INSTALLMENT LIQUIDATION (2)

01. Scott, Joe and Eric are liquidating their partnership. At the date the liquidation begins, Scott, Joe
and Eric have capital balances of P162,000, P192,000 and P215,000, respectively and that the
partners share profits and losses 40%, 35% and 25%, respectively. In addition, the partnership
has a P36,000 Note Payable to Scott and a P20,000 Note Receivable from Eric. When the
liquidation begins, what is the loss absorption potential of with respect to Joe?
a. P192,500 b. 67,375 c. P550,000 d. P770,000

2. W, X and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The
condensed statement of financial condition of Heidi Partnership as of December 31, 2020 is:

HEIDI PARTNERSHIP
STATEMENT OF FINANCIAL CONDITION
December 31, 2020

Cash P 50,000
Other Assets 130,000
Total Assets P180,000
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Liabilities P 40,000
W, Capital 60,000
X, Capital 40,000
Y, Capital 40,000
Total Liabilities and Partners’ Equity P180,000
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Assume instead that the Heidi Partnership is dissolved and liquidated by installments and the
first realization of P40,000 cash is on the sale of other assets with book value of P80,000. After
the payment of liabilities, the available cash shall be distributed to W, X and Y, respectively as
follows:
a. P36,000; P27,000; P27,000 c. P16,000; P12,000; P12,000
b. P44,000; P28,000; P28,000 d. P24,000; P13,000; P13,000

3. After incurring losses resulting from very unprofitable operations, the JJ Summit Partnership
decided to liquidate when the partners; capital balances were:

JK, Capital (40%) P 80,000

JL, Capital (40%) 130,000
JM, Capital (20%) 96,600

The non-cash assets were sold in installment. Available cash were distributed to the partners in
every sale of non-cash assets. After the second sale of non-cash assets, the partners received the
same amount of cash in the distribution. And from the third sale of non-cash assets, cash
available for distribution amounts to P28,000, and unsold no-cash assets have a book value of
P12,500. Using priority program, what amount did JM received in the third installment
distribution?
a. P11,600 b. P8,000 c. P5,600 d. P0

04. The PQR Partnership is being dissolved. All liabilities have been paid and the remaining assets
are being realized gradually. The equity of the partners is as follows:

Partners’ Loan to/(from) Profit and

Accounts Partnership Loss Ratio
P P24,000 P 6,000 3
Q 36,000 - 3
R 60,000 (10,000) 4

The second cash payment to any partner(s) under a program of priorities shall be made thus:
a. To R, P2,000 b. To Q, P6,000 c. To R, P8,000 d. To Q, P6,000 and
P8,000 to R
5. The following condensed statement of financial condition is presented for the partnership of
AA,
 BB and CC:
Cash P 28,000
Other Assets 265,000
Total Assets P293,000
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Liabilities P 48,000
AA, Capital 95,000
BB, Capital 80,000
CC, Capital 70,000
Total Liabilities and Partners’ Equity P293,000
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The profit and loss ratio is 50:25:25, respectively. The partners voted to dissolve the partnership
and liquidate by selling other assets in installments. P70,000 was realized on the first sale of the
other assets with book value of P150,000. After settlement with creditors, all cash available was
distributed to the partners. How much cash was received by CC?
a. P10,500 b. P32,500 c. P21,250 d. P20,000

06. AA, BB, and CC are partners in ABC Partnership and shares profits and losses 50%, 30% and
20%, respectively. The partners have agreed to liquidate the partnership and some liquidation
expenses to be incurred. Prior to the liquidation, the partnership statement of financial position
reflects the following book values:

Cash P 25,200
Non-cash assets 297,600
Notes payable to CC 38,400
Other liabilities 184,800
AA, capital 72,000
BB, capital deficit ( 12,000)
CC, capital 39,600

Assuming that the actual liquidation expenses are P16,800 and that the non-cash assets with a
book value of P240,000 are sold for P216,000. How much cash should CC receive?
a. P46,457 b. P39,600 c. P74,571 d. P0

07. The XYZ Partnership has assets with book value of P240,000 and a market value of P195,000,,
outside liabilities of P70,000, loans payable to partner AA of P20,000, and capital balances for
partner XX, YY and ZZ of P70,000, P30,000 and P50,000, respectively. The partners share
profits and losses equally. The first P100,000 available cash will be distributed as
a. P70,000 to outside creditors, P20,000 to XX and the balance equally among partners.
b. P70,000 to outside creditors, and P30,000 to XX.
c. P70,000 to outside creditors, P25,000 to XX and P5,000 to ZZ.
d. P40,000 to XX, P20,000 to ZZ, and the balance equally among partners.

08. The statement of financial position of AA and BB Partnership on May 1, 2021

before liquidation is as follows:

Assets Liabilities and Capital

Cash P14,000 Liabilities P35,000
Other assets 71,000 AA, Capital (70%) 28,000
BB, Capital (30%) 22,000
Total P85,000 Total P85,000
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In May, assets with a book value of P34,000 were sold for P29,000. Creditors were paid in full.
Liquidation expenses of P1,000 was paid, and P3,000 is paid to partners. In May, how much did
BB receive?
a. P0 b. P3,000 c. P 900 d. P2,100

09. The statement of financial position for MM and NN Partnership on October 1, 2021 before
liquidation is as follows:
 Cash P 5,000
Other Assets 55,000
Total Assets P60,000
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Liabilities P20,000
MM, Capital (60%) 22,500
NN, Capital (40%) 17,500
Total Liabilities and Partners’ Equity P60,000
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In October, assets with a book value of P22,000 are sold for P18,000, creditors are paid in full,
and P2,000 is paid to partners. In November, assets with book value of P10,000 are sold for
P12,000, liquidation expenses of P500 are paid and cash of P12,500 is paid to partners. In
October, NN should receive
a. P0 b. P2,000 c. P1,000 d. P1,500

10. Using the same data in no. 9, for the month of November, MM should receive
a. P0 b. P7,200 c. P5,300 d. P12,000