Test bank of Advanced Accounting by Guerrero & Peralta CHAPTER 4
68
Chapter 4
CHAPTER 4
MULTIPLE CHOICE ANSWERS AND SOLUTIONS
4-1: a
Capital balances before realization
Loss on liquidation, P40,000
Cash distribution
PAR
P 20,000
( 20,000)
P
–
BOOGIE
P 16,000
( 12,000)
P 4,000
BIRDIE
P 10,000
( 8,000)
P 2,000
Capital balances before liquidation
Gain of P10,000 (150,000-140,000)
Cash distribution
PING
P 50,000
__6,000
P 56,000
PANG
P 50,000
__2,000
P 52,000
PONG
P 10,000
__2,000
P 12,000
Capital balances before liquidation
Loss of P40,000 (P140,000-P100,000)
Cash distribution
PING
P 50,000
( 24,000)
P 26,000
PANG
P 50,000
( 8,000)
P 42,000
PONG
P 10,000
( 8,000)
P 2,000
Capital balances before liquidation
Loss of P70,000 (P140,000-P70,000)
Balances
Absorption of Pong's deficiency, 6:2
Cash distribution
PING
P 50,000
( 42,000)
P8,000
( 3,000)
P 5,000
PANG
P 50,000
( 14,000)
P 36,000
( 1,000)
P 35,000
PONG
P 10,000
( 14,000)
( 4,000)
__4,000
–
COLT
MARK
Capital balances before liquidation (net of loans)P290,000 P200,000
Loss of P130,000, 4:3:3
( 52,000)
( 39,000)
Cash distribution
P238,000
P161,000
CLOCK
P220,000
( 39,000)
P181,000
4-2: c
4-3: b
4-4: a
4-5: b
4-6: c
Capital balances before liquidation
Loss of P60,000, 40:50:10
Cash distribution
JONAS
P160,000
( 24,000)
P136,000
CARLOS
P 45,000
( 20,000)
P 25,000
TOMAS
P 55,000
( 6,000)
P 49,000
Partnership Liquidation
69
4-7: a
Capital balances before liquidation
Loss of P100,000, 4:3:3
Cash distribution
ARIEL
P40,000
( 40,000)
P
–
BERT
P180,000
( 30,000)
P150,000
NORY
P23,000
OSCAR
P 13,500
15,000
( 30,900)
P 7,100
–
( 20,600)
( P7,100)
CESAR
P 30,000
( 30,000)
P
–
4-8: b
Capital balances before realization
Additional investment by Nory for
the unpaid liabilities (33,000-18,000)
Loss on realization (schedule 1)
Payment by Oscar to Nory
Schedule 1
Total capital before liquidation
Unpaid liabilities
Total loss on realization
P 36,500
15,000
P 51,500
4-9: d
Capital balances before liquidation (net)
Loss on realization (schedule 1) P27,500
Balances, cash distribution
BLACK
P99,000
( 13,750)
P85,250
Schedule 1:
Capital balances of white (net)
Cash received by White
White's share of total loss (30%)
WHITE
P 91,500
( 27,500)
P 64,000
GREEN
P138,000
_( 5,500)
P132,500
P 91,500
_83,250
P 8,250
Total loss on realization (P8,250/39%)
P 27,500
4-10: c
Capital balances before liquidation (net)
Loss on realization, P63,600
Balances
Unrecorded liabilities, P500
Balances
Elimination of Nora's deficiency
Payment to partners
ANA
P27,000
( 25,320)
P 1,680
( 200)
P 1,480
( 1,380)
P 100
EVA
P 43,000
( 25,320)
P 17,680
( 200)
P 17,480
( 1,380)
P 16,100
NORA
P 10,000
( 12,660)
( 2,660)
( 100)
( 2,760)
__2,760
P
–
Capital balances before liquidation (net)
Loss on realization (schedule 1) P45,000
Payment to partners
ARIES
P33,500
( 22,500)
P11,000
LEO
P 49,000
( 13,500)
P 35,500
TAURUS
P 36,500
( 9,000)
P 27,500
4-11: d
70
Chapter 4
Schedule 1:
Taurus capital (net)
Payment to Taurus
Share of total loss (20%)
P36,500
( 27,500)
P 9,000
Total loss on realization (9,000/20%)
P45,000
4-12: c
Capital balances, June 11
Net loss from operation (squeeze)
Capital balances, August 30 before
liquidation (48,500-25,600)
Loss on realization (47,500-30,000)
Balances
Additional investment by Olga
Balances
Elimination of Olga's deficiency
Payment to partners
TOTAL
P32,700
( 9,800)
MONA
P15,000
( 4,200)
NORA
P13,500
( 2,800)
OLGA
P 4,200
( 2,800)
P22,900
( 17,500)
P 5,400
_1,500
P 6,900
______
P 6,900
P10,800
( 7,500)
P 3,300
_____–
P 3,300
( 1,260)
P 2,040
P10,700
( 5,000)
P 5,700
_____–
P 5,700
( 840)
P 4,860
P 1,400
( 5,000)
( 3,600)
_1,500
( 2,100)
_2,100
P
–
Capital balances before liquidation
Operating loss, P21,000
Drawings
Loans
Loss on realization, P12,000
Balances
Absorption of Tita's deficiency
Payment to Nora
RITA
P49,000
( 3,500)
( 10,000)
–
( 2,000)
P33,500
__1,500
P32,000
SARA
P18,000
( 7,000)
( 15,000)
8,000
( 4,000)
P
–
_____–
P
–
TITA
P10,000
( 10,500)
( 20,000)
25,000
( 6,000)
( 1,500)
_1,500
P
–
CLARO
P45,000
PEDRO
P27,000
ANDRO
P50,000
( 24,000)
P21,000
( 24,000)
P 3,000
( 12,000)
P38,000
TOTAL
P47,500
( 38,500)
P 9,000
MONA
P28,500
( 23,100)
P 5,400
LISA
P19,000
( 15,400)
P 3,600
4-13: b
4-14: a
Capital balances before liquidation
Loss on realization
Accounts Receivable (P50,000 X 40%)
Investment (P30,000 - P20,000)
Equipment (P60,000-P30,000)
Total
Payment to partners
P20,000
10,000
_30,000
P60,000
4-15: c
Capital balances before liquidation (inclusive loans)
Loss on realization, (squeeze)
Capital balances - cash distribution
Partnership Liquidation
Cash after realization
Less Liabilities (P36,000-P7,500)
Total capital after realization
71
P 37,500
( 28,500)
P 9,000
4-16: a
FF capital before distribution of net loss
Add: share of net loss (P10,000 X 40%)
FF capital before liquidation
Cash settlement to FF
FF share of total loss on realization (40%)
P100,000
_( 4,000)
96,000
( 80,000)
P 16,000
Total loss on realization (P16,000/40%)
P 40,000
Total capital before liquidation (P260,000-P10,000)
Add: Liabilities
Total assets
Cash before liquidation
Non-cash assets
Loss on realization
Cash to be realized
P250,000
_100,000
P350,000
( 50,000)
P300,000
( 40,000)
P260,000
4-17: d
Capital balances before realization (net)
Loss on realization (squeeze)
Capital balances after realization
(liabilities-unpaid)
Elimination of CC's deficiency
Balances
Investment by DD
Payment to EE
TOTAL
P100,000
( 125,000)
CC
P 15,000
( 62,500)
DD
P22,500
( 37,500)
EE
P62,500
( 25,000)
(P 25,000)
_______–
(P 25,000)
__43,500
P 18,500
( 47,500)
__47,500
–
______–
P
–
( 15,000)
( 28,500)
(P43,500)
_43,500
P
–
P37,500
( 19,000)
P18,500
_____–
P18,500
4-18: d
Total capital before liquidation
Liabilities
Total assets
Less: Cash balance before realization
Cash after payment of liabilities
payment of liabilities
Cash realized
Non-cash asset
Less: cash realized
Loss on realization
P 30,000
__1,500
P 31,500
P 11,100
1,500
( 11,600)
__1,000
P 30,500
_11,600
P 18,900
72
Chapter 4
4-19: d
Capital balances
Salary of LL (P600 X 8 months)
Capital balances before liquidation
Loss on realization
Balances
Additional investment by NN
Payment to partners
LL
P 50,000
__4,800
P 54,800
( 44,880)
P 9,920
______–
P 9,920
MM
P 20,000
_______
P 20,000
( 14,960)
P 5,040
_____–
P 5,040
NN
TOTAL
P 10,000 P 80,000
_______ ___4,800
P 10,000 P 84,800
( 14,960)
(P 4,960)
__4,960
P
–
4-20: b
KK's total interest (P60,000-P10,000)
Less: Cash to be paid to KK
Share of total loss (1/3)
P 50,000
__10,000
P 40,000
Total loss on realization (P40,000/1/3)
P120,000
Total assets:
Total interest of the partners before liquidation:
JJ (P70,000+P30,000+P10,000)
KK (P60,000-P10,000)
LL (P30,000+P10,000)
Divide by
Total
Loss on realization
Cash to be realized
P110,000
50,000
__40,000
P200,000
______50%
P400,000
_120,000
P280,000
4-21: a
Capital balances, July 1
Advances to NN, August 1
OO Loan, September 1
Interest, December 31 (6%)
NN (5 mos.)
OO (4 mos.)
Compensation to PP
Capital balances before liquidation
Loss on realization (squeeze)
Cash distribution
TOTAL
P 75,000
( 10,000)
20,000
(
250)
400
__2,500
P 87,650
_56,250
P 35,000
NN
P 25,000
( 10,000)
–
(
OO
P 25,000
–
20,000
PP
P 25,000
–
–
250)
_______
P 14,750
( 17,550)
( 2,800)
400
_______ ___2,500
P 45,400 P 27,500
( 17,550) ( 17,550)
P 27,850 P 9,950
NN should pay P2,800 and this is to be divided to OO & PP equally or P1,400 each.
Partnership Liquidation
73
4-22: a
Capital balances before realization
Loss on realization (squeeze)
Capital balances after realization
(unpaid liabilities)
Elimination of AS's deficiency
Cash to be absorbed
TOTAL
P 950,000
( 1,000,000)
PG
P350,000
__20,000
JR
AS
P250,000 P350,000
( 200,000) _500,000
(P 50,000)
_______–
P
–
P 50,000
( 90,000)
(P 40,000)
P 50,000 ( 150,000)
( 60,000) P150,000
(P 10,000) P
–
RM
P500,000
( 490,000)
P 10,000
ST
P825,000
( 735,000)
P 90,000
TOTAL
P 27,500
__37,500
P 65,000
LT
P 20,000
_18,750
P 38,750
AM
P 5,000
__-9,375
P 14,375
AG
P 420,000
( 300,000)
P 120,000
BM
P375,000
( 300,000)
P 75,000
4-23: a
Capital balances before realization (net)
Loss on realization, P1,225,000
Payment to Partners
4-24: a
Capital balances before realization (net)
Gain on realization (squeeze)
Capital balances after realization
ZP
P 2,500
__9,375
P 11,875
4-25: c
Capital balances before realization (net)
Loss on realization, P1,000,000
Balances
Additional investment by DJ
CP
DJ
P205,000 P150,000
(200,000) (200,000)
P 5,000 P(50,000)
50,000
4-26: a
Settlement to Uy
Uy capital before liquidation (net):
Uy capital
Receivable from Uy
Loss of Uy (50%)
P351,500
P553,500
( 132,000)
Total loss on realization (P70,000 ÷ 50%)
CB before liquidation
Receivable from Uy
Loan to Wi
Salary payable to Vi
Interest before realization
Loss on realization
Settlement to partners
__Uy__
553,500
(132,000)
P140,000
__Vi__
452,500
__Wi__
486,000
( 40,500)
421,500
( 70,000)
351,500
421,500
P 70,000
135,000
587,500
( 42,000)
545,500
445,500
( 28,000)
417,500
__Total__
1,492,000
(132,000)
(40,500)
135,000
1,454,500
( 140,000)
1,314,500
74
Chapter 4
SOLUTIONS TO PROBLEMS
Problem 4 – 1
Case 1
Rivas and Briones
Statement of Liquidation
December 31, 2008
Assets
Rivas,
Cash
Others Liabilities
Loan
Balances before liquidation ... P 20,000 P200,000 P132,000 P 18,000
Realization of assets and
distribution of loss .......... _134,000 ( 200,000) _______ _______
Balances................................. 154,000
– 132,000
18,000
Payment of liabilities ............. ( 132,000) ______– ( 132,000) ______
Balances.................................
22,000
–
–
18,000
Offset Rivas' loan against his
capital deficiency ............ _______ _______ _______ ( 18,000)
Balances.................................
22,000
–
–
–
Additional loss to Briones ..... _______ _______ _______ _______
Balances.................................
22,000
–
–
–
Payment to partner................. P(22,000)
–
–
–
Partners' Capitals
Briones, Rivas Briones
Loan
(90%)
(10%)
P 20,000 P40,000 P10,000
_______ ( 59,400) ( 6,600)
20,000 ( 19,400) 3,400
_______ _______ ______
20,000 ( 19,400) 3,400
_______ _18,000 ______
20,000 ( 1,400) 3,400
_______ __1,400 ( 1,400)
20,000
–
2,000
P(20,000)
– P(2,000)
Case 2
Rivas and Briones
Statement of Liquidation
December 31, 2008
Partners' Capitals
Assets
Rivas, Briones, Rivas Briones
Cash
Others Liabilities
Loan
Loan
(70%)
(30%)
P20,000 P200,000 P132,000 P 18,000 P 20,000 P40,000 P10,000
Balances before liquidation ...
Realization of assets and
distribution of loss .......... 134,000 ( 200,000) _______ ______ _______
Balances................................. 154,000
– 132,000
18,000
20,000
Payment of liabilities ............. ( 132,000) _______ ( 132,000) ______ _______
Balances.................................
22,000
–
–
18,000
20,000
Offset loan against capital
deficiency ........................ ________ _______ _______ ( 6,200) ( 9,800)
Balances.................................
22,000
–
–
11,800
10,200
Payment to partner................. P(22,000)
–
– P(11,800) P(10,200)
( 46,200) ( 19,800)
( 6,200) 9,800
_______ ______
( 6,200) 9,800
__6,200 __9,800
–
–
–
–
Partnership Liquidation
75
Case 3
Rivas and Briones
Statement of Liquidation
December 31, 2008
Rivas,
Loan
P 18,000
Briones,
Loan
P20,000
Partners' Capitals
Rivas
Briones
(50%)
(50%)
P40,000 P10,000
( 200,000) _______ _______
–
132,000
18,000
_______ ( 132,000)
–
–
18,000
______
20,000
__
20,000
( 33,000) ( 33,000)
( 7,000) ( 23,000)
_
_______
( 7,000) ( 23,000)
Assets
Cash
Others Liabilities
P 20,000 P200,000 P132,000
Balances before liquidation ........
Realization of assets and
distribution of loss ............... _134,000
Balances .....................................
154,000
Payment of liabilities .................. ( 132,000)
Balances .....................................
22,000
Offset Briones'' loan against
his capital deficiency ........... _______
Balances .....................................
22,000
Additional loss to Rivas.............. _______
Balances .....................................
22,000
Payment to partner...................... P(22,000)
_______
–
_______
–
–
_______
–
_______
–
–
_______ ( 20,000)
18,000
–
_______ _______
18,000
–
P(18,000)
–
______ _20,000
7,000 ( 3,000)
( 3,000) __3,000
4,000
–
P( 4,000)
–
Journal Entries
Case 1:
Cash ..... .... ...................................................................................................
Rivas, Capital ................................................................................................
Briones, Capital ............................................................................................
Other Assets ...........................................................................................
Liabilities .. ...................................................................................................
Cash ... ...................................................................................................
Rivas, Loan ...................................................................................................
Rivas, Capital .........................................................................................
Briones, Capital ............................................................................................
Rivas, Capital .........................................................................................
Briones, Loan ................................................................................................
Briones, Capital ............................................................................................
Cash ...................................................................................................
Case 2:
Cash ..... .... ...................................................................................................
Rivas, Capital ................................................................................................
Briones, Capital ............................................................................................
Other Assets ...........................................................................................
Liabilities .. ...................................................................................................
Cash ... ...................................................................................................
Rivas, Loan ...................................................................................................
Briones, Loan ................................................................................................
Rivas, Capital .........................................................................................
Briones, Capital .....................................................................................
Rivas, Loan ...................................................................................................
Briones, Loan ................................................................................................
Cash ... ...................................................................................................
134,000
59,400
6,600
200,000
132,000
132,000
18,000
18,000
1,400
1,400
20,000
2,000
22,000
134,000
46,200
19,800
200,000
132,000
132,000
6,200
9,800
6,200
9,800
11,800
10,200
22,000
76
Chapter 4
Case 3:
Cash .... ... ...........................................................................................
Rivas, Capital......................................................................................
Briones, Capital ..................................................................................
Other Assets .................................................................................
Liabilities ...........................................................................................
Cash .. ...........................................................................................
Briones, Loan......................................................................................
Briones, Capital ............................................................................
Rivas, Capital......................................................................................
Briones, Capital ............................................................................
Rivas, Loan .........................................................................................
Rivas, Capital......................................................................................
Cash .. ...........................................................................................
134,000
33,000
33,000
200,000
132,000
132,000
20,000
20,000
3,000
3,000
18,000
4,000
22,000
Problem 4 – 2
Blando and Castro
Statement of Liquidation
April 30, 2008
A s s e t s
Cash Receivables Inventory
Balances before
liquidation ....................
Collection of
receivables and
distribution of loss .......
Balances ............................
Realization of
inventory and
distribution of
loss...............................
Balances ............................
Realization of other
assets and distribution
of loss ..........................
Others
Accounts
Payable
Blando,
Loan
Partners'
Blando
(60%)
Capitals
Castro
(40%)
P 18,000
P75,000
P90,000
P84,000
P42,000
P 24,000
P102,000
P99,000
_37,500
( 75,000)
_______ _______
_______
_______
( 22,500)
( 15,000)
84,000
42,000
24,000
79,500
84,000
( 90,000) _______
_______
_______
( 36,000)
( 24,000)
42,000
24,000
43,500
60,000
_______
_______
( 26,400)
( 17,600)
42,000
24,000
17,100
42,400
_______
_______
_______
55,500
–
_30,000
_______
85,500
–
_40,000
_______
Balances ............................ 125,500
Payment of accounts
payable......................... ( 42,000)
Balances ............................
83,500
Payments to partners….. … P(83,500)
–
_______
–
–
90,000
–
84,000
_______ ( 84,000)
–
–
_______ _______
–
–
–
–
( 42,000)
–
–
24,000
17,100
P(24,000) P( 17,100)
42,400
P(42,400)
Partnership Liquidation
a.
77
Problem 4 – 3
Electric Company
Statement of Partnership Realization and Liquidation
June 30, 2008
Balances
Sale of
assets at a loss
Payment to
creditors
Capital Balances
Volt
Watt
30%
20%
Cash
Amp.
Loan
Noncash
Assets
Liabilities
Volt,
Loan
Amp
50%
20,000
15,000
135,000
30,000
10,000
80,000
36,000
14,000
_95,000
115,000
______
15,000
(135,000)
-0-
______
30,000
______
10,000
(20,000)
60,000
(12,000)
24,000
( 8,000)
6,000
_(30,000)
85,000
______
15,000
_______
-0-
(30,000)
-0-
______
10,000
_______
60,000
______
24,000
______
6,000
(24,000)
-0-
( 6,000)
-0-
Offset Amp,
receivable
(15,000)
Payments to partners:
Loan
(10,000)
Capitals
_(75,000) ______
_______
Balances
-0-0-0b. (1) Cash
Amp, Capital
Volt, Capital
Watt, Capital
Noncash Assets
Sell noncash assets at a loss of P40,000.
(15,000)
_______
-0-
(10,000)
______
-0-
(45,000)
-095,000
20,000
12,000
8,000
135,000
(2) Liabilities
Cash
Pay creditors.
30,000
(3) Amp, Capital
Amp, Loan
Offset receivable from Amp against his capital credit.
15,000
(4) Volt, Loan
Amp, Capital
Volt, Capital
Watt, Capital
Cash
Final lump-sum distribution to partners.
10,000
45,000
24,000
6,000
30,000
15,000
85,000
Note: All partners permitted Amp to offset his receivable against his capital credit. Alternatively, Amp
could be required to pay the partnership the P15,000 receivable; the partnership would then pay him an
additional P15,000 for his capital credit. In this case, an offset of the receivable against the capital credit is
reasonable, provided the receivable is not interest-bearing, Amp has a sufficient capital credit, Amp is
personally solvent, and the note is not secured against specific assts of Amp. The offset is not automatic,
but must be determined by the terms of the initial note, and by the partners.
78
Chapter 4
Problem 4 – 4
a.
b.
Bina, capital before liquidation ..................................................................... ..................
Payment to Bina ............................................................................................ ..................
P320,000
_128,000
Loss absorbed by Bina (40%) ....................................................................... ..................
P192,000
Loss on realization (P192,000 40%) .......................................................... ..................
P480,000
AIDA, BINA & CELIA
Statement of Partnership Liquidation
January 1, 2008
P720,000
( 720,000)
Aida
(5)
P320,000
( 240,000)
Capital
Bina
(4)
P320,000
( 192,000)
Celia
(1)
P160,000
( 48,000)
–
_______
80,000
( 80,000)
128,000
( 128,000)
112,000
( 112,000)
Cash
Other Assets
Balances before liquidation .
Realization & dist. of loss ...
P80,000
240,000
Balances .... .... ....................
Settlement to partners .........
320,000
(320,000)
Problem 4 – 5
a.
b.
LL, capital before liquidation........................................................................ ..................
Settlement to LL ........................................................................................... ..................
P 70,000
__98,000
Gain realized by LL (20%) ........................................................................... ..................
P 28,000
Total gain on realization (P28,000 20%) ................................................... ..................
Other assets sold ........................................................................................... ..................
P140,000
_500,000
Selling price
P640,000
.............................................................................................. ..................
JJ, KK & LL
Statement of Liquidation
Cash
Balances before liquidation ...
Realization & Dist. of gain ...
P50,000
640,000
Balances .... .... ...................... 690,000
Payment of liabilities ............ ( 60,000)
Payment to Partners .............. (630,000)
Other
Assets
Liabilities
P500,000 P60,000
( 520,000) _______
–
_______
JJ (4)
P180,000
__56,000
60,000
236,000
( 60,000)
_______ ( 236,000)
Capital
KK(4)
(LL(2)
P240,000
__56,000
P70,000
_28,000
296,000
98,000
( 296,000)
( 98,000)
Partnership Liquidation
79
Problem 4 – 6
a.
BB ................................................... P160,000
CC ................................................... P20,000
DD................................................... P60,000
EE ...................................................
P –0–
b.
BB, CC, DD, & EE
Statement of Liquidation
Cash
Balances before liquidation ...
P
0
Advances by BB to pay liabilities
Deposit by DD ......................
60,000
Balances .... .... ......................
60,000
Elimination of EE's deficiency
Elimination of DD's deficiency
Payment to partners...............
Liabilities
C a p i t
CC (10%)DD (20%)
BB (30%)
P60,000 P160,000
( 60,000)
60,000
______ _______
–
P80,000
220,000
( 90,000)
______ __( 90,000)
–
60,000
a
l
EE (40%)
(P120,000) P(180,000)
_______
__60,000
80,000
( 30,000)
( 30,000)
( 60,000) ( 180,000)
( 60,000)
180,000
120,000
–
40,000
20,000
________
–
–
Problem 4 – 7
Sayson and Company
Statement of Liquidation
–Date–
Assets
Cash Noncash
Liabilities
Accounts
Notes
Payable Payable
Peña
Loan
P a r t n e r s' C a p i t a l s
Sayson
Zobel
Ayala
(45%)
(30%)
(15%)
Balances before liquidation...
Realization of assets and
distribution of gain ..........
P 15,000
P155,250
P11,250
P9,000
P 1,500
P 75,345
185,000
( 155,250)
_______
______
______
17,850
11,900
Balances................................
Payment of liabilities ............
200,000
( 20,250) ________
11,250
( 11,250)
9,000
( 9,000)
1,500
______
93,195
______
98,398 ( 14,993)
______ _______
1,650
______
-
-
1,500
93,195
98,398 ( 14,993)
1,650
Balances................................
Additional loss to Sayson,
Zobel and Peña;
45:30:10 ..........................
179,750
-
_______ ________ ________
Balances................................
Offset Peña's loan against
his capital deficiency .......
179,750
-
_______ ________ ________
Balances................................
179,750
Payments to partners .............
P(179,750)
-
-
-
______
______
P 86,498 P(14,993)
Peña
(10%)
______
( 7,937)
( 5,292)
14,993
-
1,500
85,258
93,106
-
______
( 114)
______
______
-
1,386
85,258
93,106
P(1,386) P(85,258) P(93,106)
_______
-
P1,650
______
( 1,764)
(114)
114
80
Chapter 4
Problem 4 – 8
a.
Art, Bea and Cid Partnership
Statement of Liquidation
June 4, 2008
Balances before liquidation
(including Bea loan, P4,000) ......
Realization of assets
at a loss of P63,300 ..................
Unrecorded accounts payable .........
Payment to creditors .......................
Balances .... .... ................................
Eliminate Cid's deficit .....................
Balances .... .... ................................
Payment to Partners ........................
b.
2008
July 5
c.
Cash
Assets
Other
Liabilities
Partners' Capital
Art (40%) Bea (40%) Cid (20%)
P 6,000
P94,000
P20,000
P27,000
P43,000
30,000
( 94,000)
(20,500)
16,200
______
16,200
(16,200)
______
______
-
(25,320)
500
(20,500)
______
-
(25,320)
(200)
______
1,480
(1,380)
100
_( 100)
(12,660)
(200)
______
17,480
(1,380)
16,100
( 16,100)
Cash .... .... ................................ ............. .................. ..................
Art capital (P63,300 x 40%) ....... ............. .................. ..................
Bea capital (P63,300 x 40%) ...... ............. .................. ..................
Cid capital (P63,300 x 20%) ...... ............. .................. ..................
Other assets ....................... ............. .................. ..................
To record realization of other assets at a loss of P63,300.
30,700
25,320
25,320
12,660
Art capital (P500 x 40%)............ ............. .................. ..................
Bea capital (P500 x 40%) ........... ............. .................. ..................
Cid capital (P500 x 20%) ........... ............. .................. ..................
Liabilities .......................... ............. .................. ..................
To record trade accounts payable.
200
200
100
Liabilities .. ................................ ............. .................. ..................
Cash . ................................ ............. .................. ..................
To record payment of liabilities.
20,500
Art capital .. ................................ ............. .................. ..................
Bea capital . ................................ ............. .................. ..................
Cid capital ......................... ............. .................. ..................
To eliminate Cid's capital deficit.
1,380
1,380
Art capital .. ................................ ............. .................. ..................
Bea capital . ................................ ............. .................. ..................
Cid capital . ................................ ............. .................. ..................
Cash . ................................ ............. .................. ..................
To record payments to partners to complete liquidation.
100
4,000
12,100
P10,000
(100)
______
(2,760)
_2,760
94,000
500
20,500
2,760
16,200
Cid's loss must be limited to P5,000, or P25,000 for the partnership (P5,000 / 20% = P25,000).
Because the liquidation of liabilities results in a loss of P500, only P24,500 may be lost on the
realization of other assets. This requires that other assets realize P69,500 (P94,000 – 24,500) to
enable Cid to receive P5,000 from the partnership to pay personal creditors in full.
-
Problem 4 –9
KGB Partnership
Statement of Realization and Liquidation
Lump-sum Liquidation on June 30, 2008
-
Preliquidation balances
Sale of assets
and distribution
of 430,000 loss
Cash contributed
by B
Distribution of deficit
of insolvent partner:
20/60 (P2,000)
40/60 (P2,000)
Offset deficit with loan
Contribution by G
Payment of creditors
Distribution to K
Postliquidation
balances
Capital Balances
K
G
20%
40%
(240,000) (100,000)
B
40% (120,000)
Cash
50,000
Noncash
Assets
950,000
Liabilities
(480,000)
G
Loan
(60,000)
520,000
570,000
950,000
-0-
(480,000)
(60,000)
86,000
(154,000)
172,000
72,000
172,000
52,000
-
(480,000)
(60,000)
(154,000)
72,000
50,000
2,000
50,000
620,000
-0-
(2,000)
666
620,000
620,000
13,334
633,334
(480,000)
153,334
(153,334)
-0-
-0-0-
(480,000)
(480,000)
(60,000)
60,000
-0-
(153,334)
(153,334)
(480,000)
480,000
-0-
-0-
(153,334)
(153,334)
153,334
-0-0-
-0-
-0-
-0-
-0-
-0-
1,334
73,334
(60,000)
13,334
(13,334)
-0-
-0-0-0-
-0-
-0-
-
-0-
-
-0-
-
82
Chapter 4
KGB Partnership
Schedule of Distribution of Personal Assets
June 30, 2008
Personal assets, excluding partnership
capital and loan interests
Personal liabilities
Personal net worth, excluding
partnership capital and loan
interests
Contribution to partnership
Distribution from partnership
Personal capacity
K
G
B
500,000
(460,000)
600,000
(480,000)
700,000
(650,000)
40,000
120,000
(13,334)
-0- 106,666
50,000
153,334
193,334
-0- -0- -
Chapter 4
CHAPTER 4
MULTIPLE CHOICE ANSWERS AND SOLUTIONS
4-1: a
Capital balances before realization
Loss on liquidation, P40,000
Cash distribution
PAR
P 20,000
( 20,000)
P
–
BOOGIE
P 16,000
( 12,000)
P 4,000
BIRDIE
P 10,000
( 8,000)
P 2,000
Capital balances before liquidation
Gain of P10,000 (150,000-140,000)
Cash distribution
PING
P 50,000
__6,000
P 56,000
PANG
P 50,000
__2,000
P 52,000
PONG
P 10,000
__2,000
P 12,000
Capital balances before liquidation
Loss of P40,000 (P140,000-P100,000)
Cash distribution
PING
P 50,000
( 24,000)
P 26,000
PANG
P 50,000
( 8,000)
P 42,000
PONG
P 10,000
( 8,000)
P 2,000
Capital balances before liquidation
Loss of P70,000 (P140,000-P70,000)
Balances
Absorption of Pong's deficiency, 6:2
Cash distribution
PING
P 50,000
( 42,000)
P8,000
( 3,000)
P 5,000
PANG
P 50,000
( 14,000)
P 36,000
( 1,000)
P 35,000
PONG
P 10,000
( 14,000)
( 4,000)
__4,000
–
COLT
MARK
Capital balances before liquidation (net of loans)P290,000 P200,000
Loss of P130,000, 4:3:3
( 52,000)
( 39,000)
Cash distribution
P238,000
P161,000
CLOCK
P220,000
( 39,000)
P181,000
4-2: c
4-3: b
4-4: a
4-5: b
4-6: c
Capital balances before liquidation
Loss of P60,000, 40:50:10
Cash distribution
JONAS
P160,000
( 24,000)
P136,000
CARLOS
P 45,000
( 20,000)
P 25,000
TOMAS
P 55,000
( 6,000)
P 49,000
Partnership Liquidation
69
4-7: a
Capital balances before liquidation
Loss of P100,000, 4:3:3
Cash distribution
ARIEL
P40,000
( 40,000)
P
–
BERT
P180,000
( 30,000)
P150,000
NORY
P23,000
OSCAR
P 13,500
15,000
( 30,900)
P 7,100
–
( 20,600)
( P7,100)
CESAR
P 30,000
( 30,000)
P
–
4-8: b
Capital balances before realization
Additional investment by Nory for
the unpaid liabilities (33,000-18,000)
Loss on realization (schedule 1)
Payment by Oscar to Nory
Schedule 1
Total capital before liquidation
Unpaid liabilities
Total loss on realization
P 36,500
15,000
P 51,500
4-9: d
Capital balances before liquidation (net)
Loss on realization (schedule 1) P27,500
Balances, cash distribution
BLACK
P99,000
( 13,750)
P85,250
Schedule 1:
Capital balances of white (net)
Cash received by White
White's share of total loss (30%)
WHITE
P 91,500
( 27,500)
P 64,000
GREEN
P138,000
_( 5,500)
P132,500
P 91,500
_83,250
P 8,250
Total loss on realization (P8,250/39%)
P 27,500
4-10: c
Capital balances before liquidation (net)
Loss on realization, P63,600
Balances
Unrecorded liabilities, P500
Balances
Elimination of Nora's deficiency
Payment to partners
ANA
P27,000
( 25,320)
P 1,680
( 200)
P 1,480
( 1,380)
P 100
EVA
P 43,000
( 25,320)
P 17,680
( 200)
P 17,480
( 1,380)
P 16,100
NORA
P 10,000
( 12,660)
( 2,660)
( 100)
( 2,760)
__2,760
P
–
Capital balances before liquidation (net)
Loss on realization (schedule 1) P45,000
Payment to partners
ARIES
P33,500
( 22,500)
P11,000
LEO
P 49,000
( 13,500)
P 35,500
TAURUS
P 36,500
( 9,000)
P 27,500
4-11: d
70
Chapter 4
Schedule 1:
Taurus capital (net)
Payment to Taurus
Share of total loss (20%)
P36,500
( 27,500)
P 9,000
Total loss on realization (9,000/20%)
P45,000
4-12: c
Capital balances, June 11
Net loss from operation (squeeze)
Capital balances, August 30 before
liquidation (48,500-25,600)
Loss on realization (47,500-30,000)
Balances
Additional investment by Olga
Balances
Elimination of Olga's deficiency
Payment to partners
TOTAL
P32,700
( 9,800)
MONA
P15,000
( 4,200)
NORA
P13,500
( 2,800)
OLGA
P 4,200
( 2,800)
P22,900
( 17,500)
P 5,400
_1,500
P 6,900
______
P 6,900
P10,800
( 7,500)
P 3,300
_____–
P 3,300
( 1,260)
P 2,040
P10,700
( 5,000)
P 5,700
_____–
P 5,700
( 840)
P 4,860
P 1,400
( 5,000)
( 3,600)
_1,500
( 2,100)
_2,100
P
–
Capital balances before liquidation
Operating loss, P21,000
Drawings
Loans
Loss on realization, P12,000
Balances
Absorption of Tita's deficiency
Payment to Nora
RITA
P49,000
( 3,500)
( 10,000)
–
( 2,000)
P33,500
__1,500
P32,000
SARA
P18,000
( 7,000)
( 15,000)
8,000
( 4,000)
P
–
_____–
P
–
TITA
P10,000
( 10,500)
( 20,000)
25,000
( 6,000)
( 1,500)
_1,500
P
–
CLARO
P45,000
PEDRO
P27,000
ANDRO
P50,000
( 24,000)
P21,000
( 24,000)
P 3,000
( 12,000)
P38,000
TOTAL
P47,500
( 38,500)
P 9,000
MONA
P28,500
( 23,100)
P 5,400
LISA
P19,000
( 15,400)
P 3,600
4-13: b
4-14: a
Capital balances before liquidation
Loss on realization
Accounts Receivable (P50,000 X 40%)
Investment (P30,000 - P20,000)
Equipment (P60,000-P30,000)
Total
Payment to partners
P20,000
10,000
_30,000
P60,000
4-15: c
Capital balances before liquidation (inclusive loans)
Loss on realization, (squeeze)
Capital balances - cash distribution
Partnership Liquidation
Cash after realization
Less Liabilities (P36,000-P7,500)
Total capital after realization
71
P 37,500
( 28,500)
P 9,000
4-16: a
FF capital before distribution of net loss
Add: share of net loss (P10,000 X 40%)
FF capital before liquidation
Cash settlement to FF
FF share of total loss on realization (40%)
P100,000
_( 4,000)
96,000
( 80,000)
P 16,000
Total loss on realization (P16,000/40%)
P 40,000
Total capital before liquidation (P260,000-P10,000)
Add: Liabilities
Total assets
Cash before liquidation
Non-cash assets
Loss on realization
Cash to be realized
P250,000
_100,000
P350,000
( 50,000)
P300,000
( 40,000)
P260,000
4-17: d
Capital balances before realization (net)
Loss on realization (squeeze)
Capital balances after realization
(liabilities-unpaid)
Elimination of CC's deficiency
Balances
Investment by DD
Payment to EE
TOTAL
P100,000
( 125,000)
CC
P 15,000
( 62,500)
DD
P22,500
( 37,500)
EE
P62,500
( 25,000)
(P 25,000)
_______–
(P 25,000)
__43,500
P 18,500
( 47,500)
__47,500
–
______–
P
–
( 15,000)
( 28,500)
(P43,500)
_43,500
P
–
P37,500
( 19,000)
P18,500
_____–
P18,500
4-18: d
Total capital before liquidation
Liabilities
Total assets
Less: Cash balance before realization
Cash after payment of liabilities
payment of liabilities
Cash realized
Non-cash asset
Less: cash realized
Loss on realization
P 30,000
__1,500
P 31,500
P 11,100
1,500
( 11,600)
__1,000
P 30,500
_11,600
P 18,900
72
Chapter 4
4-19: d
Capital balances
Salary of LL (P600 X 8 months)
Capital balances before liquidation
Loss on realization
Balances
Additional investment by NN
Payment to partners
LL
P 50,000
__4,800
P 54,800
( 44,880)
P 9,920
______–
P 9,920
MM
P 20,000
_______
P 20,000
( 14,960)
P 5,040
_____–
P 5,040
NN
TOTAL
P 10,000 P 80,000
_______ ___4,800
P 10,000 P 84,800
( 14,960)
(P 4,960)
__4,960
P
–
4-20: b
KK's total interest (P60,000-P10,000)
Less: Cash to be paid to KK
Share of total loss (1/3)
P 50,000
__10,000
P 40,000
Total loss on realization (P40,000/1/3)
P120,000
Total assets:
Total interest of the partners before liquidation:
JJ (P70,000+P30,000+P10,000)
KK (P60,000-P10,000)
LL (P30,000+P10,000)
Divide by
Total
Loss on realization
Cash to be realized
P110,000
50,000
__40,000
P200,000
______50%
P400,000
_120,000
P280,000
4-21: a
Capital balances, July 1
Advances to NN, August 1
OO Loan, September 1
Interest, December 31 (6%)
NN (5 mos.)
OO (4 mos.)
Compensation to PP
Capital balances before liquidation
Loss on realization (squeeze)
Cash distribution
TOTAL
P 75,000
( 10,000)
20,000
(
250)
400
__2,500
P 87,650
_56,250
P 35,000
NN
P 25,000
( 10,000)
–
(
OO
P 25,000
–
20,000
PP
P 25,000
–
–
250)
_______
P 14,750
( 17,550)
( 2,800)
400
_______ ___2,500
P 45,400 P 27,500
( 17,550) ( 17,550)
P 27,850 P 9,950
NN should pay P2,800 and this is to be divided to OO & PP equally or P1,400 each.
Partnership Liquidation
73
4-22: a
Capital balances before realization
Loss on realization (squeeze)
Capital balances after realization
(unpaid liabilities)
Elimination of AS's deficiency
Cash to be absorbed
TOTAL
P 950,000
( 1,000,000)
PG
P350,000
__20,000
JR
AS
P250,000 P350,000
( 200,000) _500,000
(P 50,000)
_______–
P
–
P 50,000
( 90,000)
(P 40,000)
P 50,000 ( 150,000)
( 60,000) P150,000
(P 10,000) P
–
RM
P500,000
( 490,000)
P 10,000
ST
P825,000
( 735,000)
P 90,000
TOTAL
P 27,500
__37,500
P 65,000
LT
P 20,000
_18,750
P 38,750
AM
P 5,000
__-9,375
P 14,375
AG
P 420,000
( 300,000)
P 120,000
BM
P375,000
( 300,000)
P 75,000
4-23: a
Capital balances before realization (net)
Loss on realization, P1,225,000
Payment to Partners
4-24: a
Capital balances before realization (net)
Gain on realization (squeeze)
Capital balances after realization
ZP
P 2,500
__9,375
P 11,875
4-25: c
Capital balances before realization (net)
Loss on realization, P1,000,000
Balances
Additional investment by DJ
CP
DJ
P205,000 P150,000
(200,000) (200,000)
P 5,000 P(50,000)
50,000
4-26: a
Settlement to Uy
Uy capital before liquidation (net):
Uy capital
Receivable from Uy
Loss of Uy (50%)
P351,500
P553,500
( 132,000)
Total loss on realization (P70,000 ÷ 50%)
CB before liquidation
Receivable from Uy
Loan to Wi
Salary payable to Vi
Interest before realization
Loss on realization
Settlement to partners
__Uy__
553,500
(132,000)
P140,000
__Vi__
452,500
__Wi__
486,000
( 40,500)
421,500
( 70,000)
351,500
421,500
P 70,000
135,000
587,500
( 42,000)
545,500
445,500
( 28,000)
417,500
__Total__
1,492,000
(132,000)
(40,500)
135,000
1,454,500
( 140,000)
1,314,500
74
Chapter 4
SOLUTIONS TO PROBLEMS
Problem 4 – 1
Case 1
Rivas and Briones
Statement of Liquidation
December 31, 2008
Assets
Rivas,
Cash
Others Liabilities
Loan
Balances before liquidation ... P 20,000 P200,000 P132,000 P 18,000
Realization of assets and
distribution of loss .......... _134,000 ( 200,000) _______ _______
Balances................................. 154,000
– 132,000
18,000
Payment of liabilities ............. ( 132,000) ______– ( 132,000) ______
Balances.................................
22,000
–
–
18,000
Offset Rivas' loan against his
capital deficiency ............ _______ _______ _______ ( 18,000)
Balances.................................
22,000
–
–
–
Additional loss to Briones ..... _______ _______ _______ _______
Balances.................................
22,000
–
–
–
Payment to partner................. P(22,000)
–
–
–
Partners' Capitals
Briones, Rivas Briones
Loan
(90%)
(10%)
P 20,000 P40,000 P10,000
_______ ( 59,400) ( 6,600)
20,000 ( 19,400) 3,400
_______ _______ ______
20,000 ( 19,400) 3,400
_______ _18,000 ______
20,000 ( 1,400) 3,400
_______ __1,400 ( 1,400)
20,000
–
2,000
P(20,000)
– P(2,000)
Case 2
Rivas and Briones
Statement of Liquidation
December 31, 2008
Partners' Capitals
Assets
Rivas, Briones, Rivas Briones
Cash
Others Liabilities
Loan
Loan
(70%)
(30%)
P20,000 P200,000 P132,000 P 18,000 P 20,000 P40,000 P10,000
Balances before liquidation ...
Realization of assets and
distribution of loss .......... 134,000 ( 200,000) _______ ______ _______
Balances................................. 154,000
– 132,000
18,000
20,000
Payment of liabilities ............. ( 132,000) _______ ( 132,000) ______ _______
Balances.................................
22,000
–
–
18,000
20,000
Offset loan against capital
deficiency ........................ ________ _______ _______ ( 6,200) ( 9,800)
Balances.................................
22,000
–
–
11,800
10,200
Payment to partner................. P(22,000)
–
– P(11,800) P(10,200)
( 46,200) ( 19,800)
( 6,200) 9,800
_______ ______
( 6,200) 9,800
__6,200 __9,800
–
–
–
–
Partnership Liquidation
75
Case 3
Rivas and Briones
Statement of Liquidation
December 31, 2008
Rivas,
Loan
P 18,000
Briones,
Loan
P20,000
Partners' Capitals
Rivas
Briones
(50%)
(50%)
P40,000 P10,000
( 200,000) _______ _______
–
132,000
18,000
_______ ( 132,000)
–
–
18,000
______
20,000
__
20,000
( 33,000) ( 33,000)
( 7,000) ( 23,000)
_
_______
( 7,000) ( 23,000)
Assets
Cash
Others Liabilities
P 20,000 P200,000 P132,000
Balances before liquidation ........
Realization of assets and
distribution of loss ............... _134,000
Balances .....................................
154,000
Payment of liabilities .................. ( 132,000)
Balances .....................................
22,000
Offset Briones'' loan against
his capital deficiency ........... _______
Balances .....................................
22,000
Additional loss to Rivas.............. _______
Balances .....................................
22,000
Payment to partner...................... P(22,000)
_______
–
_______
–
–
_______
–
_______
–
–
_______ ( 20,000)
18,000
–
_______ _______
18,000
–
P(18,000)
–
______ _20,000
7,000 ( 3,000)
( 3,000) __3,000
4,000
–
P( 4,000)
–
Journal Entries
Case 1:
Cash ..... .... ...................................................................................................
Rivas, Capital ................................................................................................
Briones, Capital ............................................................................................
Other Assets ...........................................................................................
Liabilities .. ...................................................................................................
Cash ... ...................................................................................................
Rivas, Loan ...................................................................................................
Rivas, Capital .........................................................................................
Briones, Capital ............................................................................................
Rivas, Capital .........................................................................................
Briones, Loan ................................................................................................
Briones, Capital ............................................................................................
Cash ...................................................................................................
Case 2:
Cash ..... .... ...................................................................................................
Rivas, Capital ................................................................................................
Briones, Capital ............................................................................................
Other Assets ...........................................................................................
Liabilities .. ...................................................................................................
Cash ... ...................................................................................................
Rivas, Loan ...................................................................................................
Briones, Loan ................................................................................................
Rivas, Capital .........................................................................................
Briones, Capital .....................................................................................
Rivas, Loan ...................................................................................................
Briones, Loan ................................................................................................
Cash ... ...................................................................................................
134,000
59,400
6,600
200,000
132,000
132,000
18,000
18,000
1,400
1,400
20,000
2,000
22,000
134,000
46,200
19,800
200,000
132,000
132,000
6,200
9,800
6,200
9,800
11,800
10,200
22,000
76
Chapter 4
Case 3:
Cash .... ... ...........................................................................................
Rivas, Capital......................................................................................
Briones, Capital ..................................................................................
Other Assets .................................................................................
Liabilities ...........................................................................................
Cash .. ...........................................................................................
Briones, Loan......................................................................................
Briones, Capital ............................................................................
Rivas, Capital......................................................................................
Briones, Capital ............................................................................
Rivas, Loan .........................................................................................
Rivas, Capital......................................................................................
Cash .. ...........................................................................................
134,000
33,000
33,000
200,000
132,000
132,000
20,000
20,000
3,000
3,000
18,000
4,000
22,000
Problem 4 – 2
Blando and Castro
Statement of Liquidation
April 30, 2008
A s s e t s
Cash Receivables Inventory
Balances before
liquidation ....................
Collection of
receivables and
distribution of loss .......
Balances ............................
Realization of
inventory and
distribution of
loss...............................
Balances ............................
Realization of other
assets and distribution
of loss ..........................
Others
Accounts
Payable
Blando,
Loan
Partners'
Blando
(60%)
Capitals
Castro
(40%)
P 18,000
P75,000
P90,000
P84,000
P42,000
P 24,000
P102,000
P99,000
_37,500
( 75,000)
_______ _______
_______
_______
( 22,500)
( 15,000)
84,000
42,000
24,000
79,500
84,000
( 90,000) _______
_______
_______
( 36,000)
( 24,000)
42,000
24,000
43,500
60,000
_______
_______
( 26,400)
( 17,600)
42,000
24,000
17,100
42,400
_______
_______
_______
55,500
–
_30,000
_______
85,500
–
_40,000
_______
Balances ............................ 125,500
Payment of accounts
payable......................... ( 42,000)
Balances ............................
83,500
Payments to partners….. … P(83,500)
–
_______
–
–
90,000
–
84,000
_______ ( 84,000)
–
–
_______ _______
–
–
–
–
( 42,000)
–
–
24,000
17,100
P(24,000) P( 17,100)
42,400
P(42,400)
Partnership Liquidation
a.
77
Problem 4 – 3
Electric Company
Statement of Partnership Realization and Liquidation
June 30, 2008
Balances
Sale of
assets at a loss
Payment to
creditors
Capital Balances
Volt
Watt
30%
20%
Cash
Amp.
Loan
Noncash
Assets
Liabilities
Volt,
Loan
Amp
50%
20,000
15,000
135,000
30,000
10,000
80,000
36,000
14,000
_95,000
115,000
______
15,000
(135,000)
-0-
______
30,000
______
10,000
(20,000)
60,000
(12,000)
24,000
( 8,000)
6,000
_(30,000)
85,000
______
15,000
_______
-0-
(30,000)
-0-
______
10,000
_______
60,000
______
24,000
______
6,000
(24,000)
-0-
( 6,000)
-0-
Offset Amp,
receivable
(15,000)
Payments to partners:
Loan
(10,000)
Capitals
_(75,000) ______
_______
Balances
-0-0-0b. (1) Cash
Amp, Capital
Volt, Capital
Watt, Capital
Noncash Assets
Sell noncash assets at a loss of P40,000.
(15,000)
_______
-0-
(10,000)
______
-0-
(45,000)
-095,000
20,000
12,000
8,000
135,000
(2) Liabilities
Cash
Pay creditors.
30,000
(3) Amp, Capital
Amp, Loan
Offset receivable from Amp against his capital credit.
15,000
(4) Volt, Loan
Amp, Capital
Volt, Capital
Watt, Capital
Cash
Final lump-sum distribution to partners.
10,000
45,000
24,000
6,000
30,000
15,000
85,000
Note: All partners permitted Amp to offset his receivable against his capital credit. Alternatively, Amp
could be required to pay the partnership the P15,000 receivable; the partnership would then pay him an
additional P15,000 for his capital credit. In this case, an offset of the receivable against the capital credit is
reasonable, provided the receivable is not interest-bearing, Amp has a sufficient capital credit, Amp is
personally solvent, and the note is not secured against specific assts of Amp. The offset is not automatic,
but must be determined by the terms of the initial note, and by the partners.
78
Chapter 4
Problem 4 – 4
a.
b.
Bina, capital before liquidation ..................................................................... ..................
Payment to Bina ............................................................................................ ..................
P320,000
_128,000
Loss absorbed by Bina (40%) ....................................................................... ..................
P192,000
Loss on realization (P192,000 40%) .......................................................... ..................
P480,000
AIDA, BINA & CELIA
Statement of Partnership Liquidation
January 1, 2008
P720,000
( 720,000)
Aida
(5)
P320,000
( 240,000)
Capital
Bina
(4)
P320,000
( 192,000)
Celia
(1)
P160,000
( 48,000)
–
_______
80,000
( 80,000)
128,000
( 128,000)
112,000
( 112,000)
Cash
Other Assets
Balances before liquidation .
Realization & dist. of loss ...
P80,000
240,000
Balances .... .... ....................
Settlement to partners .........
320,000
(320,000)
Problem 4 – 5
a.
b.
LL, capital before liquidation........................................................................ ..................
Settlement to LL ........................................................................................... ..................
P 70,000
__98,000
Gain realized by LL (20%) ........................................................................... ..................
P 28,000
Total gain on realization (P28,000 20%) ................................................... ..................
Other assets sold ........................................................................................... ..................
P140,000
_500,000
Selling price
P640,000
.............................................................................................. ..................
JJ, KK & LL
Statement of Liquidation
Cash
Balances before liquidation ...
Realization & Dist. of gain ...
P50,000
640,000
Balances .... .... ...................... 690,000
Payment of liabilities ............ ( 60,000)
Payment to Partners .............. (630,000)
Other
Assets
Liabilities
P500,000 P60,000
( 520,000) _______
–
_______
JJ (4)
P180,000
__56,000
60,000
236,000
( 60,000)
_______ ( 236,000)
Capital
KK(4)
(LL(2)
P240,000
__56,000
P70,000
_28,000
296,000
98,000
( 296,000)
( 98,000)
Partnership Liquidation
79
Problem 4 – 6
a.
BB ................................................... P160,000
CC ................................................... P20,000
DD................................................... P60,000
EE ...................................................
P –0–
b.
BB, CC, DD, & EE
Statement of Liquidation
Cash
Balances before liquidation ...
P
0
Advances by BB to pay liabilities
Deposit by DD ......................
60,000
Balances .... .... ......................
60,000
Elimination of EE's deficiency
Elimination of DD's deficiency
Payment to partners...............
Liabilities
C a p i t
CC (10%)DD (20%)
BB (30%)
P60,000 P160,000
( 60,000)
60,000
______ _______
–
P80,000
220,000
( 90,000)
______ __( 90,000)
–
60,000
a
l
EE (40%)
(P120,000) P(180,000)
_______
__60,000
80,000
( 30,000)
( 30,000)
( 60,000) ( 180,000)
( 60,000)
180,000
120,000
–
40,000
20,000
________
–
–
Problem 4 – 7
Sayson and Company
Statement of Liquidation
–Date–
Assets
Cash Noncash
Liabilities
Accounts
Notes
Payable Payable
Peña
Loan
P a r t n e r s' C a p i t a l s
Sayson
Zobel
Ayala
(45%)
(30%)
(15%)
Balances before liquidation...
Realization of assets and
distribution of gain ..........
P 15,000
P155,250
P11,250
P9,000
P 1,500
P 75,345
185,000
( 155,250)
_______
______
______
17,850
11,900
Balances................................
Payment of liabilities ............
200,000
( 20,250) ________
11,250
( 11,250)
9,000
( 9,000)
1,500
______
93,195
______
98,398 ( 14,993)
______ _______
1,650
______
-
-
1,500
93,195
98,398 ( 14,993)
1,650
Balances................................
Additional loss to Sayson,
Zobel and Peña;
45:30:10 ..........................
179,750
-
_______ ________ ________
Balances................................
Offset Peña's loan against
his capital deficiency .......
179,750
-
_______ ________ ________
Balances................................
179,750
Payments to partners .............
P(179,750)
-
-
-
______
______
P 86,498 P(14,993)
Peña
(10%)
______
( 7,937)
( 5,292)
14,993
-
1,500
85,258
93,106
-
______
( 114)
______
______
-
1,386
85,258
93,106
P(1,386) P(85,258) P(93,106)
_______
-
P1,650
______
( 1,764)
(114)
114
80
Chapter 4
Problem 4 – 8
a.
Art, Bea and Cid Partnership
Statement of Liquidation
June 4, 2008
Balances before liquidation
(including Bea loan, P4,000) ......
Realization of assets
at a loss of P63,300 ..................
Unrecorded accounts payable .........
Payment to creditors .......................
Balances .... .... ................................
Eliminate Cid's deficit .....................
Balances .... .... ................................
Payment to Partners ........................
b.
2008
July 5
c.
Cash
Assets
Other
Liabilities
Partners' Capital
Art (40%) Bea (40%) Cid (20%)
P 6,000
P94,000
P20,000
P27,000
P43,000
30,000
( 94,000)
(20,500)
16,200
______
16,200
(16,200)
______
______
-
(25,320)
500
(20,500)
______
-
(25,320)
(200)
______
1,480
(1,380)
100
_( 100)
(12,660)
(200)
______
17,480
(1,380)
16,100
( 16,100)
Cash .... .... ................................ ............. .................. ..................
Art capital (P63,300 x 40%) ....... ............. .................. ..................
Bea capital (P63,300 x 40%) ...... ............. .................. ..................
Cid capital (P63,300 x 20%) ...... ............. .................. ..................
Other assets ....................... ............. .................. ..................
To record realization of other assets at a loss of P63,300.
30,700
25,320
25,320
12,660
Art capital (P500 x 40%)............ ............. .................. ..................
Bea capital (P500 x 40%) ........... ............. .................. ..................
Cid capital (P500 x 20%) ........... ............. .................. ..................
Liabilities .......................... ............. .................. ..................
To record trade accounts payable.
200
200
100
Liabilities .. ................................ ............. .................. ..................
Cash . ................................ ............. .................. ..................
To record payment of liabilities.
20,500
Art capital .. ................................ ............. .................. ..................
Bea capital . ................................ ............. .................. ..................
Cid capital ......................... ............. .................. ..................
To eliminate Cid's capital deficit.
1,380
1,380
Art capital .. ................................ ............. .................. ..................
Bea capital . ................................ ............. .................. ..................
Cid capital . ................................ ............. .................. ..................
Cash . ................................ ............. .................. ..................
To record payments to partners to complete liquidation.
100
4,000
12,100
P10,000
(100)
______
(2,760)
_2,760
94,000
500
20,500
2,760
16,200
Cid's loss must be limited to P5,000, or P25,000 for the partnership (P5,000 / 20% = P25,000).
Because the liquidation of liabilities results in a loss of P500, only P24,500 may be lost on the
realization of other assets. This requires that other assets realize P69,500 (P94,000 – 24,500) to
enable Cid to receive P5,000 from the partnership to pay personal creditors in full.
-
Problem 4 –9
KGB Partnership
Statement of Realization and Liquidation
Lump-sum Liquidation on June 30, 2008
-
Preliquidation balances
Sale of assets
and distribution
of 430,000 loss
Cash contributed
by B
Distribution of deficit
of insolvent partner:
20/60 (P2,000)
40/60 (P2,000)
Offset deficit with loan
Contribution by G
Payment of creditors
Distribution to K
Postliquidation
balances
Capital Balances
K
G
20%
40%
(240,000) (100,000)
B
40% (120,000)
Cash
50,000
Noncash
Assets
950,000
Liabilities
(480,000)
G
Loan
(60,000)
520,000
570,000
950,000
-0-
(480,000)
(60,000)
86,000
(154,000)
172,000
72,000
172,000
52,000
-
(480,000)
(60,000)
(154,000)
72,000
50,000
2,000
50,000
620,000
-0-
(2,000)
666
620,000
620,000
13,334
633,334
(480,000)
153,334
(153,334)
-0-
-0-0-
(480,000)
(480,000)
(60,000)
60,000
-0-
(153,334)
(153,334)
(480,000)
480,000
-0-
-0-
(153,334)
(153,334)
153,334
-0-0-
-0-
-0-
-0-
-0-
-0-
1,334
73,334
(60,000)
13,334
(13,334)
-0-
-0-0-0-
-0-
-0-
-
-0-
-
-0-
-
82
Chapter 4
KGB Partnership
Schedule of Distribution of Personal Assets
June 30, 2008
Personal assets, excluding partnership
capital and loan interests
Personal liabilities
Personal net worth, excluding
partnership capital and loan
interests
Contribution to partnership
Distribution from partnership
Personal capacity
K
G
B
500,000
(460,000)
600,000
(480,000)
700,000
(650,000)
40,000
120,000
(13,334)
-0- 106,666
50,000
153,334
193,334
-0- -0- -