Lump-sum Liquidation

DEF Partnership decided to liquidate its business. The condensed Statement of Financial Position of the company on April
Assets Liabilities and Capital
Cash 20,000 Liabilities 28,000
Other Assets 80,000 D, Loan 2,000
D, Capital (40%) 9,000
E, Capital (40%) 21,000
F, Capital (20%) 40,000
Total Assets 100,000 Total Liabilities and Capital 100,000
Case 1: Loss on Realization: Fully absorbed by Partners' Capital Balances
> Other assets were realized at P60,000.
Cash Other Assets Liabilities D, Loan
Balance before liquidation 20,000 80,000 28,000 2,000
Realization of Assets 60,000 - 80,000
Balances 80,000 - 28,000 2,000
Payment of Liabilities - 28,000 - - 28,000
Balances 52,000 - - 2,000
Payments to Partners - 52,000 - 2,000
- - - -

Case 2: Loss on Realization Resulting Capital Deficiency to a Partner with a Loan Account
> Other assets were realized at P55,000.

Cash Other Assets Liabilities D, Loan

Balance before liquidation 20,000 80,000 28,000 2,000
Realization of Assets 55,000 - 80,000
Balances 75,000 0 28,000 2,000
Payment of Liabilities - 28,000 - 28,000
Balances 47,000 0 0 2,000
Offsetting of D's Loan - 1,000
Balances 47,000 1,000
Payment to Partners - 47,000 - 1,000
0 0 0 0

Case 3: Loss on Realization Resulting Capital Deficiency to a Solvent Partner

> Other assets were realized at P49,500.

Cash Other Assets Liabilities D, Loan

Balance before liquidation 20,000 80,000 28,000 2,000
Realization of Assets 49,500 - 80,000
Balances 69,500 0 28,000 2,000
Payment of Liabilities - 28,000 - 28,000
Balances 41,500 0 0 2,000
Offsetting of D's Loan - 2,000
Balances 41,500 0
Additional Investment of D
Balances 41,500 0
Payment to Partners - 41,500 -
0 0 0 0

Case 4: Loss on Realization Resulting Capital Deficiency to a Insolvent Partner

> Other assets were realized at P49,500.

Cash Other Assets Liabilities D, Loan

Balance before liquidation 20,000 80,000 28,000 2,000
Realization of Assets 49,500 - 80,000
Balances 69,500 0 28,000 2,000
Payment of Liabilities - 28,000 - 28,000
Balances 41,500 0 0 2,000
Offsetting of D's Loan - 2,000
Balances 41,500 0
Capital Absorption
Balances 41,500 0
Payment to Partners - 41,500 -
0 0 0 0

Case 5: Loss on Realization Resulting Partnership Insolvency

> Other assets were realized at P25,000.

Cash Other Assets Liabilities D, Loan

Balance before liquidation 20,000 80,000 28,000 2,000
Realization of Assets 25,000 - 80,000
Balances 45,000 0 28,000 2,000
Payment of Liabilities - 28,000 - 28,000
Balances 17,000 0 0 2,000
Offsetting of D's Loan - 2,000
Balances 17,000 0
Additional Investment 11,000
Balances 28,000 0
Capital Absorption - 1,000 -
Balances 27,000 0
Payment to Partners - 27,000 -
0 0 0 0
tion of the company on April 27, 2021 is presented below:

40% 40% 20%

D (40%) E (40%) F (20%) 1 Entry 2 Entry
9,000 21,000 40,000 Cash 60,000 Liabilities 28,000
- 8,000 - 8,000 - 4,000 D, Capital 8,000 Cash
1,000 13,000 36,000 E, Capital 8,000
F, Capital 4,000
1,000 13,000 36,000 Other Assets 80,000
- 1,000 - 13,000 - 36,000
- - -

40% 40% 20%

D (40%) E (40%) F (20%)

9,000 21,000 40,000
- 10,000 - 10,000 - 5,000
-1,000 11,000 35,000
1 Entry
-1,000 11,000 35,000 D, Loan 1,000
1,000 Cash 1,000
0 11,000 35,000
- 11,000 - 35,000
0 0 0

40% 40% 20%

D (40%) E (40%) F (20%)

9,000 21,000 40,000
- 12,200 - 12,200 - 6,100
-3,200 8,800 33,900
1 Entry
-3,200 8,800 33,900 Cash 1,200
2,000 D, Capital 1,200
-1,200 8,800 33,900
1,200
0 8,800 33,900
 - 8,800 - 33,900
0 0 0

40% 40% 20%

D (40%) E (40%) F (20%)

9,000 21,000 40,000
- 12,200 - 12,200 - 6,100
-3,200 8,800 33,900 1 Entry
E, Capital 800
-3,200 8,800 33,900 F, Capital 400
2,000 D, Capital 1,200
-1,200 8,800 33,900
1,200 - 800 - 400
0 8,000 33,500
- 8,000 - 33,500
0 0 0

40% 40% 20%

D (40%) E (40%) F (20%) Assets Liab Equity

9,000 21,000 40,000 D 59,000 48,000 11,000
- 22,000 - 22,000 - 11,000 E 60,000 70,000 - 10,000
-13,000 -1,000 29,000 F 80,000 50,000 30,000
1 Entry
-13,000 -1,000 29,000 Cash 11,000
2,000 D, Capital 11,000
-11,000 -1,000 29,000
11,000 F, Capital 1,000
0 -1,000 29,000 E, Capital 1,000
1,000 - 1,000
0 0 28,000
- - 28,000
0 0 0
 3 Entry
D, Loan 2,000
28,000 D, Capital 1,000
E, Capital 13,000
F, Capital 36,000
Cash 52,000
Installment Liquidation
XYZ Partnership decided to liquidate its business with an equal PL ratio. The condensed Statement of Financial Position of the
Assets Liabilities and Capital
Cash 5,000 Liabilities 40,000
Other Assets 155,000 X, Capital 30,000
Y, Capital 40,000
Z, Capital 50,000

Total Assets 160,000 Total Liabilities and Capital 160,000

Case 1: Loss on Realization: Fully absorbed by Partners' Capital Balances
33% 33%
Cash Other Assets Liabilities X Y
Balance before liquidation 5,000 155,000 40,000 30,000 40,000
Realization of Assets 65,000 - 80,000 - 5,000 - 5,000
Balances 70,000 75,000 40,000 25,000 35,000
Payment of Liabilities - 40,000 - - 40,000
Balances 30,000 75,000 - 25,000 35,000
Payments to Partners - 1st - 30,000 - 0 - 10,000
Balances - 75,000 - 25,000 25,000
Realization of Assets 24,000 - 42,000 - 6,000 - 6,000
Balances 24,000 33,000 - 19,000 19,000
Payments to Partners - 2nd - 24,000 - 8,000 - 8,000
Balances - 33,000 - 11,000 11,000
Realization of Assets 12,000 - 33,000 - 7,000.00 - 7,000
Balances 12,000 - - 4,000 4,000
Payments to Partners - 3rd - 12,000 - 4,000 - 4,000
Balances - - - - -
50% 25%
Case 2: One or more partners have insufficient interest to absorb possible loss.
Cash Other Assets Liabilities X Y
Balance before liquidation 5,000 155,000 40,000 30,000 40,000
Realization of Assets 65,000 - 80,000 - 7,500 - 3,750
Balances 70,000 75,000 40,000 22,500 36,250
Payment of Liabilities - 40,000 - - 40,000
Balances 30,000 75,000 - 22,500 36,250
Payments to Partners - 1st - 30,000 - 10,000
Balances - 75,000 - 22,500 26,250
Realization of Assets 24,000 - 42,000 - 9,000 - 4,500
Balances 24,000 33,000 - 13,500 21,750
Payments to Partners - 2nd - 24,000 - - 12,000
Balances - 33,000 - 13,500 9,750
Realization of Assets 12,000 - 33,000 - 10,500 - 5,250
Balances 12,000 - - 3,000 4,500
Payments to Partners - 3rd - 12,000 - 3,000 - 4,500
Balances - - - - -
 50% 40%
Case 3: One or more partners becomes deficient after absorbing possible loss
Cash Other Assets Liabilities X Y
Balance before liquidation 5,000 155,000 40,000 30,000 40,000
Realization of Assets 65,000 - 80,000 - 7,500 - 6,000
Balances 70,000 75,000 40,000 22,500 34,000
Payment of Liabilities - 40,000 - - 40,000
Balances 30,000 75,000 - 22,500 34,000
Payments to Partners - 1st - 30,000
Balances - 75,000 - 22,500 34,000
Realization of Assets 24,000 - 42,000 - 9,000 - 7,200
Balances 24,000 33,000 - 13,500 26,800
Payments to Partners - 2nd - 24,000 - - 11,200
Balances - 33,000 - 13,500 15,600
Realization of Assets 12,000 - 33,000 - 10,500 - 8,400
Balances 12,000 - - 3,000 7,200
Payments to Partners - 3rd - 12,000 - 3,000 - 7,200
Balances - - - - -
t of Financial Position of the company on June 30, 2021 is presented below:
Realization of Other Assets
Book Value Cash Realized Loss
July 80,000 65,000 15,000
August 42,000 24,000 18,000
September 33,000 12,000 21,000
Total 155,000 101,000 54,000

33% Schedule of Safe Payments

Z
50,000 X Y Z
- 5,000 25,000 35,000 45,000
45,000 75,000 25,000 25,000 25,000
Balance 0 10,000 20,000
45,000
- 20,000 1 Entry
25,000
- 6,000
19,000
- 8,000
11,000
- 7,000
4,000
- 4,000
-
25%

Z 1 - SSF X Y Z
50,000 22,500 36,250 46,250
- 3,750 75,000 37,500 18,750 18,750
46,250 Balance - 15,000 17,500 27,500
Capital Absorption 15,000 - 7,500 - 7,500
46,250 Balance - 10,000 20,000
- 20,000
26,250 2 - SSF X Y Z
- 4,500 13,500 21,750 21,750
21,750 33,000 - 16,500 - 8,250 - 8,250
- 12,000 Balance - 3,000 13,500 13,500
9,750 3,000 - 1,500 - 1,500
- 5,250 - 12,000 12,000
4,500
- 4,500
-
 10%

Z 1 - SSF X Y Z
50,000 22,500 34,000 48,500
- 1,500 75,000 37,500 30,000 7,500
48,500 Balance - 15,000 4,000 41,000
Capital Absorption 15,000 - 12,000 - 3,000
48,500 Balance - - 8,000 38,000
- 30,000 Capital Absorption 8,000 - 8,000
18,500 Balance - - 30,000
- 1,800
16,700 2 - SSF X Y Z
- 12,800 33,000 13,500 26,800 16,700
3,900 Balance - 16,500 - 13,200 - 3,300
- 2,100 - 3,000 13,600 13,400
1,800 3,000 - 2,400 - 600
- 1,800 - 11,200 12,800
-
Cash Distribution Program
On December 31, 2020, the balance sheet of DLE Partnership is as follows:
ASSETS

Cash 15,360 Liabilities 51,200 1

Other Assets 271,360 D, Loan 10,240 2
Loan to E 10,240 L, Loan 20,480 3
D, Capital (30%) 38,912 Total
L, Capital (30%) 73,728
E, Capital (40%) 102,400
Total Assets 296,960 Total Liab and Equity 296,960
30% 30%
Cash Other Assets Liabilities D L
15,360 271,360 51,200 49,152 94,208
Realization of Assets 77,820 - 133,120 - 16,590 - 16,590
Balance 93,180 138,240 51,200 32,562 77,618
Payment of Liabilities - 40,000 - 40,000
Balance 53,180 138,240 11,200 32,562 77,618
Payment to Partners (1st) - 41,980 - 32,327
Balance 11,200 138,240 11,200 32,562 45,291
Realization of Assets 46,400 - 76,800 - 9,120 - 9,120
Balance 57,600 61,440 11,200 23,442 36,171
Payment of Liabilities - 11,200 - 11,200
Balance 46,400 61,440 - 23,442 36,171
Payment to Partners (2nd) - 40,000 - 3,090 - 15,819
Balance 6,400 61,440 - 20,352 20,352
Realization of Assets 32,240 - 61,440 - 8,760 - 8,760
Balance 38,640 - - 11,592 11,592
Payment to Partners (2nd) - 38,640 - 11,592 - 11,592
Balance - - - - -
 Book Value Cash Collected Expenses Paid Liabilities Paid Cash Paid to
Partners
133,120 81,920 4,100 40,000 41,980
76,800 51,200 4,800 11,200 40,000
61,440 35,840 3,600 - 38,640
271,360 168,960 12,500 51,200 120,620

40% Schedule of Safe Payments

E 1st SSF D L E
92,160 32,562 77,618 70,040
- 22,120 - 41,472 - 41,472 - 55,296 138,240
70,040 - 8,910 36,146 14,744
8,910 - 3,819 - 5,091
70,040 - 32,327 9,653
- 9,653
60,387 2nd SSF D L E
- 12,160 23,442 36,171 48,227
48,227 - 20,352 - 20,352 - 27,136 67,840
3,090 15,819 21,091
48,227
- 21,091 3,090 15,819 21,091
27,136
- 11,680
15,456
- 15,456
-
 Cash Distribution/Priority Program Cash Payments
Balances D L E D L E
Capital 38,912 73,728 102,400
Loan 10,240 20,480 - 10,240
Total Interest 49,152 94,208 92,160
PL Ratio 30% 30% 40%
MLAC 163,840 314,027 230,400
1st Priority 83,627 25,088
Balance 163,840 230,400 230,400
2nd Priority 66,560 66,560 19,968 26,624
Balance 163,840 163,840 163,840 - 45,056 26,624 71,680

Cash Priority D L E Difference

1st Cash Payment 41,980 25,088 16,892
7,239 9,653
Total 41,980 - 32,327 9,653
2nd Cash Payment 40,000 12,729 16,971 10,300
3,090 3,090 4,120
Total 40,000 3,090 15,819 21,091

3rd Cash Payment 38,640 11,592 11,592 15,456

ANSWER: D

50% 30% 20%

TOTAL CC DD EE
100,000 15,000 22,500 62,500
- 125,000 - 62,500 - 37,500 - 25,000 Squeeze
- 25,000 - 47,500 - 15,000 37,500
47,500 - 28,500 - 19,000
- 25,000 - - 43,500 18,500
43,500 43,500
18,500 - - 18,500

ANSWER: B
CASH DISTRIBUTION PROGRAM
RJ SJ TJ RJ SJ
50% 30% 20% 50% 30%
Bal before liquidation 32,000 30,000 8,000
64,000 100,000 40,000
1st Priority 36,000 10,800
64,000 64,000 40,000
2nd Priority 24,000 24,000 12,000 7,200
40,000 40,000 40,000 12,000 18,000

SAFE PAYMENT
RJ SJ TJ Total
Bal before liquidation 32,000 30,000 8,000
Possible Loss 25,000 15,000 10,000 50,000
Balance 7,000 15,000 - 2,000
Capital Deficiency Absorption - 1,250 - 750
Cash Distribution 5,750 14,250

ANSWER: C
50% 30% 20%
Cena Batista Lashley
18,000 27,000 - 3,000
MLAC 36,000 90,000 - 15,000
1st Priority 54,000 16,200
Balance 36,000 36,000 - 15,000
 20K Available for Partners
TJ RJ SJ TJ
20% Total

10,800 10,800

19,200 5,750 3,450

30,000 5,750 14,250 -