BM1705

Ho: DATE: SCORE:

Li:
Creditor:

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
Particulars Cash Non-Cash Liabilities Ho (60%) Li (40%)
Assets
Beginning 750,000 5,500,000 3,000,000 2,000,000 1,250,000
Balance
Sale of non- 4,500,000 (5,500,000) (600,000) (400,000)
cash
Assets and
allocation of
gain/loss
Balances 5,250,000 0 3,000,000 1,400,000 850,000
Payment to (3,000,000) (3,000,000)
liabilities
Balances 2,250,000 0 0 1,400,000 850,000
Payment of (2,250,000) (1,400,000) (850,000)
Partners
Balances 0 0 0 0 0

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)
Particulars Debit Credit
Cash 4,500,000
Loss on realization of non-cash 1,000,000
assets
Non-Cash Assets 5,500,000
To record assets sold

b. The allocation of the gain or loss on liquidation to the partners (3 points: 1 point for each correct
amount and account used)
Particulars Debit Credit
Ho, Capital 600,000
Li, Capital 400,000
Loss on realization of non-cash 1,000,000
assets
To record the allocation of loos
in liquidation

c. Payment of creditors (2 points: 1 point for each correct amount and account used)
Particulars Debit Credit
Liabilities 3,000,000
Cash 3,000,000
To record the payments of
creditors
 d. Distribution of cash to the partners (3 points: 1 point for each correct amount and account used)
Particulars Debit Credit
Ho, Capital 1,400,000
Li, Capital 850,000
Cash 2,250,000
To record the distribution of
cash to partners

Reference:
Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Accounting principles (12th ed.). United States of America: John
Wiley & Sons, Inc.

06 Activity 4 *Property of STI

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