PARTNERSHIP ACCOUNTING #0010

LUMP-SUM AND INSTALLMENT LIQUIDATION

PROBLEM 1.

The partnership of MB, NC, and OP was dissolved on May 31, 2013, and the account balances after all
noncash assets are converted to cash on July 1, 2013, along with residual P/L sharing ratios, are:

Cash P262,500 Accounts payable P630,000

NC, Capital (30%) 315,000 MB, Capital (30%) 472,500
OP, Capital (40%) 525,000

Personal assets and liabilities of the partners at July 1, 2013 are:

Personal Assets Personal Liabilities
MB P420,000 P472,500
NC 525,000 320,250
OP 997,500 420,000

If OP contributed P367,500 to the partnership to provide cash to pay the creditors, what amount of
MBs P472,500 partnership equity would appear to be recoverable:
A. P414, 750 C. P425,250
B. P472,500 D. P 0

PROBLEM 2.

The partnership of DBM, TRA and MDS became insolvent on December 31, 2012 and is to be liquidated.
DBM, TRA and MDS has the following balances respectively, P455,000, (P210,000), (P28,000). After
paying their personal liabilities, DBM has still P70,000 while TRA has P105,000 of their personal assets.
However, MDS has still unpaid personal liabilities amounting to P280,000 and his personal assets
amounted only to P210,000. The partners share profits and losses equally.
How much is the maximum amount that DBM can expect to receive from the partnership?
A. P217,000 C. P427,000
B. P245,000 D. P322,000

PROBLEM 3.

The partnership of CD, AY, and GP decided to liquidate their partnership on May 31, 2013. Before
liquidating and sharing of net income, their capital balances are as follows: CD (30%) P875,000, AY (30%)
P630,000, and GP (40%) P770,000. Net income from January 1 to May 31 is P420,000. Liabilities of the
partnership amounted to P735,000 and its total assets include cash amounting to P245,000. Unsettled
liabilities are P385,000. CD invested additional cash enough to settle their partnerships indebtedness.
AY is personally solvent, GP is personally insolvent, and CD becomes insolvent after investing the cash
needed by the partnership.
How much were the partnerships non-cash sold for?
A. P157,500 C. P105,000
B. P3,080,000 D. P525,000
How much cash will AY invest in the partnership?
A. P315,000 C. P294,000
B. P168,000 D. P70,000
How much will CD receive as a result of their liquidation?
A. P385,000 C. P315,000
B. 0 D. P462,000

PROBLEM 4.

AK, BS and CM are partners in a business being liquidated. The partnership has cash of P132,000,
noncash assets with a book value of P1,584,000 and liabilities of P1,039,500. The following data relates
to the partners as of June 1, 2013: AK has capital balance of P775,000, personal assets of P165,000,
personal liabilities of P82,500.

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PARTNERSHIP ACCOUNTING #0010

BS extended a loan to the partnership in the amount of P82,500, deficit of P231,000, personal assets of
P247,500, personal liabilities of P99,000. CM has a capital balance of P49,500, personal assets of
P412,500 and personal liabilities of P247,500. Their profit and loss ratio is 3:1:1 AK, BS, and CM,
respectively.

On June 12, 2013, assets with a book value of P495,000 were sold for P330,000 cash. The proceeds were
used to pay off liabilities of the partnership. During the remainder of June, no additional assets were
realized and outside creditors began to pressure the partnership for payment. On July 3, the partners
agreed to contribute personal assets, to whatever extent possible, in order to eliminate their respective
deficits. Shortly thereafter, assets with book value of P330,000 and a fair value of P379,500 were
distributed to AK. Assuming additional noncash assets with book value of P660,000 were sold in July for
P891,000.

How much cash would be distributed to CM?

A. P72,600 C. P23,100
B. P52,800 D. P3,300

PROBLEM 5.

On January 1, 2013, ACJ Partnership entered into liquidation. The partners capital balances on this date
were as follows: A (25%) P2,500,000; C (35%) P5,400,000; J (40%) P3,700,000. The partnership has
liabilities amounting to P4,400,000, including a loan from C P600,000. Cash on hand before the start of
liquidation is P800,000.

With the information given, answer the following independent situations:

(1) Noncash assets amounting to P7,400,000 were sold at book value and the rest of the noncash
assets were sold at a loss of P4,200,000. How much cash will be distributed to the partners?
A. P8,000,000 C. P4,400,000
B. P7,400,000 D. P11,800,000
(2) After exhausting the noncash assets of the partnership, assuming all partners has personal
assets more than their personal liabilities. How much cash must be invested by the partners to
satisfy the claims of the outside creditors and to pay the amount due to the partner/s?
A. P3,680,000 C. P4,480,000
B. P4,360,000 D. P3,800,000
(3) If C received P2,255,000, How much was the loss from the realization of the noncash assets?
A. P5,255,000 C. P10,700,000
B. P10,525,000 D. P9,945,000

PROBLEM 6.

YES Partnership had the following condensed financial position prior to liquidation:

Assets Liabilities and Capital

Cash P588,000 Liabilities P328,000

Noncash assets 2,880,000 Loan payable to NY 180,000
NY, Capital (25%) 776,000
RB, Capital (40%) 1,320,000
IS, Capital (35%) 864,000
Total P3,468,000 Total P3,468,000

Assuming noncash assets with a book value of P1,360,000 were sold for P1,660,000 and that all available
cash was distributed.

Which of the following statements is false for Partner NY to receive a total of P704,000 cash after
liquidation?
A. The proceeds from the sale of the remaining noncash assets amount to P212,000
B. The loss on realization on the sale of the remaining noncash assets amount to P708,000

PARTNERSHIP ACCOUNTING #0010

PARTNERSHIP ACCOUNTING #0010

C. Partner RB will receive the amount of P832,000 on the first distribution of cash
D. Partner IS will receive a total of P511,200 cash after liquidation

PROBLEM 7.

UV, PX, and TG are partners who share profits and losses as follows: UV 45%, PX 15% and TG 40%. The
Statement of Financial Position of VXG Partnership as of December 31, 2012 is given below:

VXG Partnership
Statement of Financial Position
As of December 31, 2012
Assets Liabilities and Equity
Cash P268,000 Liabilities P532,000
Noncash Assets 1,940,000 Loan from PX 44,000
UV, Capital 694,000
PX, Capital 354,000
TG, Capital 584,000
Total assets PP2,208,000 Total Liabilities & Equity P2,208,000

On January 1, 2013, the partners decided to liquidate. For the month of January, some assets were sold
at a gain of P56,000. Payment to partner PX from the initial sale of assets was P181,400. Cash withheld
for possible liquidation expenses and unrecognized liabilities amounted to P146,800.

Which of the following statements is false?

A. The book/carrying value of the noncash assets sold in January amount to P642,800
B. Payment to partner UV from the initial sale of assets was P44,200
C. The share of TG in the maximum possible loss is P600,000
D. The total amount of cash paid and distributed for the month of January is P764,000

PROBLEM 8.

HM, CM and DM of The M3 Partnership has the following account balances before liquidation:

Cash P420,000 Liabilities P524,000

Noncash assets 3,880,000 Loan from DM 100,000
Loan to CM 192,000 HM, Capital (25%) 1,120,000
Receivable from HM 44,000 CM, Capital (15%) 1,624,000
Expenses 2,556,000 DM, Capital (60%) 2,256,000
Revenues 1,468,000

During June, some noncash assets were sold that resulted to a gain of 72,000. Liquidation expenses of
P124,000 were paid and additional expenses amounting to P96,000 were expected to be incurred
through the following months of liquidating the partnership. Liabilities to outsiders amounting to
P316,000 were paid.

For CM to receive P874,000 on the first distribution of cash, which of the following statements is
correct?

A. The total maximum possible loss for the month of June amount to P2,704,000
B. The total amount of cash paid to partners in June amount to P1,144,000
C. The proceeds from the sale of the noncash assets sold in June amount to P1,396,000
D. The amount of cash withheld considered in the computation of maximum possible loss amount
to P304,000

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PARTNERSHIP ACCOUNTING #0010