SAINT COLUMBAN COLLEGE

COLLEGE OF BUSINESS EDUCATION

REFRESHER COURSE
2nd Semester, S.Y. 2021-2022

ADVANCED FINANCIAL ACCOUNTING & REPORTING (AFAR) Alyendy Mar M. Adlaon, CPA
ACCOUNTING FOR PARTNERSHIP Handout 22-03

PARTNERSHIP LIQUIDATION
Liquidation is the winding up of the business affairs of the partnership. The basic procedures in liquidation
whether lump sum or installment are the following:

a) The operating income or loss to date should be distributed to the partners in accordance with their
profit & loss ratio.
b) The non-cash assets are converted to cash. Realization is the conversion of non-cash assets to cash.
The gain or loss on realization is distributed to the partners in accordance with their profit and loss
ratio.
c) Liquidation expenses and any unrecorded liabilities are recorded. These items are distributed to the
partners as losses in accordance with their P/L ratio.
d) Outside creditors are paid. If liabilities are not fully paid yet, an amount equal to the unpaid amount
should be set aside before making any cash distribution to partners.
e) In installment liquidation, cash is normally reserved for future liquidation expenses.
f) Any remaining cash after procedures (c) and (d) is distributed to partners in accordance with a schedule
of safe payment prepared periodically or with the use of cash priority program.

LUMP SUM LIQUIDATION

In lump sum liquidation or total liquidation, all the non-cash assets are converted to cash before the
distribution of cash to the partners. One-time liquidation statement is prepared showing the distribution of gain
or loss on realization, payment of liquidation expenses and liabilities of the partnership, elimination of partners’
capital deficiency by exercising the right of offset for a deficient partner with loan balance or by making an
additional investment for a deficient partner who is solvent. For insolvent partner, his or her deficiency is
absorbed by solvent partners. Any cash remaining shall be distributed to the partners in return of loan and
capital.

INSTALLMENT LIQUIDATION
Ordinary, the liquidation of a partnership takes considerable time. In the process of liquidation, some
cash may become available to partners even before all non-cash assets are converted into cash. If the partners
decide to distribute cash as they become available, the question is, how much can be safely distributed to each?

Periodic Schedule of Safe Payments

This schedule is prepared every time there is cash available for payment. The schedule begins with the
total equity of each partner at the time of distribution (Capital balance before distribution + loan balance
(credit) – loan balance (debit) + drawing (credit balance) – drawing (debit balance). In installment liquidation,
unsold noncash assets are assumed to be worthless. The book value of unsold noncash assets together with the
cash withheld for future liquidation expenses are treated as theoretical losses or restricted interest which are
`1allocated to all the partners as possible losses in accordance with their P/L ratio. After distribution of possible
losses, some partners may show negative equity or capital deficiency. If so, negative amounts must be
allocated to the remaining partners with positive equity in their relative P/L ratio. After absorption of capital
deficiency, the amount shown for each partner with equity balance will be equal to the cash to be received
by each.

Cash Priority Program or Cash Distribution Plan

Steps in the preparation of a cash priority program:
1) Determine the Loss Absorption Balances (LAB) of each partner by dividing the total interests by their
P/L ratio. The total interest of a partner is the sum of partner’s capital and credit balance of loan or
drawing, and/or difference between capital and debit balance of loan or drawing. The loss absorption
balance is the amount of loss required to eliminate each partner’s capital account. The partner with the
highest LAB gives the first priority on cash distribution.
Priority 1: To get the amount to be paid to a partner with the highest LAB, get the difference between
the highest LAB to the next; multiply the amount by the P/L ratio.
2) Priority 2…: Repeat the procedure until the loss absorption balances are equal.
3) Once equal, any cash available may now be distributed according to their P/L ratio.
Page 1 of 11
PART I: THEORY OF ACCOUNTS

1. It refers to the process of converting the non-cash assets of the partnership and distributing the total cash to
the creditors and the remainder to the partners.
a. Dissolution
b. Termination
c. Liquidation
d. Operation

2. In the liquidation of general partnership, which of the following credits shall be paid first?
a. Those owing to third persons.
b. Those owing to partners other than capital and profits
c. Those owing to partners for their capital contribution
d. Those owing to partners for their share in profits

3. In the liquidation of limited partnership, which of the following credits shall be paid last?
a. Those owing to third persons
b. Those owing to limited partners
c. Those owing to general partners for their share in profit
d. Those owing to partners for their capital contribution

4. What is the nature of liability general partners as to partnership debts or obligations?

a. They are liable equally up to the extent of their separate assets after the partnership assets are
exhausted
b. They are liable pro-rata up to the extent of their separate assets after the partnership assets are
exhausted
c. They are liable pro-rata up to the extent of their capital contribution only
d. They are liable solidarily up to the extent of their separate assets after partnership assets are exhausted

5. What is the nature of liability of limited partners as to limited partnership debts or obligations?
a. They are liable equally up to the extent of their separate assets after the partnership assets are
exhausted
b. They are liable pro-rata up to the extent of their separate assets after the partnership assets are
exhausted
c. They are liable pro-rata up to the extent of their capital contribution only
d. They are liable equally up to the extent of their capital contribution only

6. In a partnership liquidation, the realization losses result in a debit balance in one partner’s capital account. If
this partner fails to contribute personal assets to make up this deficit, how should the debit balance be
handled by the partners?
a. It should be written off against partnership profits like any other bad debt.
b. It should be allocated to all partners in their profit and loss ratio.
c. It should be allocated to the remaining partners in the remaining profit and loss ratio.
d. It should be set up as a receivable turned over to a collection agency.

7. In the liquidation of a partnership in installments, the profit and loss ratio is used for cash payments to
partners:
a. At no time
b. Throughout the course of liquidation
c. Once the partners’ capital account balances have been reduced to the profit and loss ratio.
d. Only for asset realizations that result in gain.

PART II: PROBLEM SOLVING

I. Lump-sum Liquidation

1. The following condensed balance sheet is prepared for SAMMY and JOKER, who share profits and losses in
the ratio of 60:40, respectively:
Other assets P 720,000 Accounts Payable P 192,000
Sammy Loan 32,000 Sammy, capital 312,000
Joker, Capital 248,000
Total 752,000 Total 752,000

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The partners have decided to liquidate the partnership. If the other assets are sold for P 770,000, what amount
of the available cash should be distributed to Sammy?
a. 310,000
b. 342,000
c. 312,000
d. 390,000

2. Du30, De5 and 3llianes are partners in 3D Partnership. On January 1, 2011, the partners decided to
liquidate the partnership. The December 31, 2010 audited Statement of Financial Position of 3D Partnership
is summarized below:

Cash ₱ 2M Other Liabilities ₱5M

Advances to Du30 3M Advances from De5 1M
Other Assets 15M Advances from 3llianes 2M
Du30, Capital 4M
De5, Capital 3M
3llianes, Capital 5M
The following additional notes are provided:
 The partners share profit or loss in the ratio of 5:2:3 to Du30, De5 and 3llianes, respectively.
 All partners are legally declared personally insolvent except Du30 whose separate assets total ₱5M with
separate liabilities amounting to ₱3M.
 At the time of liquidation, all other assets are sold for ₱8M.
 Liquidation expenses amounting to ₱1M were paid.
What is the amount to be received by De5 at the end of liquidation process?
a. ₱3,200,000
b. ₱2,800,000
c. ₱2,000,000
d. ₱1,200,000

3. Partners A, B, and C are partners of ABC Partnership and decided to liquidate the business. Below is their
condensed Statement of Financial Position dated December 31, 2017.
Cash ₱ 15,000 Liabilities ₱75,000
Non-cash 110,000 A, Capital (35%) 5,000
B, Capital (45%) 15,000
C, Capital (20%) 30,000
The personal assets and liabilities of the partners on this date apart from their equities in partnership
are as follows:
Partners Personal Assets Personal Liabilities
A ₱100,000 ₱25,000
B 50,000 50,000
C 5,000 60,000
Assume that the non-cash assets are sold for ₱40,000 and liquidation expenses of ₱13,500 were
incurred and paid. How much is the total cash paid to partners?
a. ₱14,366
b. ₱22,575
c. ₱5,091
d. ₱8,209

For Items 4-5

Donna, Ella and Frey are partners in DEF Partnership with profit and loss sharing ratio of 6:1:3. Due to
disagreement, the partners decided to liquidate their business with pre-liquidation statement of financial
position presented below:
Cash ₱ 3M Liabilities ₱10M
Noncash Assets 17M Dona, Capital 1M
Ella, Capital 4M
Frey, Capital 5M
The following additional notes are provided:
 All partners are legally declared to be personally insolvent.
 All non-cash assets are sold during the liquidation process.
 Liquidation expenses amounting to ₱2M were paid.
 Ella receives a total of ₱2,500,000 at the end of liquidation.
4. What is the amount received by Frey at the end of liquidation?
a. ₱500,000
b. ₱2,500,000
Page 3 of 11
 c. ₱0
d. ₱3,500,000

5. What is the net proceeds from the sale of all noncash assets?
a. ₱14,000,000
b. ₱10,000,000
c. ₱12,000,000
d. ₱8,000,000

For items 6-8

On December 31, 2016 the accounting records of MM, NN, and OO Partnership included the following
ledger account balances:
(Dr.) Cr.
MM, drawing …………………………………………………P (30,000)
OO, drawing …………………………………………………. (11,250)
NN, loan ……………………………………………………….. 37,500
MM, capital ………………………………………………….. 153,750
NN, capital …………………………………………………… 125,625
OO, capital …………………………………………………… 135,000

Total assets of the partnership amounted to P 598,125, including P 65,625 cash, and partnership
liabilities totaled, 187,500. The partnership was liquidated on December 31, 2016
And OO received 104,062.50 cash pursuant to the liquidation. MM, NN and OO shared net income and losses in
a 5:3:2 ratio, respectively.

6. The loss on realization:

a. 19,687.50
b. 98,437.50
c. 30,937.50
d. 154, 687.00

7. The amount realized from sale of non-cash assets?

a. 321,562.50
b. 434,062.50
c. 377,812.50
d. 532,500.00

8. The cash balance after payment of liabilities?

a. 312,187.50
b. 443,437.50
c. 387,187.50
d. 499,687.50

9. GYLIN, MARIA, and CLARA decided to liquidate their partnership on November 30, 2017. Their capital
balances and profit and loss ratio are as follows:

Capitals P & L Ratio

GYLIN P 800,000 40%
MARIA 960,000 30%
CARLA 320,000 30%

The net income from January to November 30,2017 is 704,000. On November 30, 2017, the cash
balance is 640,000 and that of liabilities is 1,440,000.
GYLIN is to receive P883,200 in the settlement of her interest.
Calculate: (1) The loss on realization, and (2) the amount to be realized from the sale on non-cash assets?
a. (1) P496, 000; (2) P3, 088,000
b. (1) P248, 000; (2) P5,100,000
c. (1) P620, 000; (2) P3,860,000
d. (1) P552, 000; (2) P3,860,000

10. The accounts of the Partnership of R, S, and T at the end of its fiscal year on November 30, 2017 are as
follows:

Cash ₱ 166,000 Liabilities ₱420,000

Noncash Assets 1,132,000 Loan from S 32,000
Loan to R 24,000 R, Capital (30%) 426,000
Page 4 of 11
 S, Capital (50%) 218,000
T, Capital (20%) 226,000
If S received ₱80,000 from the cash distribution, which of the following statements is incorrect?
a. Total Amount distributed to partners is ₱538,000
b. Total Amount paid to creditors is ₱420,000
c. Total Amount realized from the noncash assets is ₱958,000
d. R received an amount equal to ₱300,000.

For Items 11-15

Due to financial difficulty, partners G, H, and I decided to liquidate. The following balances are before
liquidation: Capital balances of G, H, and I are ₱10,000, ₱25,000 and ₱20,000 respectively; Loan from G is
₱25,000; Cash ₱25,000; Profit and Loss ratio 30:35:35 respectively.
Partner H received ₱10,650 upon liquidation and the share of the liquidation expenses of partner G is
₱1,800. Meanwhile the cash available after realizing the non-cash asset and paying liquidation expenses is
₱69,000.

11. What is the amount received by Partner G?

a. ₱5,650
b. ₱0
c. ₱22,700
d. ₱39,000

12. What is the amount received by all partners?

a. ₱25,000
b. ₱39,000
c. ₱44,000
d. ₱69,000

13. How much is paid to outside creditors?

a. ₱35,000
b. ₱45,000
c. ₱30,000
d. ₱40,000

14. How much is the proceeds from sale of the noncash assets?
a. ₱44,000
b. ₱50,000
c. ₱69,000
d. ₱41,000

15. How much is the book value of the noncash assets sold?
a. ₱85,000
b. ₱80,000
c. ₱86,000
d. ₱85,500

II. Installment Liquidation

For items 1-5

AA, BB and CC are partners sharing profits and loss in the ratio of 4:3:3 respectively. On January 1,
2016, they decided to liquidate the partnership and the balance sheet were prepared as follows.
ASSETS LIABILITIES and CAPITAL
Cash ………………………………P 2,000 Liabilities ……………………….P 6,000
Other assets ……………………46,000 BB, loan …………………………. 5,000
CC, loan …………………………. 2,500
AA, capital ………………………14,450
BB, capital ……………………….12,550
_______ CC, capital ……………………..… 7,500
Total Assets P 48,000 Total Liab& Capital P 48,000

The following transactions as a result of liquidation were as follows:

Book value Payment of Payment
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 Of Assets Proceeds Liquidation to Cash
Sold from sale expenses Creditors withheld
January P 12,000 P 10,500 P 500 P 6,000 P 2,000
February 7,000 6,000 750 1,000
March 15,000 10,000 1,000 2,500
April 12,000 5,000 5,000 -0-

1. The amount to be received by Partner BB for the month of January?

a. 0
b. 4,000
c. 1,800
d. 5,000

2. The amount to be received by Partner CC for the month of February?

a. 0
b. 1,075
c. 475
d. 2,500

3. The amount to be received by Partner AA for the month of March?

a. P 0
b. 8,800
c. 3,000
d. 14,450

4. The amount to be received by Partner BB for the month of April?

a. P 0
b. 1,000
c. 750
d. 1,250

5. The second payment to any partner (s) under a program of priorities shall be made:
a. To BB, 6,712.50
b. To CC, P 6,712.50
c. To AA, 1,116.80
d. To AA, P 1,116.80 and BB, P837.6

6. On January 1, 2017, the partners CARLO, DIEGO and EDGAR, who share profits and losses in the ratio of
5:3:2, respectively, decided to liquidate their partnership. On this date the partnership condensed balance
sheet was as follows:
Cash P 80,000 Liabilities P 96,000
Other assets 400,000 Carlo, capital 128,000
Diego, capital 144,000
Edgar, capital 112,000
On January 15, 2017, the first cash sale of other assets with a carrying amount of ₱240,000 realized
₱192,000. Safe installment payments were made the same date. How much cash should be distributed to each
partner?
CARLO DIEGO EDGAR
a. P 30,000 P 102,000 P 88,000
b. 80,000 90,000 70,000
c. 24,000 81,600 70,400
d. 120,000 72,000 48,000

7. The accounts of the partnership of PBA at December 31, 2017 are as follws:
Cash ₱ 132,000 Liabilities ₱100,000
Noncash Assets 1,166,000 Loan from B 32,000
Loan to P 24,000 P, Capital 330,000
B, Capital 586,000
A, Capital 274,000
They divide profits and losses 3:5:2 to P, B, and A respectively. They have decided to liquidate the Partnership
at this date. How much is the amount payable to Partner A if cash is paid just before the start of liquidation on
December 31, 2017?
a. ₱28,286
b. ₱35,300
c. ₱35,357
d. ₱35,120

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8. CLAUDIA, PETRA, MONA and HILDA are partners who share profits and losses at 40:30:20:10, respectively.
Since two of them have given intention to withdraw, they have decided to liquidate the partnership instead.
At this point, the capital balances are as follows
Claudia P 48,000
Petra 21,600
Mona 34,400
Hilda 16,000
Which of the following statements is true?
a. The first available P 1,600 will go to Hilda
b. Claudia will be the last to receive cash
c. The first available 2,400 will go to Mona
d. Claudia will collect a portion of any available cash before Hilda receives anything

For Items 9-10

On December 31,2020, the Statement of Financial Position of UFC Partnership shows the following data
with profit or loss sharing of 2:3:5:
Cash ₱15,000,000 Liabilities ₱20,000,000
Noncash Assets 40,000,000 U, Capital 15,000,000
F, Capital 12,500,000
C, Capital 7,500,000
On January 1, 2021, the partners decided to wind up the partnership affairs. During the winding up,
liquidation expenses amounted to ₱2,000,000 were paid. Noncash assets with book value of ₱30,000,000 were
sold during January. 40% of total liabilities were also paid during January. ₱3,000,000 cash was withheld during
January for future liquidation expenses. On January 31, 2021, partner U received ₱10,000,000.

9. What is the amount received by Partner F on January 31, 2021?

a. ₱2,500,000
b. ₱7,500,000
c. ₱5,000,000
d. ₱3,000,000

10. What is the net proceeds from the sale of noncash assets during January 2021?
a. ₱25,000,000
b. ₱20,000,000
c. ₱22,000,000
d. ₱23,000,000

For Items 11-14

On December 31, 2050, the Statement of Financial Position of NBA Partnership shows the following
data with profit or loss sharing of 2:3:5:
Cash ₱20M Liabilities ₱50M
Noncash Assets 80M Payable to B 5M
Receivable from N 10M Payable to A 15M
N, Capital 30M
B, Capital 20M
A, Capital (10M)
On January 1, 2051, the partnership decided to wind up its affairs. For the month ended January 31,
2051, the following transactions occurred:
 Noncash assets with book value of ₱60M were sold at a loss of ₱10M
 Liquidation expenses amounting to ₱3M were paid.
 ₱2M cash was withheld for future liquidation expenses.
 60% of liabilities to third persons were paid.

For the month ended February 28, 2051, the following transactions occurred:
 Remaining noncash assets were sold at a gain of ₱5M
 Liquidation expenses amounting to ₱2M were paid.
 The remaining liabilities to third person were paid.

11. What is the amount received by N on January 31, 2051?

a. ₱7,000,000
b. ₱8,000,000
c. ₱3,000,000
d. ₱4,500,000
Page 7 of 11
12. What is the share of A to the maximum possible loss on January 31, 2051?
a. ₱11,000,000
b. ₱1,500,000
c. ₱10,000,000
d. ₱15,000,000

13. What is the total amount of cash withheld on January 31, 2051?
a. ₱20,000,000
b. ₱22,000,000
c. ₱3,000,000
d. ₱43,000,000

14. What is the amount received by B on February 28, 2051?

a. ₱10,000,000
b. ₱7,500,000
c. ₱15,000,000
d. ₱12,000,000

For Items 15-16

Capital balances of partners Q, R, and S are the following before liquidation: ₱87,000, ₱95,500,
₱106,250, respectively. The partnership has a loan from partner Q in the amount of ₱8,000; loan to partner R in
the amount of ₱4,500; advances to partner S in the amount of ₱6,500. The partner’s profit and loss ratio is
25:40:35 respectively.

15. If in the first installment the total cash paid to partners is ₱57,000, how much did partner S receive?
a. ₱0

b. ₱19,396
c. ₱13,854
d. ₱20,125

16. If Partner Q received ₱20,000 in the first installment and Partner S received ₱12,396 in the second
installment, how much is received by partner Q as of the second installment and how much is the total cash
paid to partners in the second installment?
a. ₱12,604 & ₱25,000
b. ₱8,854 & ₱30,000
c. ₱23,750 & ₱30,000
d. ₱32,604 & ₱25,000

For Items 17-18

ASSETS LIABILITIES & EQUITY

Cash ₱15,000 Loan from Ron ₱ 6,000
Noncash 95,000 Liabilities 20,000
Receivable from Harry 5,000 Harry, Capital 33,000
Loan to Hermione 4,000 Ron, Capital 25,000
Hermione, Capital 35,000

17. If ₱40,000 book value of the noncash assets are sold for ₱18,000, additional expenses of ₱2,500 are
incurred and paid, cash withheld is ₱5,400, and all outside creditors are paid, how much is the total cash
paid to partners during the first installment?
a. ₱15,265
b. ₱5,530
c. ₱5,100
d. ₱10,500

18. During the first installment the following data are relevant: ₱56,000 of the book value of the noncash assets
are sold for ₱38,000; additional liquidation expenses of ₱12,000 are incurred and paid; all of the outside
creditors are also paid. If Harry received ₱11,000 during the first installment, how much is the cash
withheld?
a. ₱8,500
b. ₱10,000
c. ₱9,500
Page 8 of 11
 d. ₱10,500

19. LGM partnership provided you the following account balances as of December 31, 2017 just before the
retirement of Lee.

Cash ₱ 390,000 Liabilities ₱310,000

Noncash Assets 1,100,000 Loan from David 25,000
Loan to Adam 10,000 David, Capital (20%) 450,000
Lee, Capital (20%) 325,000
Adam, Capital (60%) 390,000

On December 31, 2017, Lee decided to leave the partnership and he got paid ₱80% of his capital
balance.
After four months of attempt to carry on with the partnership, David and Adam decided to enter into
liquidation. A net loss amounting to ₱124,000 was realized. In connection with this, ₱84,000 was the net cash
inflow during the first four months of 2018 and the partnership’s liabilities increased by ₱40,000. Half of the
noncash assets were sold at a loss of ₱120,000.
Liquidation expenses of ₱35,000 are expected to be incurred in due course of liquidating the
partnership. ₱275,000 of the liabilities to outside creditors were paid. Available cash was distributed to the
partners.
How much is David’s total interest after the first cash distribution?
a. ₱279,250
b. ₱364,250
c. ₱255,250
d. ₱125,250
20. SCA Partnership has the following account balances before liquidation:
Cash ₱ 70,000 Liabilities ₱ 225,000
Noncash Assets 1,475,000 Loan from A 10,000
Loan to C 30,000 S, Capital (40%) 250,000
Receivable from S 4,000 C, Capital (40%) 380,000
Expenses 446,000 A, Capital (20%) 200,000
Revenues 960,000

During May, some noncash assets were sold that resulted to a loss of ₱9,225. Liquidation expenses of
₱35,000 were paid and additional expenses amounting to ₱18,000 were expected to be incurred through the
following months of liquidating the partnership. Liabilities to outsiders amounting to ₱175,000 were paid. What
is the book value of the noncash assets which were sold for C to receive ₱111,110?
a. ₱465,775
b. ₱426,000
c. ₱416,775
d. ₱475,000

PARTNERSHIP COMPREHENSIVE PROBLEMS

For Items 1-4

On January 1, 2015, Mars, Len and Brie formed MLB Partnership with original contribution of
₱4,000,000, ₱1,000,000 and ₱5,000,000, respectively. The article of co-partnership provides that profit or loss
shall be distributed under the following terms:
 Mars, Len, and Brie shall be entitled to monthly salary of ₱10,000, ₱20,000, and ₱30,000, respectively.
 10% interest on the original capital contribution.
 As managing partner, Len shall receive bonus equal to 10% of net income after salaries and interest but
before bonus.
 The remainder shall be distributed on the basis of original capital contribution ratio.

During 2015, the partners regularly withdraw ¼ of their monthly salary. The December 31, 2015 Statement
of Financial Position of MLB Partnership shows that the capital balance of Mars is ₱5,310,800.

On January 1, 2016, Brie decided to retire from the partnership and it was agreed that Brie shall receive
₱6,000,000. The retiring agreement provides that any bonus shall be distributed on the basis of original capital
contribution ratio.

After the retirement of Brie, the remaining partners decided to fully amend their profit or loss sharing
agreement under the following terms:
 Mars and Len shall be entitled to quarterly salary of ₱40,000 and ₱30,000, respectively.
Page 9 of 11
  20% interest on the beginning of the year capital balance.
 The remainder shall be distributed in the ratio of 1:4 for Mars and Len, respectively.

During 2016, the partnership reported net loss of ₱1,000,000. On January 1, 2017, the partners decided to
liquidate the partnership with the outstanding liabilities to third person amounting to ₱3,000,000 and the cash
balance reported at ₱1,000,000. During the liquidation process, ₱200,000 were paid for liquidation expenses.
Len receives ₱300,000 at the end of liquidation process. The partners agree to use the ratio 1:4 for Mars and
Len, respectively, for purposes of liquidation.

1. What is the net income of the partnership for the year ended December 31, 2015?
a. ₱3,772,000
b. ₱1,720,000
c. ₱2,872,000
d. ₱4,000,000

2. What is the capital balance of Len after the retirement of Brie on January 1, 2016?
a. ₱1,872,400
b. ₱1,932,400
c. ₱1,890,400
d. ₱1,854,400

3. What is the amount received by Mars at the end of liquidation process?

a. ₱6,676,240
b. ₱6,780,400
c. ₱6,320,320
d. ₱6,210,200

4. What is the net proceeds from the sale of non-cash assets at the process of liquidation?
a. ₱9,480,240
b. ₱9,680,200
c. ₱9,280,400
d. ₱9,380,120

For Items 5-9

On December 31, 2016, partners J, A, and C have capital balances of ₱252,000, ₱368,000, and
₱305,000, respectively. The partnership has ₱275,000 liabilities, including loan from A amounting to ₱20,000,
and cash of ₱175,000.

On May 31, 2017, the partnership decided to liquidate. Its net income from January to May 31
amounted to ₱348,000. Its profit/loss distribution agreement calls for annual salaries of ₱134,400, ₱158,400,
and ₱115,200 for J, A, and C, respectively. Any remainder will be distributed as follows: 25% to J, 25% to A,
and 50% to C. The partnership’s cash as of this date amounted to ₱250,000 and its total liabilities amounted to
₱307,000 excluding the loan from A.

During June, noncash assets with a book value of ₱400,000 were sold for a certain amount. The
partnership paid ₱67,000 of its liabilities to outside creditors. Liquidation expenses amounting to ₱44,000 were
paid and cash will be withheld for the payment of its remaining liabilities to outsiders.

5. How much was the total book value of the noncash assets before the sale of noncash assets in June?
a. ₱1,600,000
b. ₱1,500,000
c. ₱1,350,000
d. ₱1,250,000

6. How much were the noncash assets sold for in June in order for A to receive the amount priority to her and
an additional ₱7,500?
a. ₱540,000
b. ₱520,000
c. ₱519,000
d. ₱419,000

During July, noncash assets were sold for ₱432,000 resulting to a loss of ₱18,000. Remaining liabilities to
outsiders were paid and ₱425,000 were distributed to the partners. ₱5,000 were paid for liquidation expenses.

7. How much is the cash withheld for liquidation expenses to be incurred by August?
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 a. ₱2,000
b. ₱1,000
c. ₱3,000
d. ₱4,000

8. What is C’s share in the maximum possible loss after the July sale of noncash assets?
a. ₱231,000
b. ₱250,000
c. ₱251,000
d. ₱225,000

9. How much cash was distributed to J in July?

a. ₱125,500
b. ₱101,250
c. ₱106,250
d. ₱85,000

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