Jho Riza L.

Señeres
BSA 101A
06 Activity 4 - ARG

Partnership Liquidation (31 points)

The Braun Company at December 31 has cash P750,000, non-cash assets P5,500,000, liabilities
P3,000,000, and the following capital balances: Ho P2,000,000 and Li P1,250,000. The firm is liquidated,
and P4,500,000 in cash is received for the non-cash assets. Ho’s and Li’s income ratios are 60% and 40%,
respectively.

Requirements:

1. Prepare a cash distribution schedule. (20 points: 1 point for each correct amount used in the
cash distribution schedule)

Cash Distribution Schedule

Partners Capital Balance
Particulars Cash Non- Cash Liabilities Ho (60%) Li (40%)
Beginning Balance P 750,000 P 5,500,000 P 3,000,000 P 2,000,000 P 1,250,000
Sales of Non- Cash
4,500,000 5,500,000 (600,000) (400,000)
Assets
Balance 5,250,000 - 3,000,000 1,400,000 850,000
Payment of Liabilities (3,000,000) (3,000,000)
Balance 2,250,000
Distributed remaining
2,250,000 0 0 1,400,000 850,000
cash
Closing Balance - - - - -
2. Prepare the entries to record the following, assuming that The Braun Company decides to
liquidate the company.

a. The sale of non-cash assets (3 points: 1 point for each correct amount and account used)

b. The allocation of the gain or loss on liquidation to the partners (3 points: 1 point for each
correct amount and account used)

c. Payment of creditors (2 points: 1 point for each correct amount and account used)

d. Distribution of cash to the partners (3 points: 1 point for each correct amount and account
used)

Particulars Debit Credit

a. Cash P 4,500,000
Loss on sale of Non-Cash Assets 1,000,000
Sales of Non-Cash Assets P 5,500,000
To record sales of non-cash assets.

b. Ho’s Capital 600,000

Li’s Capital 400,000
Loss on sale of Non-Cash Assets 1,000,000

c. Liabilities 3,000,000
Cash 3,000,000

d. Ho’s Capital 1,400,000

Li’s Capital 850,000
Cash 2,250,000