Question 1

This is the process whereby the distribution of cash to the partners is done only after all the non-
cash assets have been realized.

Lump Sum Liquidation

A partner with a debit balance in his capital account after receiving his share on the loss on
realization.

Deficient Partner

The sum of a partner’s capital, loan balance and advances to the partnership.

Partner’s Interest

The point in time when all partnership affairs are wounded up or ended.

Termination

This is a process whereby assets are realized on a piecemeal basis and cash is distributed to
partners on a periodic basis as it becomes available.

Liquidation by Installment

The process of converting assets into cash

Realization

The excess of cost or book value over and above the selling price of the assets disposed through
realization.

Loss on Realization

It is the complete termination of the partnership.

Liquidation

The legal right to apply part or all of an amount owing to a partner on a loan balance against a
deficiency in his capital account resulting from losses in the process of liquidation.

Right of Offset
Question 2
Jack, Jill and Hill are partners sharing profit and losses 4:2:3. On September 30,2021, Hill
died. The partnership and Hill’s heirs decided agree to wait until December 31, to close
the books which is the end of the accounting period.
The Income summary has a debit balance of 138,000 on Dec. 31, 2021.
1. How much is the proportionate share in the profit/(loss) of Hill at the date of
(34,500)

the death?    
2. At the end of accounting period, how much is the share of Jack in the
(69,000)

profit/(loss)?    

Question 3
The capital account balances and profit and loss ratio of the partners follows after the
closing entries:

Bam (30%) P240,000                                       Tim (40%) P200,000

Tam (20%) P200,000                                        Kim (10%) P160,000

Tam is retiring from the partnership and the partners agree that he will receive a 
cash payment of P280,000 in final settlement of his interest. Bonus Method is used.
210,000

1. How much will be the capital balance of Bam after the withdrawal? 
160,000

2. How much will be the capital balance of Tim after the withdrawal?    
Question 4
Kebs Merchandise
Statement of Financial Position
December 31, 2021

LIABILITIES &
 ASSET
CAPITAL

Accounts
Cash 35,000 40,000
Payable

Accounts Mortgage
20,000 60,000
Receivable Payable

King
Inventory 45,000 20,000
Capital

Other Bing
90,000 30,000
Assets Capital

190,00 Sing
  40,000
0 Capital

190,00
     
0

 The partnership started its operations on January 2, 2019 with King, Bing and Sing as
partners, they share profit/loss 30%, 40% and 30%, respectively. On December 31,
2021, Bing decided to withdraw from the partnership. The partnership paid Bing 38,000.
Using the Bonus method:
16,000

1. How much will be the capital balance of King after the withdrawal? 
36,000

2. How much will be the capital balance of Sing after the withdrawal?    
Question 5
Kebs Merchandise
Statement of Financial Position
December 31, 2021
 

ASSET LIABILITIES & CAPITAL

Cash 35,000 Accounts Payable 40,000

Accounts
20,000 Mortgage Payable 60,000
Receivable

Inventory 45,000 King Capital 20,000

Other Assets 90,000 Bing Capital 30,000

  190,000 Sing Capital 40,000

      190,000

 
The partnership started its operations on January 2, 2019 with King, Bing and Sing as
partners, they share profit/loss 30%, 40% and 30%, respectively. On December 31,
2021, Bing decided to withdraw from the partnership. the partnership paid Bing 38,000.
Using the Asset Revaluation Method:
26,000

1. How much will be the capital balance of King after the withdrawal?   
46,000

2. How much will be the capital balance of Sing after the withdrawal?   
Question 6
Yellow, Red and Blue are partners who share profit and loss 30%, 35% and 35%,
respectively. They decided to liquidate the partnership. Below is the Statement of
Financial Position prior to liquidation.

ASSET LIABILITIES & CAPITAL

Cash 26,000 Liabilities 93,000

Other Assets 210,000 Red, Loan 3,000

  236,000 Blue, Loan 22,000

    Yellow, Capital 38,000

    Red, Capital 20,000

    Blue, Capital 60,000

      236,000

 
Other Assets realized at P140,000.00. Deficient partner is insolvent
(21,000)

1. How much is the share of Yellow in the gain/(loss) on realization?    

0

2. How much cash will Red receive in the liquidation?    

16,308

3. How much cash will Yellow receive in the liquidation?    

(808)

4. How much is the share of Blue in the additional loss?    

5. How much is left in the deficiency of Red after offsetting it to his loan
(1,500)

amount?    
Question 7
Harold, Harry and Henry are partners who share profit and loss 40%, 30% and 30%,
respectively. They decided to liquidate the partnership. Below is the Statement of
Financial Position prior to liquidation.

ASSET LIABILITIES & CAPITAL

Cash 340,000 Liabilities 250,000

Other Assets 490,000 Harry, Loan 70,000

  830,000 Henry, Loan 60,000

    Harold Capital 150,000

    Harry Capital 180,000

    Henry Capital 120,000

      830,000

 
Other Assets realized at P220,000.00. Deficient partner is solvent
1. How much cash left for distribution after paying the liability, excluding those
310,000

owing to partners?    
99,000

2. How much cash will Harry receive with respect to his capital?    
39,000

3. How much cash will Henry receive with respect to his capital?    
(108,000)

4. How much is the share of Harold in the gain/(loss) on realization? 

5. How much will be offsetted to Harry’s Loan account with respect to his
0

deficiency?