QUIZ #2

Answer the following problems and show your solution. Wrong solution with correct answer
has a corresponding deduction.
A. The following condensed statement of financial position is presented for the partnership
of  Sun, Moon and Star, who share profits and losses in the ratio of 4:3:3, respectively.

Assume that the partnership decides to admit Planet as a new partner with a one-fourth
interest.

Required: For each of the following independent cases, determine the amount that Planet
must contribute in cash or other assets.
1. No bonus is to be recorded.

Answer: 200,000

Capital to old partners

Sun 260,000
Moon 180,000
Star 160,000
Contributed Capital of old partners 600,000
Divided by ¾
Total agreed capital 800,000
Multiply by ¼
Total Contributed capital of Planet 200,000

2. Revaluation of asset of P30,000 is to be recorded and allocated to the old partners.

Answer:

Capital to old partners

Sun 260,000
 Moon 180,000
Star 160,000
Contributed Capital of old partners 600,000
Add: Revaluation of asset 30,000
630,000
¼
Total Contributed capital of Planet 200,000

3. A bonus of P24,000 is to be paid by Planet and allocated to the old partners.

Answer:
TCC BONUS TAC
Sun (40%) 260,000 9,600 269,600
Moon (30% 180,000 7,200 187,200
Star (30%) 160,000 7,200 167,200
Total 600,000 24,000 624,000
Planet 150,000 (24,000) 126,000
750,000 0 750,000

4. The old partners agreed to give Planet P10,000 bonus upon admission into the
partnership.

Answer:
TCC BONUS TAC
Sun (40%) 260,000 (4,000) 256,000
Moon (30% 180,000 (3,000) 177,000
Star (30%) 160,000 (3,000) 157,000
Total 600,000 (10,000) 590,000
Planet 150,000 10,000 160,000
750,000 0 750,000

5. The partners agree that the total resulting capital should be P820,000.
Answer:
TCC BONUS TAC
Sun (40%) 260,000 6,000 266,000
Moon (30% 180,000 4,500 184,500
Star (30%) 160,000 4,500 164,500
Total 600,000 15,000 615,000
Planet 150,000 (15,000) 205,000
750,000 0 820,000
 820,000 x ¼ = 205,000

B. Following is the statement of financial position for Daisy, Tulip and Rose Partnership on
December 31, 2021.
Daisy, Tulip and Rose Partnership
Statement of Financial Position
December 31,2021

The partners shared net income and losses as follows: Daisy, 40%; Tulip, 40% and Rose, 20%.
On December 31, 2021, the other assets realized P30,700 and P20,500 had to be paid to
liquidate the liabilities because of an unrecorded trade account payable of P500. Daisy and
Tulip were solvent, but Rose’s personal liabilities exceeded personal assets by P5,000.

Required:
a. Prepare a statement of liquidation of the partnership as of December 31, 2021.
Combine Tulip’s loan and account balances.

Daisy, Tulip and Rose Partnership

 Statement of Partnership Liquidation
December 31,2021
ASSETS PARTNER’S CAPITAL
Cash Other Asset Liabilities Daisy, Capital Tulip, Capital Rose, Capital
(40%) (40%) (20%)
Balance before 6,000 94,000 20,000 27,000 43,000 10,000
liquidation
(including Tulip
loan, 4,000)
Realization of 30,000 (94,000) (25,320) (25,320) (12,660) -
assets at a loss
of 63,300
Unrecorded - - 500 (200) (200) (100)
accounts
payable
Payment to (20,500) - (20,500) - - -
creditors
Balances 16,200 - - 1,480 17,480 (2,760)
Eliminate Rose - - - (1,380) (1,380) 2,760
deficit
Balances 16,200 - - 100 16,100 -
Payment to (16,200) - - (100) (16,100) -
partners

b. Prepare journal entries for Daisy, Tulip and Rose Partnership to record the liquidation
on December 31, 2021.

Answer:

Cash 30,700
Daisy, Capital (63,300 x 40%) 25,320
Tulip, Capital (63,300 x 40%) 25,320
Rose, Capital (63,300 x 20%) 12,660
Other Asset 94,000
To record realization of other asset at a loss of 63,300

Liabilities 20,500
Cash 20,500
To record payment of liabilities

Daisy, Capital (500 x 40%) 200

Tulip, Capital (500 x 40%) 200
Rose, Capital (500 x 20%) 100
Liabilities 500
To record trade accounts payable

Daisy, Capital 1,380

Tulip, Capital 1,380
 Rose, Capital 2,760
To eliminate Rose capital deficit

Daisy, Capital 100

Tulip, Capital 4,000
Rose, Capital 12,100
Cash 16,200
To record payments to partners to complete liquidation

c. How much cash would other assets have to realize on liquidation, in order for Rose to
receive enough cash from the partnership to pay personal creditor in full? Assume
that P20,500 is required to liquidate the partnership liabilities.
Answer:

Rose loss must be limited to 5,000, or 25,000 for the partnership (5,000 / 20% = 25,000) because the
liquidation of the liabilities results in a loss of 5,000. Only 24,500 may be lost on the realization of
other assets. This requires other assets realize 69,500 (94,000 – 24,500) to enable Rose to received
5,000 from the partnership to pay personal creditors in full.