Acc 7: Advanced Financial Accounting Reporting I

Partnership Liquidation
Short Assessment Answer Key

Problem No. 1
Requirement No. 1

A B C Cash Distribution Plan

Total Interest 165,000 120,000 53,000 A B C Total
P/L Ratio 50% 30% 20%
Loss Absorption Balance 330,000 400,000 265,000
Priority 1 (70,000) 21,000 21,000
Priority 2 (65,000) (65,000) 32,500 19,500 52,000
265,000 265,000 265,000 32,500 30,500 73,000
Cash in excess of 73,000 will be
allocated in P/L

Requirement No. 2

A B C
Jan. – 20,000
P1 (21,000) 20,000 ds

Feb. – 50,000
P1 (1,000) 1,000
P2 (49,000) 30,625 19,375 fg
265,000 265,000 265,000

Mar. – 80,000
P2 (3,000) 1,875 1,125
P/L (77,000) 32,500 23,100 15,000
34,375 24,225 15,000

Apr. – 20,000 10,000 6,000 4,000

Problem No. 2

Cash Distribution Plan

Charo Karla Therese Charo Karla Therese Total
Capital 45000 30000 15000
Loan 10000
Total 45000 30000 25000
Interest 30% 50% 20%
Loss
150,000.00 60,000.00 125,000.00
Capacity
Priority 1 25,000.00 7,500.00 7,500.00
Priority 2 65,000.00 65,000.00 19,500.00 - 13,000.00 32,500.00
TOTAL 60,000.00 60,000.00 60,000.00 27,000.00 - 13,000.00 40,000.00
Excess of 40,000 will be distributed thru P/L.

Requirement 1: Karla is the most vulnerable to losses.

Requirement 2: Only Charo will receive a share in the distribution of P7,500.