POLYTECHNIC UNIVERSITY OF THE PHILIPPINES PRACTICAL ACCOUNTING 2

2013-2014

PARTNERSHIP ACCOUNTING 102

PARTNERSHIP LIQUIDATION LUMP-SUM

P2

Problem 1. The partnership of GA, LE and MA was dissolved on May 31, 2014, and the account alances after all noncash assets are converted to cash on !uly 1, 2014 alon" with residual #$L sharin" ratios, are% &ash LE, &apital )30*+ MA, &apital )40*+ #2'2,(00 31(,000 (2(,000 #ersonal Assets # 420,000 (2(,000 --,,(00 Accounts #aya le GA, &apital #'30,000 4,2,(00

#ersonal assets and lia ilities of the partners at !uly 1, 2014 are% GA LE MA #ersonal Lia ilities # 4,2,(00 320,2(0 420,000

.f MA contri uted #3',,(00 to the partnership to provide cash to pay the creditors, what a/ount /ust GA0s #4,2,(00 partnership e1uity would appear recovera le2 Problem 2. 3enus, 4ha/cey, and !anine are partners in a tradin" usiness5 They participate in the profits and losses e1ually5 As of 6ece/ er 31, 2014, the partners0 capital and drawin" accounts are as follows% &apital 6rawin" 3enus # 200,000 120,000 4ha/cey # 1'0,000 70,000 !anine # '00,000 40,000 Total # -'0,000 240,000

The partners decided to li1uidate the partnership5 The operatin" profit for the year 2014 a/ounted to ##144,000, which was all e8hausted includin" partnership assets5 As of 6ece/ er 31, 2014, unpaid lia ilities still a/ounted to #1'7,0005 3enus is personally insolvent, ut oth 4ha/cey and !anine have su stantial private resources5 9uestions% 15 The total loss on reali:ation% 25 The a/ount received y !anine in final cash distri ution was% Problem 3. ;, <, and G are partners sharin" profits e1ually5 The partnership and also certain partners are insolvent and the partnership is li1uidated5 ;pon distri ution of partnership loss fro/ li1uidation, state/ent is drawn up su//ari:in" the status of each partners as follows% P"r#!er ; < G Per o!"l S#"#$ %E&'l$ ()e o* F(rm I!#ere #+ F(rm S#"#$ A e# L("b(l(#(e I!#ere # (! F(rm Amo$!# O,e- #o F(rm # 300,000 # 100,000 #(0,000 (0,000 100,000 # (0,000 1(0,000 100,000 1(0,000

A"ainst who/ can fir/ creditors proceed for recovery of their unpaid clai/s2 a5 A"ainst ; for #1(0,000 5 A"ainst ; for #100,000c5 A"ainst G for #(0,000 d5 A"ainst G = #(0,000, ; = #100,000 Problem 4. The partnership of 3ice, >e"ie and .ya eco/e insolvent on 6ece/ er 31, 2014 and is to e li1uidated5 3ice, >e"ie and .ya has the followin" alances respectively, #4((,000, )#210,000+, )#27,000+5 After payin" their lia ilities, 3ice has still #,0,000 while >e"ie has #10(,000 of their personal assets5 ?owever, .ya has still unpaid lia ilities a/ountin" to #270,000 and her personal assets a/ounted only to #210,0005 The partners share profits and losses e1ually5 ?ow /uch is the /a8i/u/ a/ount that 3ice can e8pect to receive fro/ the partnership2 Problem .. The partnership of !ourdan, &ory and Marvin decided to li1uidate their partnership on May 31, 20145 @efore li1uidatin" and sharin" of net inco/e, their capital alances are as follows% !ourdan )30*+ #7,(,000, &ory )30*+ #'30,000, and Marvin )40*+ #,,0,0005 >et inco/e fro/ !anuary 1 to May 31 is #420,0005 Lia ilities of the

PARTNERSHIP ACCOUNTING - P2 102

Page 1

partnership a/ounted to #,3(,000 and its total assets include cash a/ountin" to #24(,0005 ;nsettled lia ilities are #37(,0005 !ourdan invested additional cash enou"h to settle their partnership0s inde tedness5 &ory is personally solvent, Marvin is personally insolvent, and !ourdan eco/es insolvent after investin" the cash needed y the partnership5 9uestions% 15 ?ow /uch were the partnership0s nonAcash assets sold for2 a5 #10(,000 5 #1(,,(00 c5 #(2(,000 25 ?ow /uch cash will &ory invest in the partnership2 a5 #,0,000 5 #1'7,000 c5 #2-4,000

d5 #3,070,000 d5 #31(,000 d5 #4'2,000

35 ?ow /uch will !ourdan receive as a result of their li1uidation2 a5 # A0A 5 #31(,000 c5 #37(,000

Problem /. Bn !anuary 1, 2014, the partners of !L> &o5 decided to li1uidate their partnership5 The followin" infor/ation was /ade availa le% &ash Accounts Ceceiva les Merchandise .nventory E1uip/ent, net Total Assets # 70,000 240,000 470,000 1,200,000 Accounts #aya le #aya le to Li/ !anet, &apital )20*+ Li/, &apital )30*+ >apoles, &apital )(0*+ Total Lia ilities and &apital # 120,000 70,000 400,000 '00,000 700,000 # 2,000,000

# 2,000,000

.nfor/ation on the conversion of nonAcash assets is as follows% #200,000 was collected on accounts receiva leD the alance is uncollecti le5 #270,000 was received for the entire inventory5 The e1uip/ent was sold for #1,000,0005 #7,000 li1uidation e8penses were paid5 9uestions% 15 ?ow /uch did !anet receive fro/ the settle/ent of his interest in the partnership2 25 6eter/ine the li1uidation loss on the lu/pAsu/ li1uidation of !L> &o5 Problem 0. 4tella, Ariella and Mr5 M are partners in a usiness ein" li1uidated5 The partnership has cash of #132,000, nonAcash assets with a ooE value of #1,(74,000 and outside lia ilities of #1,03-,(005 The followin" data relates to the partners as of !une 1, 2014% 4tella has capital alance of #,,(,(00, personal assets of #1'(,000, personal lia ilities of #72,(005 Ariella e8tended a loan to the partnership in the a/ount of #72,(00, deficit of #231,000, personal assets of #24,,(00, personal lia ilities of #--,0005 Mr5 M has a capital alance of #4-,(00, personal assets of #412,(00 and personal lia ilities of #24,,(005 The profit and loss ratio is 3%1%1 for 4tella, Ariella and Mr5 M respectively5 Bn !une 12, 2014, assets with a ooE value of #4-(,000 were sold for #330,000 cash5 The proceeds were used to pay off lia ilities of the partnership5 6urin" the re/ainder of !une, no additional assets were reali:ed and outside creditors e"an to pressure the partnership for pay/ent5 Bn !uly 3, the partners a"reed to contri ute personal assets, to whatever e8tent possi le, in order to eli/inate their respective deficits5 4hortly thereafter, assets with carryin" value of #330,000 and fair value of #3,-,(00 were distri uted to 4tella5 Assu/in" additional noncash assets with ooE value of #''0,000 were sold in !uly for #7-1,0005 ?ow /uch cash would e distri uted to Mr5 M2 Problem 1. Bn !anuary 1, 2014, FoLan6a #artnership entered into li1uidation5 The partners0 capital alances on this date were as follows% Fo )2(*+ #2,(00,000D Lan )3(*+ #(,400,000D 6a )40*+ #3,,00,0005 The partnership has lia ilities a/ountin" to #4,400,000, includin" a loan fro/ Lan #'00,0005 &ash on hand efore the start of li1uidation is #700,0005 With the information given, answer the following independent situations: Case 1 15 >oncash assets a/ountin" to #,,400,000 were sold at a ooE value and the rest of the noncash assets were sold at a loss of #4,200,0005 ?ow /uch cash will e distri uted to the partners2 a5 #4,400,000 5 #,,400,000 c5 #7,000,000 d5 #11,700,000

PARTNERSHIP ACCOUNTING - P2 102

Page 2

Case 2 25 After e8haustin" the noncash assets of the partnership, assu/in" all partners has personal assets /ore than their lia ilities5 ?ow /uch cash /ust e invested y the partners to satisfy the clai/s of the outside creditors and to pay the a/ount due to the partners2 a5 #3,'70,000 5 #3,700,000 c5 #4,3'0,000 d5 #4,470,000 Case 3 35 .f Lan received #2,2((,000, how /uch was the loss fro/ the reali:ation of the noncash assets2 a5 #(,2((,000 5 #-,-4(,000 c5 #10,(2(,000 d5 #10,,00,000 Problem 2. Gander, Gio, Fonna and &indy share profits and losses in the ratio 2%1%1%15 The partners cannot /eet its o li"ations to creditors and they a"reed to li1uidate the partnership i//ediately after closin" the ooEs on 6ece/ er 31, 20145 The 4tate/ent of Hinancial #osition for the partnership on this date follows% A44ET4 L.A@.L.T.E4 I &A#.TAL &ash # 170,000 Lia ilities # (30,000 >oncash Assets 700,000 &indy loan (0,000 Gander, capital 100,000 Gio, capital 100,000 Fona, capital 100,000 &indy, capital 100,000 Total Assets # -70,000 Total Lia ilities and &apital # -70,000 The personal assets and lia ilities of the partners revealed that only Gander is solvent5 9uestions% 15 Assu/in" the noncash assets were sold for #240,000, how /uch will Gander contri ute to offset his deficiency2 a5 #100,000 5 #11',000 c5 #124,000 d5 #140,000 25 ;sin" the sa/e date in 1uestion no5 1, how /uch did &indy receive in the cash settle/ent2 a5 # A0A 5 #30,000 c5 #37,000 d5 #(0,000 Problem 10. #artner Arida is personally insolvent, owin" #400,0005 #ersonal assets will only rin" #1(0,000 when li1uidated5 At the sa/e ti/e, Arida has a credit capital alance in the partnership of #7(,0005 The capital a/ounts of the other partners total a )credit+ alance of #200,0005 ;nder the doctrine of /arshalin" of assets, the personal creditors of Arida can collect up to%

PARTNERSHIP LIQUIDATION INSTALLMENT

Problem 1. As of 6ece/ er 31, 2014, the ooEs of GB3 #artnership showed the followin" alances% G = #400,000D B = #2(0,000D 3 = #(0,000D Lia ilities = #(00,000D &ash = #((,0005 The noncash assets include Accounts Ceceiva le = 3 for #20,0005 The partners share profits and losses in the ratio of 3%1%25 The partners decided to li1uidate y install/ent after unfavora le results of operation for the last three years5 @efore the li1uidation starts, the ooEEeeper discovered unpaid ills a/ountin" to #1(,000 they scheduled pay/ent i//ediately5 .n the first /onth, (0* of the noncash assets were reali:ed for #(00,0005 Li1uidation e8penses of #10,000 and #3(0,000 of lia ilities were paid5 At the end of the first /onth, the availa le cash was paid to partners after settin" aside #(,000 for contin"encies5 ?ow /uch cash was availa le to partners2 a5 #2(,000 5 #30,000 c5 #1,(,000 d5 #170,000 Problem 2. Assu/e that a partnership had assets with a ooE value of #240,000 and a /arEet value of #1-(,000, outside lia ilities of #,0,000, loans paya le to partner A le of #20,000, and capital alances for partners A le, @aEer, and &hap/an of #,0,000, J30,000, and #(0,0005 ?ow would the first #100,000 of availa le assets e distri uted assu/in" profits and losses are allocated e1ually2 a5 #,0,000 to outside lia ilities, #20,000 to A le, and the alance e1ually a/on" the partners 5 #,0,000 to outside lia ilities and #30,000 to A le c5 #,0,000 to outside lia ilities, #2(,000 to A le, and #(,000 to &hap/an d5 #40,000 to A le, #20,000 to &hap/an, and the alance e1ually a/on" the partners Problem 3. <6# #artnership had the followin" condensed Hinancial #osition prior to li1uidation% A44ET4 L.A@.L.T.E4 I &A#.TAL &ash # (77,000 Lia ilities # 327,000 >oncash Assets 2,770,000 Loan paya le to <i//y 170,000 <i//y, capital ,,',000 6ora, capital 1,320,000

PARTNERSHIP ACCOUNTING - P2 102

Page 3

Total Assets

# 3,4'7,000

!ohnson, capital Total Lia ilities and &apital

7'4,000 # 3,4'7,000

Assu/in" noncash assets with carryin" value of #1,3'0,000 were sold for #1,''0,000 and that all availa le cash was distri uted5 Khich of the followin" state/ents is false for #artner <i//y to receive a total of #,04,000 cash after li1uidation2 a5 The proceeds fro/ the sale of the re/ainin" noncash assets a/ount to #212,0005 5 #artner 6ora will receive the a/ount of #732,000 on the first distri ution5 c5 #artner !ohnson will receive a total of #(11,200 cash after li1uidation5 d5 The loss on reali:ation on the sale of the re/ainin" noncash assets a/ount to #,07,0005 Problem 4. Allen, @randen I &aylin are in the process of li1uidatin" their partnership5 They have the followin" capital alances and profit and loss percenta"es% &apital #rofit$Loss * @alance Allen #(,000 de it 20* @randen 17,000 credit (0* &aylin ',000 credit 30* The partnership alance sheet shows cash of #(,000, nonAcash assets of #14,000, and no lia ilities5 Assu/in" no li1uidation e8penses, what safe pay/ent could e /ade2 a5 #(,000 split etween @randen I &aylin y a ratio of ($7 and 3$7, respectively5 5 #(,000 to @randen only c5 #1,000 to Allen, #2,(00 to @randen, and #1,(00 to &aylin d5 #17,000 to @randen only Problem .. The accounts )with the related profit I loss ratio+ of the partnership of <i/, Gerald and MaLa at the end of its fiscal year on 4epte/ er 30, 2013 are as follows% &ash >oncash Assets Loan to Gerald Lia ilities # 1(,000 130,000 (,000 (0,000 Loan to MaLa <i/, capital )30*+ Gerald, capital )(0*+ MaLa, capital )20*+ # 10,000 4(,000 30,000 1(,000

.f MaLa received #-,000 on the first distri ution of cash, the cash reali:ed fro/ the sale of assets was Problem /. Bn !une 1, 2012, after /ore than ten years of profita le usiness of A@& Merchandisin", partners !aLa, !eLe, !iLi and !oLo decided to dissolve the partnership usiness and to li1uidate its affairs for "ood5 6urin" the first five /onths of operations for the calendar year endin" 6ece/ er 31, 2012, the partnership has earned a total net inco/e of #hp1,000,0005 The Articles of #artnership provides for the followin" profit$loss sharin" a"ree/ents5 !aLa and !oLo is to receive #hp30,000 and #hp20,000 /onthly salary, respectivelyD !eLe, !iLi and !oLo shall receive interests for their e"innin" capital alances a/ountin" to 3*, 2* and 10*, respectively5 The total capital alance of the partnership as of the e"innin" of the year is #hp2,(00,000 of which !iLi and !oLo owns #hp(00,000 and #hp1,000,000, respectively5 !aLa owns M of the re/ainin" capital alance5 Any re/ainin" profit or loss is apportioned to !aLa, !eLe, !iLi and !oLo, respectively, usin" the followin" ratio% 1%2%3%4 Bn !uly 2, 2012, the partnership sold #hp1,000,000 of its assets for #hp700,0005 Total availa le cash was used to pay all outstandin" lia ilities a/ountin" to #hp-00,000 and li1uidation e8penses a/ountin" to #hp10,0005 Also, in !uly 2, 2012, re/ainin" availa le cash of #hp(00,000 was paid to the partners as partial pay/ent of their respective shares in the partnership li1uidation5 Bn !uly 1(, 2012, the re/ainin" assets were sold5 After payin" for e8penses a/ountin" to #hp1(,000, all availa le cash was distri uted to the partners5 !oLo received #hp'-7,000 as his share for the final install/ent of his share in the partnership5 @ased on the fore"oin", how /uch was received y !eLe as his share in the install/ent pay/ent to the partners in !uly 2, 20122 Problem 0. 4a/sun", >oEia and Apple are partners who share pIl as follows% 4(*%1(*%40*, respectively5 The 4tate/ent of Hinancial #osition of N#hone #artnership as of 6ece/ er 31, 2013 is "iven elow% A44ET4 &ash # 2'7,000 L.A@.L.T.E4 I &A#.TAL Lia ilities # (32,000

PARTNERSHIP ACCOUNTING - P2 102

Page 4

>oncash Assets

1,-40,000

Total Assets

# 2,207,000

Loan fro/ >oEia 4a/sun", capital >oEia, capital Apple, capital Total Lia ilities and &apital

44,000 '-4,000 3(4,000 (74,000 # 2,207,000

Bn !anuary 1, 2014, the partners decided to li1uidate5 Hor the /onth of !anuary, so/e assets were sold at a "ain of #(',0005 #ay/ents to partner >oEia fro/ initial sale of assets was #171,4005 &ash withheld for possi le li1uidation e8penses and unreco"ni:ed lia ilities a/ounted to #14',7005 Khich of the followin" state/ents is false2 a5 #ay/ent to partner 4a/sun" fro/ initial sale of assets was #44,2005 5 The share of Apple in the /a8i/u/ possi le loss is #'00,0005 c5 The total a/ount of cash paid and distri uted for the /onth of !anuary is #,'4,0005 d5 The ooE value of the noncash assets sold in !anuary a/ount to #'42,7005 Problem 1. No, Cai, and 6a of the NoCai6a #artnership has the followin" account alances efore li1uidation% &ash >oncash Assets Loan to Cai Ceceiva le fro/ No E8penses # 420,000 3,770,000 1-2,000 44,000 2,((',000 Lia ilities Loan fro/ 6a No, capital Cai, capital 6a, capital Cevenues # (24,000 100,000 1,120,000 1,'24,000 2,2(',000 1,4'7,000

6urin" !une, so/e noncash assets were sold that resulted to a "ain of #,2,0005 Li1uidation e8penses of #124,000 were paid and additional e8penses a/ountin" to #-',000 were paid e8pected to e incurred throu"h the followin" /onths of li1uidatin" the partnership5 Lia ilities to outsiders a/ountin" to #31',000 were paid5 Hor Cai to receive #7,4,000 on the first distri ution of cash, which of the followin" state/ents is correct2 a5 The total /a8i/u/ possi le loss for the /onth of !une a/ount to #2,,04,0005 5 The proceeds fro/ sale of the noncash assets sold in !une a/ount to #1,3-',0005 c5 The a/ount of cash withheld considered in the co/putation of /a8i/u/ possi le loss a/ount to #304,0005 d5 The total /a8i/u/ possi le loss for the /onth of !une a/ount to #2,,04,0005

PARTNERSHIP ACCOUNTING - P2 102

Page (