NAME: Dellosa, Jierstine Shaney R.

Course/Section: BSA 2-C

INTERMEDIATE ACCOUTING

Assume that non-cash assets are sold at P900,000 with a resulting loss on realization of P2,500,000 distributed in the ratio
4:4:2. The cash balance after full realization of the non-cash assets in the amount of P1,100,000 was not enouch to settle
all the liabilities to outsiders. Also, the capital balances of Malaya an Tria were insufficient to fully absorb their share in lthe
loss and thus, incurred capital deficiencies of P50,000 and P400,000, respectively.
Tria, exercised her right of offset but it was not enough to cover her losses; she has no recourse but to invest additional
cash of P350,000 to fully eliminate her deficiency. Malaya also invested P50,000. Then the balance of P380,00 is paid
to Marasigan for his loan and capital account balances of P80,000 and P300,000 respectively.

Pertinent entries to illustrate this case are shown below:

1- Sale of Non-cash Assets

Cash 900,000
Loss on Realization 2,500,000
Non-Cash Assets 3,400,000

Distribution of loss on Realization based of Partners P & L ratio

Malaya, Capital 1,000,000

Tria, Capital 1,000,000
Marasigan, Capital 500,000
Loss on Realization 2,500,000

2- Partial payment of Liabilities:

Liabilities 1,100,000
Cash 1,100,000

3- Exercise the right of offset

Tria, Loan 50,000

Tria, Capital 50,000

4- Additional investment by Partners

Cash 400,000
Malaya, Capital 50,000
Tria, Capital 350,000

5- Full payment of Liabilities

Liabilities 20,000
Cash 20,000

6- Distribution of Cash to Partners

Marasigan, Loan 80,000