School of Business and Accountancy – Southland College

Second Semester SY 2021-2022

Financial Accounting and Reporting
Partnership Liquidation – Installment

Problem 1. Refer to the board discussion last meeting.

Problem 2

The NDC Partnership decided to liquidate the partnership as of June 30, 2021. The statement of financial position as
of this date is presented as follows:

NDC Partnership
Statement of Financial Position
June 30, 2021

Cash P100,000
Accounts Receivable, Net 190,000
Inventories 150,000
Property, Plant and Equipment, Net 1,000,000
Total Assets P1,440,000

Accounts Payable P810,000

Nadia Gomez, Capital 200,000
Dennis Pangilinan, Capital 280,000
Charles Yee, Capital 150,000
Total Liabilities and Equity P1,440,000

The personal assets (excluding partnership loan and capital interests) and personal liabilities of each partner as of
June 30, 2021, are as follows:

Nadia Dennis Charles

Personal assets P500,000 P900,000 P600,000
Personal liabilities (P540,000) (P840,000) (P480,000)
Personal net worth (P40,000) P60,000 P120,000

The NDC Partnership was liquidated during the months of July, August and September. The assets and the amounts
realized are as follows:

Month Assets Sold Carrying Amount Amount Realized

July Inventories P100,000 P90,000
Accounts receivable, net 120,000 80,000
Property, plant and equipment, net 800,000 610,000
August Inventories 50,000 36,000
Accounts receivable, net 20,000 8,000
September Accounts receivable, net 50,000 20,000
Property, plant and equipment, net 200,000 90,000

Requirement:
1. Prepare a statement of partnership realization and liquidation for the NDC Partnership for the three-month
period ended September 30, 2021. Nadia, Dennis, and Charles share profits and losses in the ratio of
50:30:20.
2. Support each cash distribution to the partners with a schedule of safe payments or cash priority program.
School of Business and Accountancy – Southland College
Second Semester SY 2021-2022
Financial Accounting and Reporting
Partnership Liquidation – Installment

NDC Partnership
Statement of Partnership Realization and Liquidation
From July 01, 2021 through September 30, 2021
Cash Noncash Liabilities Nadia, Dennis, Charles,
Assets Capital Capital Capital
Pre-
liquidation
balances,
June 30 P100,000 P1,340,000 P810,000 P200,000 P280,000 P150,000
Sale for the
month of July 780,000 (1,020,000) (120,000) (72,000) (48,000)
Balances 880,000 320,000 810,000 80,000 208,000 102,000
Payment to
creditors (810,000) (810,000)
Balances 70,000 320,000 - 80,000 208,000 102,000
Distribution
to partners (70,000) (64,000) (6,000)
Balance - 320,000 - 80,000 144,000 96,000
Sale for the
month of
August 44,000 (70,000) (13,000) (7,800) (5,200)
Balances 44,000 250,000 - 67,000 136,200 90,800
Distribution
to partners (44,000) (26,400) (17,600)
Balances - 250,000 - 67,000 109,800 73,200
Sale for the
month of
September 110,000 (250,000) (70,000) (42,000) (28,000)
Balances 110,000 - - (3,000) 67,800 45,200
Allocation of
Nadia’s
Deficit to
Dennis and
Charles 3,000 (1,800) (1,200)
Balances 110,000 - - - 66,000 44,000
Distribution
to partners (P110,000) - - - (P66,000) (P44,000)

NDC Partnership
Schedule of Safe Payments to Partners
Month of July

Nadia (50%) Dennis (30%) Charles (20%)

Cash before distribution 80,000 208,000 102,000
Restricted interest – P320,000 (160,000) (96,000) (64,000)
Balances (80,000) 112,000 38,000
Restricted interest – P80,000 80,000 (48,000) (32,000)
Distribution for month of July P- P64,000 P6,000

NDC Partnership
Schedule of Safe Payments to Partners
Month of August
School of Business and Accountancy – Southland College
Second Semester SY 2021-2022
Financial Accounting and Reporting
Partnership Liquidation – Installment

Nadia (50%) Dennis (30%) Charles (20%)

Cash before distribution 67,000 136,200 90,800
Restricted interest – 250,000 (125,000) (75,000) (50,000)
Balances (58,000) 61,200 40,800
Restricted interest – P58,000 58,000 (34,800) (23,200)
Distribution for month of July P- P26,400 P17,600

NDC Partnership
Cash Priority Program

Nadia (50%) Dennis (30%) Charles (20%) Nadia Dennis Charles

(50%) (30%) (20%)
Capital Interests P200,000 P280,000 P150,000
Divided by: P/L
ratio 50% 30% 20%
Loss absorption
capacity 400,000 933,333 750,000
Priority I (183,333) 55,000
Balance 400,000 750,000 750,000
Priority II (350,000) (350,000) 105,000 70,000
400,000 400,000 400,000

For the first P70,000 - July

Dennis = 55,000 + (15,000 x 3/5) = P64,000
Charles = 15,000 x 2/5 = P6,000

For the month of August – P44,000

Dennis = 44,000 x 3/5 = P26,400
Charles = 44,000 x 2/5 = P17,600
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