PARTNERSHIP LIQUIDATION – PRACTICE PROBLEMS

Question 1

On September 21, 20x8, Tina, Donna and Gina formed a partnership investing cash of P189,000,
P170,100 and P52,920, respectively. The partners share profits 3:2:2 and on October 17, 20x8,
they have cash of P12,600, and other assets of P598,500; liabilities are P322,560. On this date
they decided to go out of business and sell all the assets for P378,000. Gina has personal assets
of P18,900 that may, if necessary, be used to meet partnership obligations. How much should
be distributed to Donna upon liquidation of the partnership?

Question 2

A balance sheet for the partnership of Susan, Myrna and May, who share profits in the ratio of
50:25:25, shows the following balance just before liquidation:

Cash P162,000 Susan, capital P297,000

Other assets 803,250 Myrna, capital 209,250
Liabilities 270,000 May, capital 189,000
On the first month of liquidation, certain assets are sold for P432,000. Liquidation expenses of
P13,500 are paid, and additional liquidation expenses are anticipated. Liabilities are paid
amounting to P72,900 and sufficient cash is retained to insure the payment to creditors before
making payments to partners. On the first payment to partners, Susan receives P84,375. The
amount of cash withheld for anticipated liquidation expenses is:

Question 3

Partners Sasha, Haly and Jane share profits and losses in the ratio of 5:3:2. At the end of a very
unprofitable year, they decided to liquidate the firm. The partners’ capital account balances at
this time are as follows:

Sasha P123,300
Jane P44,000
Haly 139,440

The liabilities accumulate to P168,000, including a loan of P56,000 from Sasha. The cash balance
is P33,600. All the partners are personally solvent. The partners plan to sell the assets in
installment. If Haly received P20,160 from the first distribution of cash, how much did Sasha
receive at that time?

Page 1 of 10
Question 4

Question 4 options:
On December 31, 20x9, the Statement of Financial Position of XYZ Partnership with profit or loss
ratio of 5:3:2 of respective partners X, Y and Z. showed the following information:

Cash 1,600,000 Total Liabilities 2,000,000

Noncash assets 1,400,000 X, Capital 100,000
Y, Capital 500,000
Z, Capital 400,000

On January 1, 20x9, the partners decided to liquidate the partnership in installment. All partners
are legally declared to be personally insolvent.

As of January 31, 20x9, the following transactions occurred:

• Noncash assets with a carrying amount P1,000,000 were sold at a gain of P100,000.
• Liquidation expenses for the month of January amounting to P50,000 were paid.
• It is estimated that liquidation expenses amounting to P150,000 will be incurred for the
month of February, 2019.
• 20% of the liabilities to third persons were settled.
• Available cash was distributed to the partners.

As of February 28, 20x9, the following transactions occurred:

• Remaining noncash assets were sold at a loss of P100,000.
• The final liquidation expenses for the month of February amounted to P100,000.
• The remaining liabilities to third persons were settled at a compromise amount of
P1,500,000.
• Remaining cash was finally distributed to the partners.

What is the amount of cash received by Partner Z on January 31, 20x9?

What is the share of Y in the maximum possible loss on January 31, 20x9?
What is the amount of total cash withheld on January 31, 20x9?

Page 2 of 10
Question 5

On December 31, 20x8, the Statement of Financial Position of ABC Partnership with profit or
loss ratio of 6:1:3 of partners A, B and C respectively, revealed the following data:

Cash 1,000,000 Other Liabilities 2,000,000

Receivable from A 500,000 Payable to B 1,000,000
Other noncash assets 2,000,000 Payable to C 100,000
A, Capital 700,000
B, Capital (650,000)
C, Capital 350,000

On January 1, 20x9, the partners decided to liquidate the partnership. All partners are legally
declared to be personally insolvent. The other noncash assets were sold for P1,500,000.
Liquidation expenses amounting to P100,000 were incurred.

How much cash was received by B at the end of partnership liquidation?

How much cash was received by C at the end of partnership liquidation?

Question 6

Partners A, B, C, and D have been operating ABCD Partnership for ten years. Due to a
significant reduction in the demand for their product over recent years, the partners have
agreed to liquidate the partnership. At the time of liquidation, balance sheet accounts
consisted of cash, P103,500; noncash assets, P300,000; liabilities to outsiders, P60,000;
capital credit balances for partners A, B, and C, P90,000, P150,000, and P120,000,
respectively; and a debit capital balance for partner D of P16,500. Partners share equally in
income and loss. It is estimated that the administrative cost of liquidation will total P4,500.
While preparing for liquidation, an unrecorded liability of P7,500 was discovered.

Assuming the available cash of P103,500 was distributed, how much must be the share of
partner B?

For how much must the noncash assets be sold for partner D to receive at least P5,000?

Page 3 of 10
Question 7

The Walker, Wilson, and Winston Partnership is being liquidated. All liabilities have been
paid. The balance of assets on hand is being realized gradually. The following are details
of partners’ accounts:

Capital Drawing Loans to P/L Ratio

Account Account Partnership
Balances Balances
Walker P200,000 P15,000 Cr. P150,000 5
Wilson 250,000 20,000 Dr. - 2
Winston 100,000 30,000 Cr. 50,000 3

If you are to rank the partners from the most vulnerable to the least vulnerable, the
ranking will be as follows:

A. Walker, Wilson, and Winston, respectively.

B. Wilson, Walker, and Winston, respectively.
C. Winston, Wilson and Walker, respectively
D. Winston, Walker and Wilson, respectively.

If partner Walker receives P150,000, how much partner Wilson receives?

Question 8

Partners A, B and C share profits and losses in the ratio of 5:3:2. At the end of a very
unprofitable year, they decided to liquidate the firm. The partner’s capital account
balances at this time are as follows: A, P616,000; B, P697,200; C, P420,000. The liabilities
accumulate to P840,000, including a loan of P280,000 from A. The cash balance is
P168,000. All the partners are personally solvent. The partners plan to sell the assets in
instalment.

If B received P100,800 from the first distribution of cash, how much did C receive at that
time?

Page 4 of 10
Question 9

The partnership of AB, BC, and CD was dissolved on May 31, 20x3, and the account
balances after all noncash assets are converted to cash on July 1, 20x3, along with
residual P/L sharing ratios, are:
Cash P262,500 Accounts payable P630,000
BC, Capital (30%) 315,000 AB, Capital (30%) 472,500
CD, Capital (40%) 525,000

Personal assets and liabilities of the partners at July 1, 2013 are:

Personal Personal
Assets Liabilities
AB P420,000 P472,500
BC 525,000 320,250
CD 997,500 420,000

If CD contributed P367,500 to the partnership to provide cash to pay the creditors,

what amount of CD’s P472,500 partnership equity would appear to be recoverable:

Question 10

The partnership of ABC, DEF and GHI became insolvent on December 31, 20x2 and is to
be liquidated. ABC, DEF and GHI has the following balances respectively, P227,500,
(P105,000), (P14,000). After paying their personal liabilities, ABC has still P35,000 while
DEF has P52,500 of their personal assets. However, GHI has still unpaid personal
liabilities amounting to P140,000 and his personal assets amounted only to P105,000.
The partners share profits and losses equally.

How much is the maximum amount that ABC can expect to receive from the
partnership?

Page 5 of 10
Question 11

SCA Partnership has the following account balances before liquidation:

Cash P350,000 Liabilities P1,125,000
Noncash assets 7,375,000 Loan from A 50,000
Loan to C 150,000 S, Capital (40%) 1,250,000
Receivable from S 20,000 C, Capital (40%) 1,900,000
Expenses 2,230,000 A, Capital (20%) 1,000,000
Revenues 4,800,000

During June, some noncash assets were sold that resulted to a loss of P46,125.
Liquidation expenses of P175,000 were paid and additional expenses amounting to
P90,000 were expected to be incurred through the following months of liquidating the
partnership. Liabilities to outsiders amounting to P875,000 were paid.
What is the book value of the noncash assets which were sold for C to receive
P555,550?

Question 12

JFK Partnership engaged in steel manufacturing business had the following condensed
financial position prior to liquidation:
Cash P24,000 Liabilities P70,000
Noncash assets 360,000 Loan from A 30,000
A, Capital (50%) 90,000
J, Capital (30%) 140,000
R, Capital (20%) 54,000

Assuming assets with a book value of P140,000 were sold for P100,000 and that all
available cash was distributed.
For what amount would the remaining assets have to be sold in order for Partner F to
receive a total of P158,000 cash after liquidation.

Page 6 of 10
Question 13

After a long dispute, Chris, Ann, and Nine decided to liquidate their partnership. Their
total interests as of January 1, 20x4 are:
Chris (25%) P375,000 Ann (40%) P450,000 Nine (35%) P280,000

Partnership’s total assets on this date include P125,000 cash and a receivable from
Chris amounting to P25,000 and noncash assets of a certain amount. Total liabilities to
outside creditors are P320,000 and the partnership still owes Nine an amount of
P20,000. At the end of the liquidation, Ann received P75,000.
How much were the noncash assets sold for?
Question 14

Capital balances of partners after exhausting their non-cash assets are as follows:
A (20%) U (10%) B (10%) R (10%) I (20%) O (10%) N (20%)
(54,000) 20,000 (66,000) (12,000) 35,000 10,000 (40,000)

Partners R, I, O and U are personally solvent. How much cash must O contribute to the
partnership? (Round off your answer to the nearest peso)
Question 15

AZ, BY and CX are partners in a business being liquidated. The partnership has cash of
P132,000, noncash assets with a book value of P1,584,000 and liabilities of P1,039,500.
The following data relates to the partners as of June 1, 20x3: AZ has capital balance of
P775,000, personal assets of P165,000, personal liabilities of P82,500.
BY extended a loan to the partnership in the amount of P82,500, deficit of P231,000,
personal assets of P247,500, personal liabilities of P99,000. CX has a capital balance of
P49,500, personal assets of P412,500 and personal liabilities of P247,500. Their profit
and loss ratio is 3:1:1 AZ, BY, and CX, respectively.
On June 12, 20x3, assets with a book value of P495,000 were sold for P330,000 cash.
The proceeds were used to pay off liabilities of the partnership. During the remainder
of June, no additional assets were realized and outside creditors began to pressure the
partnership for payment. On July 3, the partners agreed to contribute personal assets,
to whatever extent possible, in order to eliminate their respective deficits. Shortly
thereafter, assets with book value of P330,000 and a fair value of P379,500 were
distributed to AZ. Assuming additional noncash assets with book value of P660,000
were sold in July for P891,000.
How much cash would be distributed to CX?

Page 7 of 10
Question 16

A, B, and C are partners in a business liquidated. The partnership has cash of P22,000,
noncash assets with a book value of P264,000 and liabilities of P173,250. The following
data relates to the partners as of June 1, 20x4:
(a) A has capital balance of P129,250, personal assets of P27,500, personal liabilities of
P13,750.
(b) B extended loan to the partnership in the amount of P13,750, deficit of P38,500,
personal assets of P41,250, personal liabilities of P16,500.
(c) C has a capital balance of P8,250, personal assets of P68,750 and personal liabilities
of P41,250.
(d) Their profit and loss ratio is 3:1:1, A, B and C, respectively.
On June 12, 20x4, assets with a book value of P82,500 were sold for P55,000 cash. The
proceeds were used to pay off liabilities of the partnership. During the remainder of
June, no additional assets were realized and outside creditors began to pressure the
partnership for payment.
Only July 3, the partners agreed to contribute personal assets, to whatever extent
possible, in order to eliminate their respective deficits. Shortly thereafter, assets with
book value of P55,000 and a fair value of P63,250 were distributed to A.
Assuming additional noncash assets with book value of P110,000 were sold in July for
P148,500.
How much cash would be distributed to C?
Question 17

V, F, and H are partners who share profits and losses as follows: V 35%, F 25%, and H
40%. The Statement of Financial Position of the partnership as of December 31, 20x3 is
given below:
VFH Company
Statement of Financial Position
As of December 31, 20x3
Assets Liabilities and Equity
Cash P120,000 Liabilities P1,050,000
Noncash Assets 1,650,000 Loan from V 41,400
V, Capital 257,700
F, Capital 90,000
H, Capital 330,900
Total Assets P1,770,000 Total Liabilities and P1,770,000
Equity

Page 8 of 10
On January 1, 20x4, the partners decided to liquidate. All the partners are solvent. If
after the sale of noncash assets but before additional investment to cover the capital
deficiency of any partner, F’s capital balance was a debit of P45,000.
What is the total amount that V will receive?
Question 18

J, A, and C are partners who share profits and losses as follows: J 35%, A 25%, and C
40%. The Statement of Financial Position of the partnership as of December 31, 20x3 is
given below:
JAC Company
Statement of Financial Position
As of December 31, 20x3
Assets Liabilities and Equity
Cash P8,000 Liabilities P18,000
Noncash Assets 110,000 Loan from A 2,000
J, Capital 32,700
A, Capital 23,500
C, Capital 41,800
Total Assets P118,000 Total Liabilities and P118,000
Equity

On January 1, 20x4, the partners decided to liquidate. For the month of January, some
assets were sold for a loss of P2,000. Payment to partners J, A, and C from the initial
sale of assets were P150, P2,250, and P4,600 respectively. Cash withheld for possible
liquidator expenses and unrecognized liabilities amounted to P1,258.
What was the book/carrying value of the noncash assets sold in January?
Question 19

Asser, Jing and Tony are in the process of liquidating their partnership. They have the
following capital balances and profit and loss percentages:

Capital Balance Profit and Loss %

Asser 8,000 debit 20%
Jing 28,800 credit 50%
Tony 9,600 credit 30%

The partnership balance sheet shows cash of P8,000, non-cash assets of P22,400, and
no liabilities.

Page 9 of 10
Assuming no liquidation expenses, what safe payments could be made?
a. P8,000 to Jing only
b. P28,800 to Jing only
c. P1,600 to Asser, P4,000 to Jing and P2,400 to Tony
d. P8,000 split between Jing and Tony by ratio of 5:3, respectively

Question 20

On January 1, 20x7, the partners Selya, Tessa and Ursula, who share profits and losses
in the ratio of 5:3:2, respectively, decided to liquidate their partnership. On the date,
the partnership condensed balance sheet was as follows:

Cash P45,000 Liabilities P54,000

Other asset 225,000 Selya, capital 72,000
Tess, capital 81,000
Ursula, capital 63,000
Total P270,000 Total P270,000

On January 15, 20x7, the first cash sale of other assets with a carrying amount of
P135,000 realized P108,000. Safe instalment payments were made on the same date.
How much cash should be distributed to Selya, Tessa and Ursula, respectively?
a. P55,000; P33,000; P22,000
b. P15,000; P51,000; P44,000
c. P40,000; P45,000; P35,000
d. P13,500; P45,900; P39,600*

Page 10 of 10