Assignment 1.

2: Partneship Dissolution and Liquidation

1. Presented below is the condensed balance sheet of the partnership of ANSWER:

KK, LL and MM who share profits and losses in the ratio of 6:3:1,
respectively: Capital, Beg.
Sales of Interest to NN
Cash 85,000.00 Liabilities 80,000.00 Capital, End.
Other assets 415,000.00 KK, Capital 252,000.00
LL, Capital 126,000.00 OR
MM, Capital 42,000.00
Total 500,000.00 Total 500,000.00
KK
LL
The partners agree to sell NN 20% of their respective capital and profit
and loss interests for a total payment of P90,000. The payment by NN is MM
to be made directly to the individual partners. The capital balances of
KK, LL and MM, respectively after admission of NN are:
 KK LL MM NN Total
252,000.00 126,000.00 42,000.00 - 420,000.00
(50,400.00) (25,200.00) (8,400.00) 84,000.00 -
201,600.00 100,800.00 33,600.00 84,000.00 420,000.00

20% was
sold to NN
252,000.00 80% 201,600.00
126,000.00 80% 100,800.00
42,000.00 80% 33,600.00
2. Oliver and Twist are partners with capital balances P60,000 and P20,000, respectively. Profits and losses are divi
the ratio of 60:40. Oliver and Twist decided to form a new partnership with Gunther, who invested land valued at P1
for a 20% capital interest in the new partnership. Gunther's cost of the land was P12,000. The partnership elected to
the bonus method to record the admission of Gunther into the partnership. Gunther's capital account should be cred
for:

ANSWER:
Oliver, Capital 60,000.00 Investment of Gunther 15,000.00
Twist, Capital 20,000.00 Bonus to Gunther 4,000.00
Investment of Gunther 15,000.00 Gunther's Capital after
Net Assets after Admission 95,000.00 Admission 19,000.00
Gunther's Interest in Net Assets 20%
Gunther's Capital Credit 19,000.00
Investment of Gunther 15,000.00
Bonus 4,000.00

OR
TAC TCC
Oliver 60,000.00 57,600.00 2,400.00 decrease in Old
Twist 20,000.00 18,400.00 1,600.00 decrease in Old
Gunther (20% of TAC) 15,000.00 19,000.00 4,000.00 increase in New
95,000.00 95,000.00
Bonus method: TAC = TCC
ofits and losses are divided in
sted land valued at P15,000
e partnership elected to use
account should be credited
3. On June 30, 2020, the statement of financial position for the partnership of CC,
Lelouch, and Nunnally, together with their respective profit and loss ratios, were as
follows:

Assets, at cost 180,000.00

CC, Loan 9,000.00
CC, Capital (20%) 42,000.00
Lelouch, Capital (20%) 39,000.00
Nunnally, Capital (60%) 90,000.00
Total 180,000.00

CC decided to retire from their partnership. By mutual agreement, the assets are to
be adjusted to their fair value of P216,000 at June 30, 2020. It was agreed that the
partnership would pay CC P61,200 cash for CC's partnership interest, including
CC's loan which is to be repaid in full. No goodwill is to be recorded. After CC's
retirement, what is the balance of Lelouch's capital account?
ANSWER:

Total interest of CC:

Loans 9,000.00
Capital 42,000.00
Add: Share in adjustment of asset (OLD ratio)
(216l -180k) x 20% 7,200.00
Total interest 58,200.00
Amount paid to CC 61,200.00
Bonus to retiring partner (3,000.00)

Lelouch (20%) Nunnally (60%)

Capital 39,000.00 90,000.00
Add: Share in adjustment of asset (OLD ratio) 7,200.00 21,600.00
Share in Bonus to CC - NEW ratio) (750.00) (2,250.00)
45,450.00 109,350.00
4. Partners Peter and Tony, who share equally in profits and losses, have the following
balance sheet as of December 31, 2019:

Cash 120,000.00 Accounts Payable 172,000.00

Accounts Receivable 100,000.00 Accum. Dep'n 8,000.00
Inventory 140,000.00 Peter, Capital 140,000.00
Equipment 80,000.00 Tony, Capital 120,000.00
Total 440,000.00  Total 440,000.00

They agreed to incorporate their partnership, with the new corporation absorbing the net assets
after the following adjustments: provision of allowance for bad debts of P10,000; restatement of
the inventory at its current fair value of P160,000; and recognition of further depreciation on the
equipment of P3,000. The corporation's capital stock is to have a par value of P100, and the
partners are to be issued corresponding total shares equivalent to their adjusted capital
balances.

The total par value of the shares of capital stock that were issued to partners Peter and Tony
was:
ANSWER:

Unadjusted capital balance 260,000.00

Adjustments:
Allowance for bad debts (10,000.00)
Revaluation of inventory 20,000.00
Additional depreciation expense (3,000.00)
Adjusted capital balance 267,000.00
5. The following statement of financial position is presented for the partnership of ANSWER:
David, Ebreo, and Franco who share profits and losses in the ratio of 5:3:2,
respectively: Net cash proceeds
Carrying amount of non-cash as
Cash 60,000.00  Liabilities 140,000.00 Total loss
Other Assets 540,000.00  David, Capital 280,000.00
 Ebreo, Capital 160,000.00
 Franco, Capital 20,000.00 Capital balances
 Total 600,000.00  Total 600,000.00 Allocation of loss
Totals
The partners decide to liquidate the partnership. If the other assets are sold for Share in Franco's Deficit
P400,000, how should the available cash be distributed to each partner? Amounts received by the partn

OR

Balances before realization

Loss on realiztion

Paid outside creditors

Share on Franco's deficit

Available for distribution
ANSWER:

Net cash proceeds 400,000.00

Carrying amount of non-cash assets 540,000.00
Total loss (140,000.00)

David Ebreo Franco

Capital balances 280,000.00 160,000.00 20,000.00
Allocation of loss (70,000.00) (42,000.00) (28,000.00)
210,000.00 118,000.00 (8,000.00)
Share in Franco's Deficit (5,000.00) (3,000.00) 8,000.00
Amounts received by the partners 205,000.00 115,000.00 -

ASSETS = LIABILITIES + EQUITY

Cash Other Assets Laibilities David (50%) Ebreo (30%)
Balances before realization 60,000.00 540,000.00 140,000.00 280,000.00 160,000.00
Loss on realiztion 400,000.00 (540,000.00) (70,000.00) (42,000.00)
460,000.00 - 140,000.00 210,000.00 118,000.00
Paid outside creditors (140,000.00) (140,000.00)
320,000.00 - - 210,000.00 118,000.00
Share on Franco's deficit (5,000.00) (3,000.00)
Available for distribution 320,000.00 - - 205,000.00 115,000.00
QUITY
Franco (20%)
20,000.00
(28,000.00)
(8,000.00)

(8,000.00)
8,000.00
-
6. On December 31,2018, the accounting records of the STU Partnership
included the following ledger account balances:

 (Dr) Cr
Sy, drawing -24,000.00
Uy, drawing -9,000.00
Ty, loan 30,000.00
Sy, capital 123,000.00
Ty, capital 100,500.00
Uy, capital 108,000.00

Total assets of the partnership amounted to P478,500, including P52,500

cash. The partnership was liquidated on December 31,2018 and Uy
received P83,250 cash pursuant to the liquidation. Sy, Ty and Uy share
profits and losses in a 5:3:2 ratio, respectively. What is the loss on
realization of assets and cash received by Sy, respectively?
ANSWER:
Sy Ty Uy Total
Capital balances 123,000.00 100,500.00 108,000.00 331,500.00
Drawing accounts (24,000.00) (9,000.00) (33,000.00)
Ty, loan 30,000.00 30,000.00
Total 99,000.00 130,500.00 99,000.00 328,500.00
Allocation of loss (39,375.00) (23,625.00) (15,750.00) (78,750.00)
Amounts received by partners 59,625.00 106,875.00 83,250.00 249,750.00

OR
Total interest before realization
Loss on realization (SQUEEZE)
Available cash for distribution
ASSETS LIABILITIES + EQUITY
Cash Other Assets Sy (50%) Ty (30%) Uy (20%)
52,500.00 426,000.00 99,000.00 130,500.00 99,000.00
347,250.00 (426,000.00) (39,375.00) (23,625.00) (15,750.00)
399,750.00 - 59,625.00 106,875.00 83,250.00

Loss on realization = 15,750 / 20% (78,750.00)

7. Pepe and Pilar started a partnership some years ago and managed to operate profitably for several years. Recen
substantial legal suit and incurred unexpected losses on accounts receivable and inventories. As a result, they decid
assets and only P162,000 was available to pay liabilities, which amounted to P297,000. Their capital account balanc
their profit and loss sharing ratios are shown below:

Pepe 207,000.00 0.60

Pilar 121,500.00 0.40

Pepe is personally insolvent after investing cash to pay the unpaid creditors, but Pilar has personal assets in excess
settlement to partners, how much cash should Pepe receive?

ANSWER:
ASSETS = LIABILITIES + EQUITY
Cash Other Assets Liabilities Pepe (60%)
Balances before realization - 625,500.00 297,000.00 207,000.00
Loss on realization 162,000.00 (625,500.00) (278,100.00)
162,000.00 - 297,000.00 (71,100.00)
Pepe invested cash to pay creditors 135,000.00 135,000.00
297,000.00 - 297,000.00 63,900.00
Paid outside creditors 297,000.00 (297,000.00)
- - - 63,900.00
Pilar (solvent) additional investment 63,900.00
Available cash for distribution 63,900.00 - - 63,900.00
 for several years. Recently however, they lost a
es. As a result, they decided to liquidate. They sold all
eir capital account balances before the liquidation and

personal assets in excess of P900,000. In the

IES + EQUITY
Pilar (40%)
121,500.00
(185,400.00)
(63,900.00)

(63,900.00)

(63,900.00)
63,900.00
-
8. A cash distribution plan (payment priority program) for the Matthew, Norell, and Reams partnership appears below

Priority
Creditors  Matthew  Norell Reams
First P300,000 100%
Next P80,000 70% 30%
Next P70,000  3/7 4/7.
Remainder 22% 34% 44%

If P550,000 of cash is to be distributed, how much will be received by the priority creditors, Matthew, Norell and Rea

ANSWER:
Matthew Norell Reams Total
Cash 550,000.00
Less: Payment to Priority Creditors 300,000.00
Available cash 250,000.00
Allocation:
Next P80,000 56,000.00 24,000.00 (80,000.00)
Next P70,000 30,000.00 40,000.00 (70,000.00)
Balance 100,000.00
Remainder 22,000.00 34,000.00 44,000.00 (100,000.00)
Cash received by partners 108,000.00 58,000.00 84,000.00 -
d Reams partnership appears below:

creditors, Matthew, Norell and Reams?