1 D, 61,900 6 D 11 C

2 C 7 A 12 B
3 C 8 A 13 C
4 B 9 B 14 B
5 A 10 A 15 D

1. Bel, capital P22,000

Bel, loan 10,000
Total interest before cash distribution P32,000
Cash received 20,000
Loss share (50%) P12,000
Loss on realization (PI2,000 / 50%) P24,000
Non-cash assets:
Total capital P61,900
Total liabilities 30,000
Total assets P91,900
Cash 6,000 85,900
Cash realized P61,900
2. (c)
Total interests of Millo:
Capital .- .P39.000
Drawings 4,800 P43,800
Less: Cash received in final settlement 33,000
Share in loss on realization P10,800
Divided by: Profit and loss ratio of Millo 20%
Loss on realization P54,000
3. C Nal Lou Gee
Capital balances
Before liquidation P175,000 P125,000 P175,000
Distribution of loss 3:2:5
(P475,000 + 25,000) (150,000) (100,000) (250,000)
Balances 25,000 25,000 (75,000)
Absorption of Gee (3:2) (45,000) (30,000) 75,000
Capital balances (P20,000) (P5,000)
Distribution of loss P 150,000
Absorption of Gee 45,000
Decrease in capital of Nal P 195,000
Note that upon liquidation, all of the partnership's assets are sold and sufficient cash is realized to
pay all claims except one for P25,000, therefore, the partnership incurred loss from realization,
which will eventually reduce the capital balances of the partners. In addition, the deficiency of an
insolvent partner is simply eliminated by absorption, thus. increasing the decrease in capital
account of Nal to PI 95,000, as shown above. Incidentally, since Nal and Lou are solvent,
additional cash ofP20,000 and P5,000, respectively will be invested by them.
4. b)
Gardo (60%) Gordo (40%) Total
Initial Investments P30.000 P20.000 P 50,000
 Investments (personal disbursements*) ....62,275 70,695 132,970
Withdrawals (Personal receipts) (79,100) (65,245) (144,345)
Balance before liquidation P13,175 P25,450 P 38,625
Gain on realization (P60,000 - P38,625) 12,825 8,550 21,375
Balances before payment to partners P26,000 P34.000 P 60,000
Payment to partner (26,000) (34,000) (60,000)
Since personal disbursements were made by partners on behalf of the partnership, such
transaction were treated they are an "investment". To analyze further, the following partnership
entry would be as follows:
Purchase /Expenses (or any appropriate acct.) xxx
Capital (personal cash) xxx
For personal receipts (as if "withdrawals"), the entry would be:
Capital/Drawings (personal cash) xxx
Sales (or any appropriate acct.) xxx
5. (a)
Arthur Baker Carter Total
Balances before net income
Capital P100,000 P80,000 P300,000 P480,000
Drawings 60,000 40,000 20,000 120,000
Totals P40,000 P40,000 P280,000 P360.000
Add: Net Income (equally) 24,000 24,000 24,000 72,000
Total interests P64,000 P64,000 P304,000 P432,000
Loss on liquidation* (172,000) (172,000) (172,000) ( 516,000)
Balances P( 108,000) P(108,000) P132,000 P(84,000)
Loss for insolvency of Arthur:
(equally) 108,000 ( 54,000) ( 54,000) -
P(162,000) ** P78,000 P(84,000)
*Loss on liquidation amounted to:
Liabilities P 84,000
Capital (P64,000 + P64.000 + P304.000) 432,000
Total assets P516,000
The P516,000 assets are exhausted with no. proceeds arising from it, therefore the P516.000
represents loss on realization.
••The P 162,000 capital deficiency of Baker will ultimately be considered as additional
investment since he has substantial resources to cover it. The PJ62.000 investment will be applied
first to unpaid liabilities of P84.000, then the balance will be given to
Carter, P78.000 (a)
6. (d)
The non-cash assets are realized at book value therefore, there is no gain or loss, in which case
partners are entitled to receive an amount equivalent to their capital interest.
7. Suggested answer (c) 410,000,230,000,0
A B C
Capital balances before liquidation 560,000 320,000 40,000
Loss on realization (280,000)(5:3:2) (140,000) (84,000) (56,000)
Balances 420,000 236,000 (16,000)
Absorption of C (5:3) (10,000) (6,000) 16,000
Payment to A and B 410,000 230,000 -
Again, generally accepted accounting principle states that partners should contribute assets to the
partnership to the extent of their debit balances. However, if such contribution is not possible
because of special personal or legal considerations, the debit balance will be viewed as a
realization loss and allocated according to the remaining partners' profit or loss ratio.
8. . Batman Robin Total
Total interest P126,000 P99,000 P225,000
Loss on realization (Schedule 1) ( 93,900) ( 62,600) (156,500)
Payment to partners P32,100 P36,400 P68,500
Schedule 1:
Total book value of non-cash assets P249,000
Cash realized:
Receivables (P75,000 x 1/3) P25,000
Inventory (P45,000 x 70%) 31,500
Other assets 36,000 92,500
Loss on realization P156,500
9. . Rook King
Capital balances P28,800 P74,400
Loan balances 14,400
Total interest 43,200 74,400
Liquidation expenses, P4,800 ( 2,400) ( 2,400)
Loss on realization (P219,600 - P123,600) ( 48,000) ( 48,000)
Balances ( 7,200) 24,000
Additional investment by Rook (P62,400-56,400) 6,000
Balances ( 1,200) 24,000
Additional loss to King 1,200 ( 1,200)
Payment to King P -0- P22,800
10. a)
August Albert Gerry
Balances before realization 70,000 (60,000) (30,000)
Additional investment 30,000
Balances 70,000 (60,000)
Additional loss (1:1) (30,000) 60,000 (30,000)
Balances 40,000 (30,000)
Additional investment (P70.000 - P30.000 -P30.000) 10,000
Balances 40,000 (20,000)
Additional loss (20,000) 20,000
Balances 20,000
11. Suggested answer: (c) 5,600
When the liquidation period extend over a long period of time, calculations of safe
payments to partners may become frequent and bothersome such that it may be desirable to
prepare in advance an installment distribution plan, called Cash Priority Program.
This program, which is an alternative to Schedule of Safe Payments, permits the partners
to determine how cash should be safely distributed when it becomes available. Using this
program, the first priority of payments should be provided to the partner with the highest loss
absorption balance. The amount to be paid could be determined by multiplying the excess loss
absorption balance of partner over another by his profit and loss percentage. The process should
be continually done until the loss absorption balances of the partners are equal, in which case,
distribution of available cash should be made according to their profit and loss percentage.
Since there are three partners in the firm (Goh, Kong, and Wei), in the third priority of
payments, the amount to be received by Wei is P5,600 (P28,000 x 20%), because at this point,
their loss absorption balances are equal.
12. . NN OO PP GG Total
Balances before liquidation
Advances P(18,000) P(10,000) P(28,000)
Loans P20,000 P40,000 - - 60,000
Capital 160,000 120,000 60,000 100,000 440,000
Total interests 180,000 160,000 P42,000 P 90,000 P472.000
Loss on liquidation (5:3:1:1). (200,000) ( 120,000) (40,000) (40,000) (400,000)*
Balances P(20,000) P40,000 P2,000 P50,000 P72,000
Loss for possible insolvency
3:1:1 20,000 ( 12,000) (4,000) (4,000) -
Balances P28,000 P(2,000) P46,000 P72,000
Loss for possibleinsolvency (1,500) 2,000 (500) -
Cash received P26,500 P45,500 P72,000
• P72.000 - P472,000
13. . L M N o
Capital balances P40,000 P30,000 P15.000 P25,000
Loan balances 5,000 10,000
Advances (4,500) (2,500)
Total Interest P45,000 P40,000 P10.500 P22,500
Possible loss (P118,000-P18,000) ( 50,000) ( 30,000) ( 10,000) ( 10,000)
Balances (5,000) 10,000 500 12,500
Additional loss to MNO, 3:1:1 5,000 (3,000) (1,000) (1,000)
Balances P7,000 500) 11,500
Additional loss to M and 0,3:1 (375) 500 (125)
Payment to M and O P 6,625 P11,375
14. b
15. d