Reviewer for the Midterm Exam

Given: ABC decided to liquidate and prepared the following priority program on July 1 2022:

A (1) B (3) C (2)

Priority 1 50,000

Priority 2 200,000 400,000

50 / .166666= 300 Excess LAB of A over C

200/ .16666= 1,200 and 400 /.3333 = 1,200 Excess LAB of A and C over B

2. The following is given just after all the properties were sold. Partners share profits equally:

Liabilities P50,000, A Capital P110,000, B Capital (P180,000) and C Capital P50,000.

The following are incorrect, except

A. Operation and liquidation losses are greater than the capital credit balances of A and C.

B. Right of offset may be exercised if there is a loan due from partner B.

C. Cash available is insufficient for distribution to the creditors.

D. Partnership is liquid.

Answer C Assets ???30 = Liab 50,000 – PE 20,000 (110+50-180)

Unless cash is given, assets will all represent non-cash

Unless non cash is given, the diff will represent cash.

Depende kung ano given, but hindi pwede both are not given. Pwede lang one missing.

3. Know when to prepare a schedule of safe payment.

Know when to prepare a priority program and how to use it.

The adjusted trial balance of Jason, Moore and Olsen partnership on June 30, 2019 showed the
following just before liquidation:

Cash P 400,000
Accounts Receivables- net 100,000
Properties 850,000
Loan to Jason 50,000
Total P1,400,000
Accounts Payable P 370,000
Loan from Olsen 30,000
 Jason, Capital (20%) 300,000
Moore, Capital (50%) 460,000
Olsen, Capital (30%) 240,000
Total P1,400,000

The partners agreed to liquidate and cash available to partners is 77,000 after half of the
liabilities to outside suppliers were paid and cash of P10,000 was for future liquidation
expenses until all the properties have been sold. Only half of the receivables were sold less
3,000 liquidation expenses.
Question: 3: How much is the gain or loss from the sale of the AR(net)? Net dapat ang AR
Beg 400
+ ??? 57 net proceeds
- 10 rest cash
- 370 liab
= 77 Available Reverse procedure
If proceeds is 57,000 add back liq expenses paid 3,000= 60,000 proceeds from the sale against 50,000
receivables sold = 10,000 gain fr0m the sale.\

Use partners’ interest: Capital plus loan due to a partner or less loan due from a partner.
Priority Program
J M 0 J M O
250 460 270
20% 50% 30%
1,250 920 900
(330) 66
920 920 900
( 20) (20) 4 10
900 900 900
Total priorities 70 10
Remaining cash to all acc to p and l ratio.

Jason 66,000 + 3,143 ( 2/7 x 11)= 69,143 total payment for the least vulnerable partner
Moore 5/7 x 11,000 7,857
Total 77,000
For Olsen to receive 6,000 how much should be the net proceeds from the sale of the assets?

Remainder=6,000/.3= 20,000 cash for remainder plus 80,000 cash from priority 1 and 2= 100,000.

Without liquidation expenses pa ito na dapat iadd if there is liquidation expenses which the problem
should say so.

Corporate Bankruptcy
Review FRIA Law

Application against estimated realizable value of corporate resources of secured liabilities and unsecured
liabilities.
Effect of excess secured against assets or vice versa excess assets against secured.

Deficiency account Assets 80,000= 100,000-20,000 assets deficient by 20,000 its only 80,000 against
100,000 liab. Why is SHE -20,000 (Paid in capital is lesser than RE deficient)
Know how to determine dividend ration or rrecovery rate and how to apply.
Realization and Liquidation Account: Memorize arrangement of Assets:dr or left side and cr or right side
Liabilities=or right side against dr or left side
How to get net income after e or loss
Cash balance Beg before transfer to trustee :
assets to be realized + missing cash= Liab to be liquidated + SHE
Cash bal end after transfer back to trustee:
Assets not realized plus the missing cash = Liab not liquidated + SHE

Roces Problem page 113

Assets pledged w fully secured creditors Free Unsecured

Assets
Land P 105,000
Building 30,000
Notes Payable (120,000) P15,000

Assets pledged with partially secured creditors

Investments P18,000

Notes Payable 30,000 12,000

Unsecured liability

Free assets

Free Assets
Cash P 2,000
Accts Receivable 20,800
Inventory 36,000
Equipment 20,000
Other Assets 1,000
Total 94,800
Preferred unsecured (7,000+5,000+3,000+12,000) 27,000
Net free assets 67,800
Unsecured non-preferred (48-15= 33+35+12 ) 80,000
Deficiency account 12,200

Prove def account analyze SHE (RE beg 156 def + 56.2net loss on real -200 CS)= 12,200

Pay-out ratio (12,200/80,000)= P.84755 for every peso of unsecured liability

PNB Note = 18,000 + (.84755 x 12,000)= P28,170.60

 Unsecured note deficiency loss 35,000 x (1-.84755)= P5,335.75

Multiple choice no 3 A and B Paras problem

A. Net loss or credits on assets realized (1,375+750-1,200-1375) (P450,000)

Net gain or credits on liabilities liquidated (2,250+1625-1875-1700) ( 300,000)

Supplementary Charges less Supplementary credits (3,125-2,800) 325,000

Net gain P425,000 Answer C

B. Assets not realized 1,375 + Cash??? = Liab not liquidated 1,700 + SHE 1,000

Cash end P1,325

JOINT ARRANGEMENTS

Go over IFRS 10 and IFRS 11

Differences in classifying Joint Venture and oint Operation

Whether joint venture, joint operaton or consignmet out the approach for determining profit or loss is the ssame:

Goods available for sale less inventory end or unsold plus operating expenses against sales

Mr. Thad conducted joint operation setting up a natural gas depot with Mr.Carl and Mr. Seth. Mr. Thad is
to receive a 10% bonus of the venture profit on the completion of the venture before deducting
bonus. The venture is completed on Oct. 31 with the following balances in the books of Mr Thad:

Debit Credit

Joint Operation P 80,000

Carl 5,000

Seth P 20,000

There is still unsold merchandise carried by the venture which Mr. Thad agrees to take over at the cost
of P25,000. The remaining profits are to be divided equally.
Share of Thad in the profit
Who should pay and how much?
How much will Thad receive?
Profit 80 +25= 105 x .1= 10.5 + 1/3 of 94.5 or 31.5= 42,000 profit share of Thad
Thad haas an accountability of P105,000 (balancing figure) + 25,000 -42,000= 88,000 shd be paid to
Carl and Seth. Prove:
Carl 5,000 + 31,500= P36,500 equity credit side will receive from Thad
Seth 20,000 + 31,500= 51,500 equity credit side will receive from Thad
Total P88,000
Per books of Ana, the manager, the following account balances were taken:
                                                          Debit                Credit
Joint Operation Cash          P120,000
Joint Operation                        70,000
Beth                                                                   P60,000
Chiel                                                                      40,000
      Ana is guaranteed a salary of P15,000 from the profit sharing, remainder to be divided
equally. Unsold goods were taken over by Chiel for P10,000. 
Because there is joint operation cash, dito ang pagkukunan ng mga opoerators unless and
account nila maging debit balance dapat magbayad pa sila.
a) How much is profit
b) Profit share of Ana
c) How much cash will Ana? 
Joint operation acct of 70,000 less unsold of 10,000 (debit balance kasi ang joint operation account kaya
dapat loss unsold (di ba nilalagay unsold sa credit side pag dinebit mo yong operator na kumuha) becomes
still a debit balance or loss of 60,000.

Balancing figure for Ana is credit of 90,000 (190,000-100,000) + salary 15,000- loss share in the remainder
(60 dati ang loss pag nagbigay ka salary tataas and loss maging 75,000/3= 15,000 -25,000 loss share per
operator= 10,000 loss for Ana against 90,000 balancing figure= 80,000 cash for ANA.

When a participant gets a salary which is a profit share, the loss of 60,000 becomes 75,000 loss /3= 25,000 share of
each in the remainder

How much will Beth receive 60,000-25,000 loss= P35,000

How much will Chiel receive 40,000 -10,000 unsold – 25,000 loss share= 5,000
Prove the cash: 80 for Ana + Beth 35 + Chiel 5= 120,000 joint operation cash.
Be sure you know how to record this in each book especially the last entry for cash settlement. Remember
joint ooperation cash nasa libro lang ni Ana.

CONSIGNMENT

Consignment in Consignment Out

Consign Expenses Sales Cost of shipment Sales
Freight or Cartage In Shipping cost
Delivery n Instlalation Charges of consignee:
Freight for returns Freight In (all sets recd)
Commission Delivery and Install(sets
sold
Commission (sets sold)
Freight for returns
 Debits are Credit is an Debits represent Credits represent sales and
reimbursable thus obligation to Cost of goods and returns of goods
less from credit or pay Charges
obligation to pay
Usually a credit balance unless fully paid If all units are sold (of course less returns) then the
then it is a zero balance balance of this account will represent profit if a credit
balance.
If there are unsold, after posting the profit on the dr
side this will still have a balance on the debit side
representing the unsold: cost of the goods and the
shipping cost oand freight in allocated based on units
sold against total shipment.

To determine profit from viewpoint of consignor prepare an analysis of charges or an income

statement.

THAT IN ALL THINGS GOD MAY BE GLORIFIED