CHAPTER 5

Ex. 1.a)
Mary, Helga, Luz,
Cash Capital Capital Capital
Balances before liquidation P 400,000 700,000 400,000 200,000
1) Sale of accts recble at a loss P25,000 175,000 (12,500) (6,250) (6,250)
2) Sale of inventories at a gain P20,000 820,000 10,000 5,000 5,000
3) Sale of equipments at a loss P50,000 550,000 (25,000) (12,500) (12,500)
4) Liquidation expenses paid P12,000 (12,000) (6,000) ( 3,000) ( 3,000)
5) Payment to creditors (700,000) ________ ________ _______
6) Payment to partners P1,233,000 P666,500 P383,250 P183,250

Cash 1,545,000
Mary, Capital 27,500
Helga, Capital 13,750
Luz, Capital 13,750
Accum Depn 100,000
Accounts Receivable 200,000
Inventories 800,000
Furniture and Equipment 700,000
Mary, Capital 6,000
Helga, Capital 3,000
Luz, Capital 3,000
Cash 12,000
Liquidation expenses paid.

Accounts Payable 300,000

Notes Payable 400,000
Cash 700,000

Mary, Capital 666,500

Helga, Capital 383,250
Luz, Capital 183,250
Cash 1,233,000

2) Mary, Helga, Luz,

Cash Non Cah Liabilities Capital Capital Capital
Balances before liquidation P 400,000 1,600,000 700,000 700,000 400,000 200,000
Sale of non-cash assets at a loss 800,000 (1,600,000) (400,000) (200,000) (200,000)
liquidation expenses paid.of P12,000 (12,000) _______ ( 6,000) ( 3,000) ( 3,000)
Balances after sale 1,188,000 0 700,000 294,000 197,000 (3,000)
Payment of liabilities (700,000) (700,000)
Balances after payment of liabilities 488,000 0
Additional investment 3,000 3,000
4) Payment to Mary and Helga 491,000 (294,000) (197,000) 0

a.Cash 800,000 c. Accounts Payable 700,000

Mary, Capital 400,000 Cash 700,000
Helga, Capital 200,000 Cash 3,000
Luz, Capital 200,000 Luz, Capital 3,000
Accum Depn 100,000
Accounts Receivable 100,000 d.
Furniture and Equipt 700,000 Mary, Capital 294,000
Inventories 800,000 Helga, Capital 197,000
Cash 491,000
b.Mary, Capital 6,000
Helga, Capital 3,000
Luz, Capital 3,000
Cash 12,000

3) Mary, Helga, Luz,

Cash Non-Cash Liabilities Capital Capital Capital
Balances before liquidation 400,000 1,600,000 700,000 700,000 400,000 200,000
Sale of non-cash assets less liquid exp 752,000 (1,600,000) (424,000) (212,000) (212,000)
Balances after sale 1152,000 - 276,000 188,000 (12.000)
Payment of liabilities (700,000) 700,000) _______ _______ _______
452,000 -____ 276,000 188,000 (12,000)
Balances after payment of debts (8,000) (4,0000 12,000
Deficiency absorbed 268,000 184,000
Bal after absorption
Payment to Mary & Helga (452,000) (268,000) (184,000)

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Ex 4
a.1)Total Liab + PE = Total Assets of P100,000 – Non cash Assets of P80,000 = Cash of P20,000
Cash after sale is P70,000 against cash beg of P20,000= Proceeds from Sale of P50,000.
Book value of other assets of P80,000 against the sale of P50,000= P30,000 Loss on sale

d. 1)
Cash Other Assets Acc.Payable Jem, Capital Roy, Capital
Balances 20,000 80,000 60,000 30,000 10,000
Sale at a loss 50,000 (80,000) (10,000) (20,000)
Balances 70,000 0 60,000 20,000 (10,000)
Payment of Accts Pay (60,000) (60,000)
Balances after payment
Investment by def partner 10,000 10,000
Cash to Jem 20,000 (20,000)

e)
Cash 50,000
Jem, Capital 10,000
Roy, Capital 20,000
Non-Cash Assets 80,000
Accounts Payable 60,000
Cash 60,000
Cash 10,000
Roy, Capital 10,000
Jem, Capital 20,000
Cash 20,000
5.
Cash Other Acc.Payable Jem, Roy,
Assets Capital Capital
Balances after sale 70,000 0 60,000 20,000 (10,000)
Def absorbed by Jem (10,000) 10,000
70,000 60,000 10,000
Payment to creditors & Jem (70,000) (60,000) (10,000)

Jem, Capital 10,000

Roy, Capital 10,000
Accounts Payable 60,000
Cash 60,000

Jem, Capital 10,000

Cash 10,000
6)
Accounts Loan from
Cash Others Payable Roy Jem Roy
Balances before sale 70,000 0 45,000 15,000 20,000 (10,000)
Liabilities paid (45,000) (45.000)
Balances 25,000 0 15,000 20,000 (10,000)
Right of Offset _______ (10,000) ______ 10,000
Balances 5,000 20,000 0
Payment to partners (25,000) 0 (5,000) (20,000)
for loan and capital

Loan from Roy 10,000

Roy, Capital 10,000

Jem, Capital 20,000

Loan from Roy 5,000
Cash 25,000

7. SOL Partnership- Table to update partners’ equity at point of liquidation:

Sid Olga Louie Total
Salary allowances 10,000 10,000 10,000 30,000
Remainder 5:2:1 (22,500) (13,500) (9,000) (45,000)
Share in Profit/Loss (12,500) ( 3,500) 1,000 (15,000)
Capital balances 55,000 24,000 26,000 115,000
Revised equities 42,500 20,500 27,000 90,000

Statement of Partnership Liquidation

January 31, 2015
Cash Other Liabilities Loan, Sid, Olga, Louie,
Assets Olga Capital Capital Capital
Balances 8,000 190,000 98,000 10,000 42,500 20,500 27,000
1) Sale of non-cash assets 90,000 (190,000) (50,000) (30,000) (20000)
Balances 98,000 0 P98,000 5,000 (7,500) (4,500) 7,000
2) Payment of Liabilities (98,000) (98,000)

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Balances 0 0 0 5,000 (7,500) (4,500) 7,000
3) Right of Offset (4,500) _____ 4,500 ____
500 (7,500) 7,000
3) Addtl investment 7,500 7,500
Balances for distribution 7,500 500 7,000

Cash 90,000
Sid Capital 50,000
Olga, Capital 30,000
Louie, Capital 20,000
Other Assets 190,000
Liabilities 98,000
Cash 98,000

Loan, Olga 4,500

Olga Capital 4,500

Cash 7,500
Sid, Capital 7,500

Louie, Capital 7,000

Olga, Loan 500
Cash 7,500
.
8.
Cash Non-Cash Accts Pay Loan Pay- Miss,Captal Mister,Captl MasterCaptl
Mister
Balances 80,000 1,520,000 750,000 50,000 300,000 200,000 300,000
Sale 700,000 (1,520,000) (307,500) (205,000) (307,500)
Balances 780,000 0 750,000 50,000 (7,500) (5,000) (7,500)
Payment of liab (750,000) (750,000)
Balances 30,000 0 0 50,000 (7,500) (5,000) (7,500)
Def absorbed (4,500) (3,000) 7,500
Balances 30,000 50,000 (12,000) (8,000) 0
Right of offset (8,000) 8,000
Balances 30,000 42,000 (12,000) 0
Adtl investment 12,000 12,000
Paid to Mister 42,000 42,000

Cash 700,000
Miss, Capital 307,500
Mister, Capital 205,000
Master, Capital 307,500
Non Cash Assets 1,520,000

Liabilities 750,000
Cash 750,000

Miss, Capital 4,500

Mister, Capital 3,000
Master, Capital 7,500

Mister, Loan 8,000

Mister, Capital 8,000

Cash 12,000
Miss, Capital 12,000

Mister, Loan 42,000

Cash 42,000

9 Other Loan,
Cash Assets Liabilities Pepe Pepe Pilar Paz
Balances 70,000 530,000 280,0000 30,000 65,000 90,000 135,000
Sale 200,000 (530,000) ________ ______ (110,000) (110,000) (110,000)
_
Balances 270,000 0 280,000 30,000 (45,000) (20,000) 25,000
Payment (270,000) ________ (280,000) ______ _10,000__ _______
_
Balances 0 0 0 30,000 (35,000) (20,000) 25,000
Right of Offset _______ ________ _______ (30,000) 30,000 _______ ______
Balances 0 0 0 0 ( 5,000) (20,000) 25,000
Pepe and Pilar pays Paz
a. Cash 200,000
Pepe, Capital 110,000
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 Pilar, Capital 110,000
Paz, Capital 110,000
Other Assets 530,000
b. Liabilities 280,000
Cash 270,000
Pepe, Capital 10,000
c. Loan, Pepe 30,000
Pepe, Capital 30,000
d. Paz, Capital 25,000
Pepe, Capital 5,000
Pilar, Capit 20,000
b. P25,000, not from the partnership cash but from the addtl cash given by the deficient but solvent partner.

Ex 10. Other Loan,

Cash Assets Liabilities Pepe Pepe Pilar Paz
Balances after sale 270,000 0 280,000 30,000 (45,000) (20,000) 25,000
Def of Pepe transferred ______ ________ _______ 45,000 (22,500) (22,500)
Balances 270,000 280,0000 30,000 0 (42,500)
Payments made to creditors (270,000) ______ (280,000) (30,000) 40,000 _______
Balances for settlement 0 0 0 0 (2,500) 2,500
Paz creditors collects from Pepe P2,500 more.

Ex 11,
a) Danny, Drawing 150,000 b) Danny, Capital 240,000
Arnel, Drawing 37,500 Arnel, Capital 37,500
Floyd, Drawing 112,500 Floyd, Capital 232,500
Income Summary 300,000 Danny, Drawing 240,000
Arnel, Drawing 37,500
Floyd, Drawing
232,500

Cash Non-Cash Liabilities Danny (4) Arnel (1) Floyd (3)

Balances 240,000 1,100,000 650,000 120,000 262,500 307,500
Sale at a loss of P730 370,000 (1,100,000) ( 365,000) (91,250) (273,750)
Balances 610,000 0 650,000 (245,000) 171,250 33,750
Addtl investment 245,000 245,000
Balances 855,000 650,000 0 171,250 33,750
Cash payment (855,000) (650,000) (171,250) (33,750)

12. Amount Available P 40,000

Add back Liabilities Paid 150,000
Total cash after sale 190,000
Proceeds 160,000
Cash beg P 30,000
Total Liab. & PE= Total Assets P550,000
Non cash Assets (550-30) P520,000
Proceeds 160,000
Loss from sale of non cash assets P360,000

Cash Red White Blue

P40,000 170,000 125,000 105,000
Sale at a Loss on realization 160,000 (120,000) (120,000) (120,000)
200,000 50,000 5,000 (15,000)
Liabilities paid (160,000)
Balances 40,000 50,000 5,000 (15,000)
Cash distribution (refer to schedule) ( 40,000) (40,000)
Addtl investment by Blue 15,000 15,000
Balances for distribution P15,000 10,000 5,0000
Schedule of Cash Distribution
Red White Blue
50,000 5,000 (15,000)
Restricted interest Blue deficiency (7,500) (7,500) 15,000
Restricted interest White deficiency (2,500) 2,500
Free interest 40,000 0 0
Exercise 13.
Cash AP Greg Oscar Olivia Donna
72,000 220,000 120,000 40,000 60,000 50,000
Sale with Loss on realization 228,000 (28,500) (38,000) (57,000) (66,500)
300,000 220,000 91,500 2,000 3,000 (16,500)
Liabilities paid (220,000) (220,000)
80,000 0
Addtl investment 16,500 16,500
Balances 96,500 91,500 2,000 3,000
Payment to partners (96,500) (91,500) ( 2,000) ( 3,000)
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 Amount Available to partners P 80,000
Liabilities Paid 220,000
Total cash after sale 300,000
Proceeds 228,000
Cash beg P 72,000
Total Liab. & PE= Total Assets 490,000
Non cash P 418,000
Proceeds 228,000
Loss P190,000

Partner Greg’s personal creditors may be paid in full P50,000 coming from partnership cash.
Partner Oscar’s personal creditors may be paid P2,252,000 only, P2,000 coming from the partnership cash.
Partner Olivia’s personal creditors may be paid in full P5,000. She is not insolvent.

Ex. 14-15. Statement of Liquidation

Cash Assets Acct Pay Kuok Tong Lau

June balances before liq 40,000 210,000 60,000 48,000 72,000 70,000
Sale at a loss 90,000 (120,000) _______ (15,000) (9,000) (6,000)
130,000 90,000 60,000 33,000 63,000 64,000
Liquidation expenses paid (2,000) _______ _______ (1,000) (600) (400)
128,000 90,000 60,000 32,000 62,400 63,600
Partial payment of liab (30,000) ________ (30,000) ______ ________ _______
98,000 90,000 30,000 32,000 62,400 63,600
Cash Dist See Sch 1 (65,000) ________ _______ _______ (25,800) (39,200)
33,000 90,000 30,000 32,000 36,600 24,400
July sale at a loss 37,000 (45,000) _______ (4,000) (2,400) (1,600)
70,000 45,000 30,000 28,000 34,200 22,800
Liquidation Expenses paid (2,000) (1,000) (600) (400)
Payment of liabilities (30,000) ________ (30,000) _______ _______ _______
38,000 45,000 0 27,000 33,600 22,400
Cash dist see sch 2 (36,000) ________ _______ (3,500) (19,500) (13,000)
2,000 45,000 0 23,500 14,100 9,400
Aug sale at a loss 48,000 (45,000) _______ 1,500 900 600
50,000 0 0 25,000 15,000 10,000
Final cash distribution (50,000) 0 0 (25,000) (15,000) (10,000)

Alternative Schedules:
Schedule 1) Cash balance P40,000
Add Proceeds net of liq exp 88,000
Total 128,000
Less: Restricted interest 63,000
Cash available to partners P65,000

Schedule 2) K T L
a. Capital balances 32,000 62,400 63,600
. Possible loss if non-
cash assets of P90,000
will not be sold + 3,000 (46,500) (27,900) (18,600)
Balances P(14,500) P34,500 P45,000
Possible loss of 14,500 14,500 (8,700) ( 5,800)
Free Interest P25,800 P39,200

Schedule 3)
K T L
Balances 27,000 33,600 22,400
Possible loss of 47,000 (23,500) (14,100) (9,400)
Free Interest P 3,500 P 19,500 P 13,000

Ex. 16 As an alternative, a priority program may be prepared, and cash payments applied against it.

Priority Program Loss Absorption Ability Payment Plan

K T L K T L
Partners’ Interest 48,000 72,000 70,000
Profit and Loss Ratio 50% 30% 20%
LAB 96,000 240,000 350,000
Priority 1 (110,000) 22,000
LAB balances 96,000 240,000 240,000
Priority 2 144,000) (144,000) 43,200 28,800
Balances 96,000 96,000 96,000 43,200 50,800
Further cash distribution to all based on
P and L ratio.
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Cash distribution for June based on the priority program:
Ava. Cash K T L
Priority 1 22,000 22,000
Priority 2 43,000 25,800 17,200
Total 65,000 25,800 39,200

Ex. 17.
Cash Other A Liabilities Pearl Apple Mao Sweet
10,000 190,000 30,000 60,000 30,000 60,000 20,000
Jan:Write off goodwill (20,000) (8,000) (6,000) (4,000) (2,000)
Merchandise sold 18,000 (20,000) ( 800) ( 600) ( 400) ( 200)
Balances 28,000 150,000 30,000 51,200 23,400 55,600 17,800
Liabilities paid (15,000) (15,000)
13,000 150,000 15,000 51,200 23,400 55,600 17,800
Feb:Receivables sold 36,000 (40,000) (1,600) (1,200) ( 800) ( 400)
CSV of Prepaid Insurance 15,000 (20,000) (2,000) (1,500) (1,000) ( 500)
Balances 49,000 110,000 13,000 50,400 22,800 55,200 16,900
Balance of liabilities paid (13,000) (13,000)
Balamces 36,000 110,000 0 50,400 22,800 55,200 16,900
Sch 1 for cash dist (31,000) (27,333) (3,667)
Balances 5,000 110,000 0 50,400 22,800 27,867 13,933
Mar:Sale of remaining assets 102,000 (110,000) (3,200) ( 2,400) (1,600) ( 800)
Liquidation expenses paid (8,000) 0 0 (3,200) (2,400) (1,600) ( 800)
Final Cash distribution 99,000 0 0 44,000 18,000 24,667 12,333

Pearl Apple Mao Sweet

50,400 22,800 55,200 17,600
Restricted interest of 115,000 (46,000) (34,500) (23,000) (11,500)
4,400 (11,700) 32,200 6,100
Restricted interest of 11,700 (6,686) 11,700 (3,343) (1,671)
(2,286) 0 28,857 4,429
Restricted interest of 2,280 2,286 (1,524) ( 762)
Free interest 0 27,333 3,667

18.
Pearl Apple Mao Sweet Pearl Apple Mao Sweet
1. Profit and Loss ratio 4 3 2 1
2. Capital Balances 60,000 30,000 60,000 20,000
3. LAB (2/1) 150,000 100,000 300,000 200,000
4. First Priority (100,000) 20,000
5. 2nd Priority (50,000) (50,000) 10,000 5,000
6. 3rd Priority ( 50,000) (50,000) (50,000) 20,000 10,000 5,000

Further distribution acc to P & L

To prove: If available cash is P31,000 using the priority program, distribution should be the same as free interest in no.14:
Mao 20,000 + 7,333 (11,000 x 10 divide by 15) = P27,333
Sweet (11,000 x 5 divide by 15) 3,667

Legal Issue:
1. PNB 90,000
2. Ciel 20,000
3. Axel 10,000
4. Axel P90,000
Biel 90,000
Ciel 90,000 270,000
Total 390,000

Accounting Issue:
Gray Mayer Jason
Capital balances, Dec 31, 2013 P55,000 P115,000 P60,000
Profit and loss percentage 50% 30% 20%
Loss on revaluation 140,000 (70,000) (42,000) (28,000)
Capital accounts will change to (15,000) 73,000 32,000
Offer 10,000 80,000

Gray stands to gain by P25,000.

Partnership 2015 edition

8. Kate, Ren and Will Partnership
36
 Statement of Partnership Liquidation
Other
Cash Assets A.P. Ren, loan Kate Ren Will
Balances 300,000 800,000 210,000 50,000 150,000 250,000 440,000
Payment of Accts Pay (210,000) (210,000
Balances 90,000 800,000 - 50,000 150,000 250,000 440,000
Cash to
partners(SchA*) (90,000) ______ - (90,000)
800,000 50,000 150,000 250,000 350,000

9.. 800,000 50,000 180,000 250,000 350,000

Sale at a loss 440,000 (800,000) (180,000) (108,000) (72,000)
Balances 440,000 50,000 (30,000) 142,000 278,000
Addtl investment 30,000 30,000 ______ ______
Balances 470,000 0 142,000 278,000
Final cash dist (470,000) (50,000) (142,000) (278,000)

Schedule A Schedule of Safe Payment for Ex no. 8

Kate Ren Will
Total Interest(Captl and loan) 150,000 300,000 440,000
Restricted Interest of 800,000 (400,000) (((240,000) (160,000)
(250,000) 60,000 280,000
Restricted interest of 250,000 250,000 (((150,000) (100,000)
(90,000) 180,000
Restricted interest of P90,000 90,000 (90,000)
Free interest for ex. 8* 90,000

37