! P &$!!!
Pa*ment to partners ( '$!!!) ( 2$!!!) ( &$!!!)

Estrella$ Espino and Espiritu

Schedule to Accompan* Statement of Liquidation
Amounts to be Paid to Partners
 Estrella (2) Espino (2) Espiritu (&)
Capital balances before cash distribution P 2"$!!! (P '$!!!) P 0%$!!!
Add loan balance .$!!!
Total partners9 interest P 2"$!!! (P '$!!!) P 50$!!!
estricted interest - possible loss to Estrella and Espiritu in the
ratio of 2=& if Espino fails to pa* his deficienc* ( 2$!!!) '$!!! ( &$!!!)
?ree interests - amounts to be paid to partners P 25$!!! P 5'$!!!
Pa*ment to appl* on=
Loan P .$!!!
Capital P 25$!!! 05$!!!
Cash distribution P 25$!!! P 5'$!!!

Case 0

Estrella$ Espino and Espiritu

Statement of Liquidation
,anuar* &  '&$ 2!&5
 3ther L 3AN CAPTIAL
Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (&)
#alances before liquidation P 2!$!!! P '0!$!!! P &&2$!!! P 5$!!! P .$!!! P /5$!!! P %!$!!! P .!$!!!
Sale of assets 8 distr ibution of loss &25$!!! ( '0!$!!!) (.%$!!!) (.%$!!!) (0'$!!!)
#alances P &05$!!! P &&2$!!! P 5$!!! P .$!!! P /$!!! (P2%$!!!) P '"$!!!
Pa*ment of liabilities ( &&2$!!!) (&&2$!!!)
#alances P ''$!!! P 5$!!! P .$!!! P /$!!! (P2%$!!!) P '"$!!!
3ffset of loan a4ainst debit balance
in the capital of Espino ( 5$!!!) 5$!!!
#alances P ''$!!! P .$!!! P /$!!! (P2&$!!!) P '"$!!!
Pa*ment to partners ( ''$!!!) ( .$!!!) ( 25$!!!)
#alances P /$!!! (P2&$!!!) P &2$!!!
Additional inestment b* Espino 2&$!!! 2&$!!!
#alances P 2&$!!! P /$!!! P &2$!!!
Pa*ment to partners ( 2&$!!!) ( /$!!!) ( &2$!!!)
 Estrella$ Espino and Espiritu
Schedule to Accompan* Statement of Liquidation
Amount to be Paid to Partners

Estrella (2) Espino (2) Espiritu (&)

Capital balances before cash distribution P /$!!! (P 2&$!!!) P '"$!!!
Add loan balance .$!!!
Total partners9 interest P /$!!! (P 2&$!!!) P 05$!!!
estricted interest - possible loss to Estrella and Espiritu in
the ratio of 2=& if Espino fails to pa* his deficienc* (&0$!!!) 2&$!!! ( "$!!!)

#alances (P 5$!!!) P '.$!!!

estricted interest - possible loss to Espiritu if Estrella
fails to pa* his deficienc* 5$!!! ( 5$!!!)
?ree interests - amounts to be paid to partners P ''$!!!
Pa*ment to appl* on=
Loan P .$!!!
Capital 25$!!!
Cash distribution P ''$!!!
 Case 5
Estrella$ Espino and Espiritu
Statement of Liquidation
,anuar* & - '&$ 2!&5
3ther 3ther L3AN CAP I TAL
Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (&)
#alances before liquidation P 2!$!!! P '0!$!!! P &&2$!!! P 5$!!! P .$!!! P /5$!!! P %!$!!! P .!$!!!
Sale of assets 8 distribution of loss /!$!!! ('0!$!!!) (&!!$!!!) (&!!$!!!) (5!$!!!)
#alances P &&!$!!! P &&2$!!! P 5$!!! P .$!!! (P 5$!!!) (P 0!$!!!) P '!$!!!
Pa*ment of liabilities ( &&!$!!!) (&&!$!!!)
#alances P 2$!!! P 5$!!! P .$!!! (P 5$!!!) (P 0!$!!!) P '!$!!!
3ffset of loan a4ainst debit balance
in the capital of Espino ( 5$!!!) 5$!!!
#alances P 2$!!! P .$!!! (P 5$!!!) (P '5$!!!) P '!$!!!
Additional inestment b* Estrella and 0!$!!! 5$!!! '5$!!!
Espino
#alances P 0!$!!! P 2$!!! P .$!!! P '!$!!!
Pa*ment of liabilities and pa*ment ( 0!$!!!) ( 2$!!!) (.$!!!) ( '!$!!!)
to partners
 Problem 6 – 4
&+
Asset #oo@ alue Cash (Bain) Loss
eali:ed
Accounts eceiable P %!$!!! P%0$!!! (P 0$!!!)
erchandise Inentor* 5!$!!! 25$!!! 25$!!!
Prepaid Adertisin4 2$!!! .!! &$2!!
achiner* and Equipment 0!$!!! 20$!!! &%$!!!
P&52$!!! P&&'$.!! P '.$2!!

2+
Easco-Ellor Partnership
Statement of Liquidation
,anuar* &  '&$ 2!&5

Cash 3ther  Accounts  Notes CAPITAL

Assets Pa*able Pa*able Easco (0) Ellor (%)
#alances before
liquidation P &$!!! P&52$!!! P2!$!!! P .%$!!! P '!$!!! P &"$!!!
Sale of assets and
distribution of loss &&'$.!! (&52$!!!) (&5$2.!) (22$/2!)
#alances P&&0$.!! P2!$!!! P .%$!!! P &0$"2! (P 5$/2!)
Dnrecorded liabilities 2$!!! &$!!! ( &$2!!) ( &$.!!)
#alances P&&0$.!! P22$!!! P ."$!!! P &'$52! (P "$"2!)
Pa*ment of liabilities (&!/$!!!) (22$!!!) (."$!!!)
#alances P 5$.!! P &'$52! (P "$"2!)
Additional inestment of
Ellor 0$!!! 0$!!!
#alances P /$.!! P &'$52! (P '$"2!)
Additional loss to Easco
for the deficienc* of
Ellor ( '$"2!) '$"2!
#alances P /$.!! P /$.!!
Pa*ment to Easco ( /$.!!) ( /$.!!)

'+

a+ Cash &&'$.!!
Easco$ Capital &5$2.!
Ellor$ Capital 22$/2!
Allo>ance for Dncollectible Accounts 2!$!!!
Accumulated ;epreciation %!$!!!
Accounts eceiable .!$!!!
erchandise Inentor* 5!$!!!
Prepaid Adertisin4 2$!!!
achiner* and Equipment &!!$!!!

 b+ Easco$ Capital &$2!!

Ellor$ Capital &$.!!
Accounts Pa*able 2$!!!
Notes Pa*able &$!!!

c+ Accounts Pa*able 22$!!!

 Notes Pa*able ."$!!!
  Cash &!/$!!!
 d+ Cash 0$!!!
Ellor$ Capital 0$!!!

e+ Easco$ Capital '$"2!

Ellor$ Capital '$"2!

f+ Easco$ Capital /$.!!

  Cash /$.!!

&'LT(PLE CH)(CE

&+ C Total assets  Total capital F Total liabilities

 P%!$!!! F P '$!!! P %'$!!!
Less Cash  P'$!!! F P22$2!! - P2'$2!! 6662$!!!
#oo@ alue of noncash assets P %&$!!!

2+ # P%&$!!! - P2'$2!!  P'"$.!! 1 02& P "$2!!

'+ # Espina Espinosa Esteban Estrellita

Capital bal+ before liquidation P&$!!! P25$!!! P25$!!! P /$!!!
Loss on reali:ation ( 5$0!!) ( "$2!!) ( &!$.!!) ( &0$0!!)
#alances (P0$0!!) P&"$.!! P&0$2!! (P5$0!!)
Add9l loss to Espinosa and Esteban 0$0!! ( '$/2!) ( 5$..!) 5$0!!
Cash pa*ments to partners P .$'2!

0+ C Total capital P"!$!!!

Less Cash left for distribution 2.$!!!
Loss on reali:ation P 02$!!!

5+ A E& E2 E'
Capital bal+ before liquidation P 0!$!!! P 25$!!! P 5$!!!
Loss on reali:ation ( 2&$!!!) (&0$!!!) ( "$!!!)
#alances P &/$!!! P &&$!!! P( 2$!!!)
Addl loss to E& 8 E2 for the deficienc* of E' ( &$2!!) ( .!!) 2$!!!
Cash pa*ment to E& P &"$.!!

%+ ; Total capital (P'%!$!!! F P"2$!!!) P0'2$!!!

Total liabilities .0$!!!
Total loss on liquidation P5&%$!!!

"+ A Espera Elor Este

Capital balances P &!!$!!! P .!$!!! P '!!$!!!
;ra>in4 ( %!$!!!) ( 0!$!!!) (2!$!!!)
;istribution of net income 20$!!! 20$!!! 20$!!!
Loss on liquidation (&"2$!!!) (&"2$!!!) (&"2$!!!)
#alances (P&!.$!!!) P(&!.$!!!) P &'2$!!!
Additional loss to Elor and Este &!.$!!! ( 50$!!!) ( 50$!!!)
Cash to be distributed to Este P ".$!!!

.+ # Escano Ender Eelo

#alances before liquidation P&!$!!! P'5$!!! P0&$!!!
Loss from sale of non-cash assets ( &%$!!!) ( &2$!!!) ( &2$!!!)
#alances (P %$!!!) P2'$!!! P2/$!!!
Additional loss for deficienc* of Escano %$!!! ( '$!!!) ( '$!!!)
#alances P2!$!!! P2%$!!!
Add Loan balance &0$!!!
Cash to be receied b* Ender P'0$!!!
/+ # Escano Ender Eelo
#alances before liquidation P&!$!!! P'5$!!! P0&$!!!
Loss on liquidation - P05$!!! ( &.$!!!) ( &'$5!!) ( &'$5!!)
#alances (P .$!!!) P2&$5!! P2"$5!!
Additional loss for deficienc*
of Escano (P.$!!! - P5$!!!  P'$!!!) '$!!! ( &$5!!) ( &$5!!)
Pa*ment to Eelo 2%$!!!

&!+ ; Cash to be receied b* Escano P&2$!!!

Escano capital before liquidation &!$!!!
Escano9s share in the 4ain on reali:ation P 2$!!!
Escano <s profit share  0!7
Total 4ain on reali:ation P 5$!!!
#oo@ alue of non-cash assets "!$!!!
Cash reali:ed from sale of non-cash assets P"5$!!!

&&+ C Capital of Echo before liquidation P5!$!!!

Share in loss from liquidation (P%!$!!! 1 %&!) ('%$!!!)
Amount to be receied b* Echo P&0$!!!

&2+ # Echo E4a* Elma

Capital balances P5!$!!! P5!$!!! P&!$!!!
Loss on reali:ation (&2$!!!) (&2$!!!) ('%$!!!)
  P'.$!!! P'.$!!! (P2%$!!!)
Addl loss for the deficienc* of Elma (&'$!!!) (&'$!!!) 2%$!!!
Amt to be receied b* E4a* P25$!!!

&'+ A Esmer Estrel Ellea Elmer  

&0+ A Capital and loan balances P 5!$!!! P 5!$!!! P5!$!!! P "5$!!!
&5+ # Loss on reali:ation ( &&2$!!!) ( 5%$!!!) ( 5%$!!!) ( 5%$!!!)
#alances (P %2$!!!) (P %$!!!) (P %$!!!) P &/$!!!
Add9l loss for the def of Estrel ( '$!!!) %$!!! ( & $5!!) ( &$5!!)
Amount to be receied from the partnership P &"$5!!
Personal assets 2!!$!!!
Amount aailable to personal creditors of Elmer P2&"$5!!

TE*T &ATER(AL*
Test &ateria% +o, "1 Test &ateria% +o, ""
&+ ? &&+ T &+ Loan pa*able &&+ arshalin4 of assets
2+ ? &2+ T 2+ Lump-sum liquidation &2+ Capital deficienc*
'+ T &'+ ? '+ i4ht of offset &'+ Bain on reali:ation
0+ T &0+ T 0+ Liquidation &0+ Liquidation e1penses
5+ T &5+ T 5+ eali:ation &5+ Loss to the other partner  
%+ ? &%+ ? %+ Loan rec9l from partner &%+ Capital balance
"+ T &"+ T "+ Installment liquidation &"+ Personal creditors
.+ T &.+ ? .+ ;eficient partner &.+ Additional inestment
/+ ? &/+ T /+ Statement of liquidation &/+ Addition to capital
&!+ T 2!+ T &!+ Insolent partner 2!+ Profit and loss ratio

Test &ateria% +o, "3

&+ A
 2+ ;
'+ ;
0+ C
5+ ;
%+ C
"+ #
.+ A
/+ C
&!+ ;
&&+ ;
&2+ A P&!!$!!!0  P25$!!!
&'+ # P&2!$!!! 1 2'  P.!$!!!G P&2!$!!! 1 &'  P0!$!!!
&0+ C P.!$!!! 1 '5  P0.$!!!G P.!$!!! 1 25  P'2$!!!
&5+ ; P%!$!!! F P/!$!!!  P2!$!!!  P&'!$!!!
&%+ A Em* El* E*
Capital balances before liquidation P2.!$!!! P&%!$!!! P2!$!!!
;istribution of loss on reali:ation ( "!$!!!) ( 02$!!!) ( 2.$!!!)
#alances P2&!$!!! P&&.$!!! (P .$!!!)
Additional loss for 
the deficienc* of E* ( 5$!!!) ( '$!!!) .$!!!
#alances P2!5$!!! P&&5$!!!
Cash pa*ments to partners ( 2!5$!!!) ( &&5$!!!)

&"+ C P'2!$!!! - (P&2!$!!! 1 0&!)  P2"2$!!!

&.+ A Eden Elisa Elma

Capital balances before liquidation P'2!$!!! P /!$!!! P&&!$!!!
;istribution of loss on reali:ation ( &00$!!!) ( &.!$!!!) ( '%$!!!)
#alances P&"%$!!! (P /!$!!!) P "0$!!!
Additional loss for the deficienc* of 
Elisa ( "2$!!!) /!$!!! ( &.$!!!)
Pa*ment to Elma P 5%$!!!

&/+ C Estacio Estioco

Capital balances (P2&$!!!) P2&$!!!
Loan 05$!!!
Cash pa*ment to partners P20$!!! P2&$!!!

2!+ A P&0!$!!! F P&!$!!!  P&5!$!!!   

P&2!$!!!  P'!$!!!0!7  P"5$!!!
Test &ateria% "#
Pro$%em A
EEE Partnership
*tatement o Liquidation
Januar. 1 – 31! "1/
Cash Non-cash Accounts Loan Pa*able to CAPITAL
Assets Pa*able Empo* Esto* Empo* Elo*
#alances before liquidation P 25$!!! P 0"5$!!! P 20!$!!! P '!$!!! P&2!$!!! P 5!$!!! P %!$!!!
Sale of assets and dist+ of loss 2%!$!!! (0"5$!!!) (0'$!!!) (.%$!!!) (.%$!!!)
#alances P 2.5$!!! P 20!$!!! P '!$!!! P ""$!!! (P'%$!!!) (P 2%$!!!)
Pa*ment of liabilities ( 20!$!!!) ( 20!$!!!)
#alances P 05$!!! P '!$!!! P ""$!!! (P'%$!!!) (P 2%$!!!)
3ffset of loan a4ainst deficienc* of
Empo* ( '!$!!!) '!$!!!
#alances P 05$!!! P ""$!!! (P %$!!!) (P2%$!!!)
Additional loss to Esto* and Empo*
for the deficienc* of Elo* ( ''') ( %%") &$!!!
#alances P 05$!!! P "%$%%" (P %$%%") (P25$!!!)
Additional inestment b* Empo* and
Elo* '&$%%" %$%%" 25$!!!
#alances P "%$%%" P "%$%%"
Pa*ment to Esto* ( "%$%%") ("%$%%")
2+
a$ Cash 2%!$!!!
Esto*$ Capital 0'$!!!
Empo*$ Capital .%$!!!
Elo*$ Capital .%$!!!
Accounts eceiable "5$!!!
Inentories &!! !!!
Propert*$ Plant and Equipment '!!$!!!

 b+ Accounts Pa*able 20!$!!!

  Cash 20!$!!!

c+ Loan Pa*able to Empo* '!$!!!

Empo*$ Capital '!$!!!

d+ Esto*$ Capital '''

Empo* Capital %%"
Elo*$ Capital &$!!!

e+ Cash '&$%%"
Empo*$ Capital %$%%"
Elo*$ Capital 25$!!!

f+ Esto*$ Capital "%$%%"

  Cash "%$%%"

'+

Esto* Empo* Elo*

Personal assets P25!$!!! P'!!$!!! P'5!$!!!
Applied to
Personal liabilities ( 2'!$!!!) ( 20!$!!!) ( '25$!!!)
Partnership liabilities ( %$%%") ( 25$!!!)
#alances P 2!$!!! P 5'$''' ---

Pro$%em 0

&+ a+ Escobar Elloso Echaes

Capital balances before liquidation P/!$!!! P /!$!!! P '!$!!!
(eceiables) Pa*ables ( "5$!!!) 0!$!!! %!$!!!
Total partners9 interest P&5$!!! P&'!$!!! P /!$!!!
Loss on reali:ation ( '2$2!!) ( '2$2!!) ( &%$&!!)
#alances (P&"$2!!) P /"$.!! P "'$/!!
Additional inestment of Escobar &"$2!!
 Pa*ment to partners ( /"$.!!) ( "'$/!!)

 b+ Escobar Elloso Echaes

Capital balances before liquidation P/!$!!! P /!$!!! P '!$!!!
(eceiables) Pa*ables ( "5$!!!) 0!$!!! %!$!!!
Total partners9 interest P&5$!!! P&'!$!!! P /!$!!!
Loss on reali:ation ( 00$2!!) ( 00$2!!) ( 22$&!!)
#alances (P2/$2!!) P .5$.!! P %"$/!!
Additional loss to Elloso and Echaes 25$2!! ( &%$.!!) ( .$0!!)
#alances (P 0$!!!) P %/$!!! P 5/$5!!
Additional inestment of Escobar 0$!!!
Pa*ment to partners ( %/$!!!) ( 5/$5!!)

c+ Escobar Elloso Echaes

Capital balances before liquidation P/!$!!! P /!$!!! P '!$!!!
(eceiables) Pa*ables ( "5$!!!) 0!$!!! %!$!!!
Total partners9 interest P&5$!!! P&'!$!!! P /!$!!!
Loss on reali:ation ( 00$2!!) ( 00$2!!) ( 22$&!!)
Liquidation e1penses ( /$/5!) ( /$/5!) ( 0$/"5)
#alances (P'/$&5!) P "5$.5! P %2$/25
Additional loss to Elloso and Echaes '/$&5! ( 2%$&!!) ( &'$!5!)
Pa*ment to partners ( 0/$"5!) ( 0/$."5)

2+ Partnership assets of P055$5!! (e1cludin4 cash) less partnership liabilities of P'!.$5!! is

 partnership net assets of P&0"$!!!+ Price offered is P&0!$!!!G the loss on sale of the
 business is P"$!!!+ Therefore$ it is >iser to accept the offer for the purchase of the
 business for P&0!$!!!+ The loss shall be P"$!!! compared >ith liquidatin4 the business and
sellin4 the other assets for P'!!$!!! incurrin4 loss on reali:ation of P&55$5!!+