BAM 201 – Partnership Liquidation

Quiz # 2

1. It refers to the process of converting the non-cash assets of the partnership and distributing the total
cash to the creditors and the remainder to the partners.
a. Dissolution b. Termination c. Liquidation d. Operation

2. In the liquidation of general partnership, which of the following credits shall be paid first?
a. Those owing to third persons
b. Those owing to partners other than capital and profits
c. Those owing to partners for their capital contribution
d. Those owing to partners for their share in profits

3. When a partner’s capital account shows a debit balance and the said partner has a loan account, this
law permits him to use his loan to make up for his deficiency. What legal doctrine permits this law?
a. Right to realization
b. Right to termination
c. Right to equalization
d. Right to offset

4. What is the nature of liability of general partners as to partnership debts or obligations?

a. They are liable equally up to the extent of their separate assets after the partnership assets are
exhausted.
b. They are liable pro-rata up to the extent of their separate assets after the partnership assets are
exhausted.
c. They are liable pro-rata up to the extent of their capital contribution only.
d. They are liable solidarily up to the extent of their separate assets after the partnership assets are
exhausted.

5. It is the loss where in the book value of the unrealized non-cash assets and cash withheld for future
liquidation are combined.
a. Loss absorption potential
b. Loss on Realization
c. Maximum possible loss
d. Liquidation loss

Numbers 6 and 7

On 2022, Dianne, Daniel and Dale decided to liquidate their partnership. The facts of the partnership
balances were as follows:

 The capital balance of Dianne, Daniel and Dale at the beginning of liquidation process were
P100,000, P150,000 and P110,000, respectively.
 The partner’s capital ratio was 45:35:20.
  The Total Assets of the partnership has a debt and equity component of 1:3.
 All non-cash assets were realized and the partnership recorded gain of P30,000.
 Liquidation expense paid amounting to P50,000.
 The ending balance of cash before distribution of cash to partners was P110,000 lower
compared to the book value of non-cash assets.

6. much is the beginning balance of cash?

A. 30,000
B. 50,000
C. 0
D. None of the above

7. Which of the following is correct?

a. Daniel’s share in liquidation expense was P10,000
b. The cash settlement for the capital interest of Dianne is P91,000
c. The cash proceeds from sale of non-cash assets was P450,000
d. The cash balance at the beginning of liquidation process was nil

Diego, John, and Joe are in the process of liquidating their partnership. Since it may take
several months to convert the other assets into cash, the partners agree to distribute all
available cash immediately, except for P10,000 that is set aside for contingent expenses.
The balance sheet and residual profit and loss sharing percentages are as follows:

Cash 400,00 Accounts payable 200,000

0
Other assets 200,00 Diego, capital (40%) 135,000
0
John, capital (30%) 216,000
Joe, capital (30%) 49,000

Total assets 600,00 Total liab./equity 600,000

 0

8. How much cash should John receive in the first distribution?

A. 156,000
B. 146,000
C. 153,000
D. 147,000

9. The statement of financial position of the partnership of A, B and C shows the following
information:

Cash 40,000
Other assets 720,000
Total assets

760,000
Liabilities 300,000
B, loan 64,000
C, loan 20,000
A, capital (50%) 250,000
B, capital (30%) 86,000
C, capital (20%) 40,000
Total liabilities and
equity
760,000

The non-cash assets are sold for ₱320,000. Partner C is the only solvent partner. In the
settlement of the partners’ claims, how much additional contribution is required of Partner
C?
A. 50,000
B. 30,000
C. 20,000
D. 0
10 to 13

On December 31, 2024, the Statement of Financial Position of ABC Partnership with profit or loss ratio of
5:3:2 of respective partners A, B, and C. Showed the following information:
Cash 1,600,000 Total Liabilities 2,000,000
Noncash assets 1,400,000 A, Capital 100,000
B, Capital 500,000
C, Capital 400,000
On January 1, 2025, the partners decided to liquidate the partnership in installment.

As of January 31, 2025, the following transactions occurred:

 Noncash assets with a carrying amount of P800,000 were sold for P500,000.
 Liquidation expenses for the month of January amounting to 80,000 were paid.
 It is estimated that liquidation expenses amounting to 20,000 will be incurred for the month of
February, 2025.
 30% of the liabilities to third persons were settled.
 Available cash was distributed to the partners.

As of February 28, 2025, the following transactions occurred:

 Remaining non cash assets were sold at a gain of 250,000
 The final liquidation expenses for the month of February amounted to 40,000
 The remaining liabilities to third persons were settled.
 Remaining cash was finally distributed to the partners.

10. What is the amount of cash received by partner C on January 31, 2025?
a. 40,000 b. 200,000 c. 20,000 d. 0

11. What is the share of B in the maximum possible loss on January 31, 2025?
a. 186,000 b. 420,000 c.180,000 D. 435,000

12. What is the amount of total cash withheld on January 31, 2025?
a. 50,000 b. 1,400,000 c. 1,750,000 d. 1,420,000

Future LE + unpaid outside creditors = 20,000 + ( 2M x 70%) = 1420000

13. What is the amount of cash received by partner A on February 28,2025?

a. 0 b. 25,000 c. 15,000 d. 205,000

Int of A prior 100,000 – Loss on sale 150,000 – Liq Exp 40,000 = 90,000 deficit ( interest of A at the start
of feb)

(90,000) + Gain 125,000 – Liq exp 20,000 = 15,000 Cash received 2nd installment

The Statement of Financial Position for the partnership of R, S and T who share profits in the
ratio of 2:1:1, shows the following balances just before liquidation:

Cash P12,000
Other assets 59,500
Liabilities 49,000
R, capital 22,000
S, capital 15,500
T, capital (15,000)

On the first installment of the liquidation, a gain of P 8,525 was realized from the sale of
certain assets. Liquidation expenses of P1,000 were paid and additional liquidation expenses
are anticipated. Liabilities paid amounted to P34,400. Remaining book value of other assets
is P1,550. On the first payment to partners, R receives P 6,250.

14. The amount of cash withheld for anticipated liquidation expenses and unpaid liabilities are
A. 11,475
B. 14,600
C. 26,075
D. 29,200
 15. Which of the following statements regarding Partnership Liquidation is TRUE?
a. In a partnership liquidation, all cash withheld is part of the maximum possible loss
under the safe payment to partners.
b. In a partnership liquidation, with more than one deficient partner, partner(s) with
personal liabilities lower than his personal assets are the first to be eliminated in the
distribution of cash.
c. In a partnership liquidation, a partner who is insolvent may still receive a distribution
of cash from the partnership.
d. In an installment liquidation, a partner with a debit balance pre-liquidation interest is a
non- priority partner and shall not receive any distribution from the partnership.

16-19
X and Y, who share in profits and losses in the ratio of 3:7, decided to liquidate their XY partnership. The
partner’s capital balances were 300,000 and 190,000 respectively.

16. If all partnership assets and liabilities are realized and settled at their carrying amounts, how much
will Y receive from liquidation?
a. 300,000 b. 190,000 c. 120,000 d. 0

17. The partnership has a total liabilities of 200,000. If all partnership assets are realized for 500,000,
how much will X receive from liquidation?
a. 243,000 b. 57,000 c. 300,000 d. 133,000

18. If ater all partnership assets are realized and all liabilities are settled, the partnership has remaining
cash of 120,000, how much will Y receive forom the liquidation?
a. 189,000 b. 120,000 c. 69,000 d. 0
19. If on the final settlement of the partners’ claim Y recceived 99,000, how much did X receive?
a. 261,000 b. 234,000 c. 89,000 d. 0
20. If a partner with a debit capital balance during liquidation is personally solvent, the
A. Partner must invest additional assets in the partnership
B. Partner's debit balance will be allocated to the other partners
C. Other partners will give the partner enough cash to absorb the debit balance
D. Partnership will loan the partner enough cash to absorb the debit balance