ACTIVITY 2 SOLUTION

A, B, C, and D are partners sharing earnings in the ratio of 3/21, 4/21, 6/21 and 8/21, respectively.
The balances of their capital accounts on December 31, 2006 are as follows:

A P 1,000

B 25,000

C 25,000

D _ 9,000

P 60,000

The partners decide to liquidate, and they accordingly convert the non-cash assets into P23, 200 of
cash After paying the liabilities amounting to P3, 000, they have P22,200 to divide. Assume that the
debit balance of any partner’s capital is uncollectible.

After the P22, 200 was divided, the capital balance of B was:

a. P3, 200

b. P3, 920

c. P4, 500

d. P17, 800

3/21 4/21 6/21 8/21

CASH NCA = LIABILITIES A B C D

Beg. 2, 000 61, 000 = 3, 000 1, 000 25, 000 25, 000 9, 000
Realization 23, 200 (61, 000) (5, 400) (7, 200) (10, 800) (14, 400)
Payment (2, 000) (3, 000)
Ending 22, 200 - = - (4, 400) 17, 800 14, 200 (5, 400)
TOTAL 4, 400 (3, 920) (5, 880) 5, 400
LIABILITIES
22, 200 = - 13, 880 8, 320

BALANCE SHEET
CASH CAPITAL STATEMENT
A B C D
22, 200 (4, 400) 17, 800 14, 200 (5, 400)
Distribution (22, 200) - (13, 880) (8, 320) -
- (4, 400) 3, 920 5, 880 (5, 400)