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115. The following condensed balance sheet is presented for the partnership of
AA, BB, and CC, who share profits and losses in the ratio of 4:3:3,
respectively:
Cash P 160,000
Other assets 320,000
Total P 480,000
Liabilities P 180,000
AA, capital 48,000
BB, capital 216,000
CC, capital 36,000
Total P 480,000
The partners agreed to dissolve the partnership after selling the other assets
for P200,000. Upon the dissolution of the partnership. AA should have
received.
a. P 0 c. P72,000
b. 48,000 d. 84,000
(AICPA)
Answer: (a)
AA BB CC
Capital balances before liquidation P48,000 P216,000 P36,000
Loss on realization (P320,000 –
P200,000): (48,000) (36,000) (36,000)
4:3:3
Cash received P 0 P180,000 P 0
116. W, X, and Y are partners sharing profits and losses in the ratio of 4:3:3,
respectively. The condensed balance sheet of Heidi Partnership as of
December 31, 20x5 is:
Cash P 50,000
Other assets 130,000
Total assets P 180,000
Liabilities P 40,000
W, capital 60,000
X, capital 40,000
Y, capital 40,000
(PhilCPA)
Answer: (d)
W X Y
Balances before liquidation P 60,000 P 40,000 P 40,000
Loss on realization (80,000 – P40,000):
4:3:3 (16,000) (12,000) (12,000)
During the month of July, the partners collected P600 of the receivables with
no loss. The partners also sold during the month the entire inventory on which
they realized a total of P32,400. How much of the cash was paid to M's
capital on July 31, 20x5?
a. P25,600 c. P320
b. 5,400 d. 0
(PhilCPA)
Answer: (c)
M N
Drawing P(5,400) P(200)
Loan - 14,000
118. Larry, Marsha, and Natalie are partners in a company that is being
liquidated. They share profits and losses 55 percent, 20 percent, and 25
percent, respectively. When the liquidation begins they have capital
account balances of P108,000, P62,000, and P56,000, respectively. The
partnership just sold equipment with a historical cost and accumulated
depreciation of P25.000 and P18,000, respectively for P10,000. What is the
balance in Marsha's capital account after the transaction is completed?
a. P62,000 c. P62,600
b. P61,400 d. P65,000
Answer: (c)
119. After operating for five years, the books of the partnership of Bo and By
showed the following balances:
If liquidation takes place at this point and the net assets are realized at book
value, the partners are entitled to:
a. Bo to receive P117,000 & By to receive P52,000
(PhilCPA)
Answer: (d)
The non-cash assets are realized at book value therefore: There is no gain or loss,
in which case partners are entitled to received an amount equivalent to their capital
interest.
120. RR, SS and I decided to dissolve the partnership on November 30, 20x5. Their
capital balances and profit ratio on this date, follow:
The net income from January 1 to November 30, 20x5 is P44,000. Also, on this
date, cash and liabilities are P40,000 and P90,000, respectively. For RR to
receive P55,200 in full settlement of his interest in the firm, how much must be
realized from the sale of the firm's non-cash assets?
a. P196,000 c. P193,000
b. 177,000 d. 187,000
(Adapted)
Answer: (c)
121. Larry. Marsha, and Natalie are partners in a company that is being
liquidated. They share profits and losses 55 percent, 20 percent, and 25
percent, respectively. When the liquidation begins they have capital
account balances of P108,000, P62,000, and P56,000, respectively. The
partnership just sold equipment with a historical cost and accumulated
depreciation of P25,000 and P18,000, respectively for P10,000. What is the
balance in Larry's capital account after the transaction is completed?
a. P106,350 c. P109,650
b. P108,000 d. P110,000
Answer: (c)
122. Donald, Marion, and Jeff are liquidating their partnership. At the date the
liquidation begins Donald, Marion, and Jeff have capital account balances
of P147,000, P260,000, and P285,000, respectively and the partners share
profits and losses 35%, 25%, and 40%, respectively. In addition, the
partnership has a P28,000 Notes Payable to Donald and a P15,000 Notes
Receivable from Jeff. When the liquidation begins, what is the loss
absorption power with respect to Donald?
a. P 80,000 c. P420,000
b. P340,000 d. P500,000
Answer: (d)
123. Silverio, Domingo, Reyes, and Pastor are partners, sharing earnings in the
ratio of 3/21, 4/21, 6/21 and 8/21, respectively. The balances of their capital
accounts on December 31, 20x5 are as follows:
Silverio P 1,000
Domingo 25,000
Reyes 25,000
Pastor 9,000
P 60,000
The partners decide to liquidate, and they accordingly convert the non-
cash assets into P23,200 of cash. After paying the liabilities amounting to
P3,000, they have P22,200 to divide. Assume that a debit balance in any
partner's capital is uncollectible. After the P22,200 was divided, the capital
balance of Domingo was
a. P3,200 c. P 4,500
b. 3,920 d. 17,800
(PhilCPA)
Answer: (b)
Loss or realization:
(P22,200 - P60,000)
3/21: 4/21: 6/21: 8/21 (5,400) 7,200 (10.800) (14,400) (37,800)
Balances P(4,400) P17,800 P14,200 P(5,400) P22,200
Loss for possible insolvency of
Silverio and Pastor: 4:6
P4,400 + P5,400) 4,400 (3,920) (5,880) 5,400 _
124. As of December 31, 20x5, the books of Ton Partnership showed capital
balances of: T, P40,000: O, P25,000: N, P5,000. The partners' profit and loss
ratio was 3:2:1, respective. The partners decided to liquidate and they sold
all non-cash assets for P37,000. After settlement of all liabilities amounting
P12,000, they still have cash of P28,000 left for distribution. Assuming that any
capital debit balance is uncollectible, the share of T in the distribution of the
P28,000 cash would be:
a. P17,800 c. P19,000
b. 18,000 d. 17,000
(PhilCPA)
Answer: (a)
T O N TOTAL
Balances before Liquidation P40,000 P25,000 P5,000 P70,000
Loss on realization:
(P28,000 – P70,000) 3:2:1 (21,000) (14,000) (7,000) (42,000)
Ding's creditors filed a P25,000 claim against the partnership's assets. At that
time, the partnership held assets reported at P360,000 and liabilities of P
120,000. If the assets could be sold for P228,000, what is the minimum amount
that Ding's creditors would have received?
a. P 0 c. P36,000
b. P2,500 d. P38,720
Answer: (b)
126. The Keaton. Lewis and Meador partnership had the following balance
sheet just before entering liquidation:
Keaton, Lewis and Meador share profits and losses in a ratio of 2:4:4. Non-
cash assets were sold for P180,000. Liquidation expenses were P10,000.
Assume that Keaton was personally insolvent with assets of P8,000 and
liabilities of P60,000. Lewis and Meador were both solvent and able to
cover deficits in their capital accounts, if any. What amount of cash could
Keaton's personal creditors have expected to receive from partnership
assets?
a. P0 c. P30,000
b. P26,000 d. P34,000
Answer: (d)
127. The following account balances were available for the Perry, Quincy and
Answer: (c)
128. AA, BB, and CC are partners in ABC and share profits and losses 50%, 30%,
and 20%, respectively. The partners have agreed to liquidate the
partnership and some liquidation expenses to be incurred. Prior to the
liquidation, the partnership balance sheet reflects the following back
values:
Cash P 25,200
Non-cash assets 297,600
Notes payable to CC 38,400
Other liabilities 184,800
AA, capital 72,000
BB, capital deficit (12,000)
CC, capital 39,600
Assuming that the actual liquidation expenses are P16,800 and that the
non-cash assets with a book value of P240,000 are sold for P216,000. How
much cash should CC received?
a. P 46,457 c. P 74,571
b. 39, 600 d. -0-
(Adapted)
Answer: (b)
AA BB CC
Capital (deficit) balance P 72,000 (P 12,000) P 39,600
Notes payable 0 0 38, 400
Total Interest P 72,000 (P 12,000) P 78,000
Loss on realization: ( P216,000- P240,000)
50%, 30%, 20% ( 12,000) ( 2,200) (4,800)
Balances P 60,000 ( P 19,200) P 73,200
Payment of liquidation expenses (8,400) ( 5,040) ( 3,360)
Balances P 51,600 ( P 24,240) P 69,840
Loss on possible unrealization of non-
cash assets: (P297,600- P240,000) (28,800) (17,280) (11,520)
Balances P 22,800 ( P 41,520) P 58,320
Loss for possible insolvency of 58(5:2) (29,657) P 41,520 (11,862)
Balances ( 6,857) P 44,457
Loss for possible insolvency of AA P 6,857 ( 6,657)
Cash received P 39,600 (b)
or alternatively,
AA BB CC
Total Interest P 72,000 (P 12,000) P 39,600
Other deficit (5:2) ( 8,571) P12,000 ( 3, 429)
Balances P 63,429 P 74,571
Loss on realization: ( P216,000- P240,000) (17,143) (6,657)
Balances P 46,286 P 73,200
Payment of liquidation expenses (P 12,000) ( 4,800)
Balances P 34,286 P 62,914
Loss on possible unrealization of non-
cash assets: (P297,600- P240,000) (41,143) (16,457)
Balances ( 6,857) P 46,457
Loss for possible insolvency of AA P 6,857 ( 6,857)
Cash received P 39,600 (b)
129. After all non-cash assets have been converted into cash in the liquidation
of the AA and JJ partnership, the ledger contains the following account
balances:
Debit Credit
Cash P 34, 000
Accounts payable P 25, 000
Loan payable to AA 9, 000
AA, capital 8, 000
JJ, capital 8, 000
Answer: (c)
130. Arthur, Baker and Carter are partners in textile distribution business sharing
profit and losses equally. On December 31, 20x5 the partnership capital and
partners drawings were as follows:
The partnership was unable to collect on trade receivables and was forced
to liquidate. Operating profit in 20x5 amounted to P72, 000 which was all
exhausted, including the partnership assets. Unsettled creditor’s claims of
December 31, 20x5 totalled P84, 000. Baker and Carter have substantial
private resources but Arthur has no personal assets. The final cash
distribution to Carter was?
Answer: (a)
The P516, 000 assets are exhausted with no proceeds arising from it, therefore
the P516, 000 represents loss on realization.
131. Jar, Ram and Millo, who divide profits and losses, 50% 30% and 20%
respectively, have the following October 31, 20x5 account balances:
Jar, drawing Dr. P 12, 000
Milo, drawing Cr. 4,800
Accounts receivable-Jar 7,200
Loans payable-Ram 14, 000
Jar, capital 59, 400
Ram, capital 44, 400
Millo, capital 39, 000
The partnership assets are P21, 200 (including cash of P64, 200), the
partnership is liquidated and Millo receives P33, 000 in final settlement .How
much is the total loss on realization?
a. P 10,500 c. P 54,000
b. 30,200 d. 64,200
(Adapted)
Answer: (c)
132. When Mikki and Mylene, partners who share earnings equally were
incapacitated in an airplane accident, a liquidator was appointed to wind
up their business. The accounts showed cash, P 35, 000 other assets P100,
000; Liabilities, P 20, 000; Mikki, capital, P71, 000 and Mylene, capital, P54,
000. Because of highly specialized nature of the non-cash assets, the
liquidator anticipated that considerable time would be required to dispose
them. The expenses of liquidating the business (advertising, rent, travel, etc.)
are estimated as P 10, 000.How much cash can be distributed safely to
each partner at this point?
(Adapted)
Answer: (a)
133. A balance sheet for the partnership KK, LL and MM, who share profits 2:1:1
respectively, shows the following balances just before liquidation;
Cash Other Assets Liab. KK. Cap. LL. Cap. MM. Cap.
P48,000 P238,000 P80,000 P88,000 P62,000 P56,000
In the first month of liquidation, P125,000 was received on the sale of certain
assets. Liquidation expenses of P4,000 were paid and additional liquidation
expenses of P3,200 are anticipated before liquidation is completed.
Creditors were paid P22,400. The available cash was distributed to the
partners. The cash to be received by each partner based on the above
data:
KK LL MM KK LL MM
a. P56,600 P28,300 P28,300 c. P29,400 P32,700 P26,700
b. 86,000 61,000 55,000 D. 88,000 62,000 56,000
(Adapted)
Answer: (c)
KK LL MM Total
Balances before liquidation..... P88,000 P62,000 P56,000 P206,000
Loss on realization (P128,000-
P238,000): 2:1:1................... (55,000) (27,500) (27,500) (110,000)
Balances.................................... P33,000 P34,500 P28,500 P96,000
Payment of liquidation expenses. (2,000) (1,000) (1,000) (4,000)
Balances...................................... P31,000 P33,500 P27,500 P92,000
Anticipated liquidation
Expenses............................ (P1,600) (P8,00) (P8,00) (P3,200)
P29,400 P32,700 P26,700 P88,880 (c)
134. NN, OO, PP and GG, partners to a law firm, shares profits at the ratio of
5:3:1:1. On June 30 relevant partners accounts follow;
Answer: (b)
NN OO PP GG Total
Balances before liquidation.....
Advances................. (P18,000 (P10,000) (P28,,000)
)
Loans......................... 20,000 40,000 - - 60,000
Capital....................... 160,000 120,000 60,000 100,000 440,000
Total Interest................................ P180,000 P160,000 P42,000 P90,000 P472,000
Loss on realization (5:3:1:1)........ (200,000) (120,000) (40,000) (40,000) (400,000)*
Balances..................................... (P20,000) P40,00 P2,000 P50,000 P72,000
Loss of possible insolvency 2,0000 (12,000 ) (4,000) (4,000) -
3:1:1............................
Balances....................................... P28,000 (P2,000) 46,000 P72,000
Anticipated liquidation
Expenses............................. (P1,500) P2,000 (500) -
P26,500 P45,500 P72,000 (b)
Cash received..........................
*P72,000-P472
135. The partnership of AA, BB and CC was dissolved on June 30, 20x5 and
account balances after non-cash assets were converted into cash on
September 1 20x5 are:
b. P90,000 b. P79,000
b. 81,000 c. None
136. Aaron, Ben and Chris are partners who share income in a 1:3:1 ratio,
respectively. On January 1, 20x5, they decide to terminate operations. The
partnership’s final balance on that date is as follows:
Debit Credit
Cash P 20,000
Accounts Receivable 200,000
Loan Receivable-Ben 15,000
Inventory 400,000
Equipment 600,000
Accounts Payable P80,000
Bank Loan Payable 240,000
Loan Payable 25,000
Capital-Aaron 3 10,000
Capital-Ben 250,000
Capital-Chris 330,000
P 1,235,000 P 1,235,000
Liquidation of assets will take place over the next few months. At the end
of each month, available cash, less an amount retained to cover
estimated future liquidation cost is distributed to each partner.
137. How much should each partner receive for the month of February?
Answer: (d)
In 20x3, four friends form a partnership to invest in real estate. All are equal
partners. At January 1, 20x5, the books of the partnership show cash of
P23,000 and real estate with a cast of P400,000 and fair market value of
P650,000. The partnership has no liabilities. The partnership books are
maintained on a cost basis, and neither goodwill nor bonus is recorded when
a new partner is admitted.
On January 1, 20x5 a new partner joins the partnership making a cash
investment equal to one fourth of the fair market value of partnership assets.
During 20x5 each partner invested P10,000 in new funds and the partnership
invested P370,000 in real estate. Also during 20x5, real state costing P100,000
was sold for P150,000. The January 1, 20x5 fair market value of the real estate
sold was P125,000. Interest earned on the partnership savings account for
20x5 was P500.
138. How much must the new partner invest in the partnership at January 1,
20x5?
a. P168,250 c. P100,000
b. P105,750 d. Zero
Answer: (d)
[(P23,000+P65,000)/4= P168,250]
139. The share in the partnership's 20x5 income to the four original partners (as a
group).
a. P 0 c. P25,000
b. P20,000 d. P45,400
Answer: (d)
Answer: (d)
141. After all partnership assets were converted into cash and all available cash
was distributed to creditors, the ledger of the Daniela, Erika, and Fredline
partnership showed the following balances:
Debit Credit
Accounts payable P 20,000
Daniela, capital(40%) 10,000
Erika, capital(30%) 60,000
Fredline, capital(30%) P 90,000
P 90,000 P 90,000
Percentages indicated are residual profit and loss sharing ratios. Personal
assets and liabilities of the partners are as follows:
a. P -0 c. P47,143
(Adapted)
Answer: (b)
Assume that residual profits and losses are shared equally among the three
partners. Based on this information, calculate the maximum amount that
August can expect to receive from the partnership liquidation is:
a. P20,000 c. P70,000
b. 40,000 d. 110,000
(Adapted)
Answer: (a)
Gardo Gordo
Cash receipts P 79,100 P 65,245
Cash disbursements 62,275 70,695
On October 31, 20x5, all remaining noncash assets in the two stores were
sold for cash of P50,000. The partnership was dissolved, and cash settlement
was effected. In the distribution of the P60,000 cash, Gardo received:
a. P24,000 c. P34,000
b. 26,000 d. 36,000
(PhilCPA)
Answer: (b)
144. PP, QQ, and RR partners to a firm have capital balances of P11,200,
P13,000, and P5,800, respectively, and share profits in the ratio of 4:2:1.
Prepare a schedule showing how available cash will be given to the
partners as it becomes available. Who among the partners shall be paid
first with an available cash of P1,400?
a. QQ c. RR
b. No one d. PP
(Adapted)
Answer: (b)
INTEREST PAYMENTS
PP QQ RR PP QQ RR TOTAL
Balances before P 11,200 P13,000 P5,800
realization
Divided by: P&L 4/7 2/7 1/7
ratio
Loss absorption P 19,600 P 45,500 P 40,600
ability
Priority I - (4,900) - P 1,400 P 1,400
145. The PQR Partnership is being dissolved. All liabilities have been paid and the
remaining assets are being realized gradually. The equity of the partners is
as follows:
a. To R, P2,000 c. To R, P8,000
(PhilCPA)
Answer: (d)
INTEREST PAYMENTS
P Q R P Q R TOTAL
Balances before
realization
Loans P6,000 P(10,000)
146. A cash distribution plan (payment priority program) for the Matthew, Norell,
and Reams partnership appears below:
(Adapted)
Answer: (d)
147. Scott, Joe, and Ed ore liquidating their partnership. At the date the
liquidation begins Scott, Joe, and Ed have capital account balances of
P162,000, P192,500, and P215,000, respectively and the partners share
profits and losses 40%, 35%, and 25%, respectively, in addition, the
partnership has a P36,000 Notes Payable to Scott and a P20,000 Notes
Receivable from Ed. When the liquidation begins, what is the loss
absorption power with respect to Joe?
a. P192,500 c. P550,000
b. P 67,375 d. P770,000
Answer: (d)
(P192,500/.35)
148. The assets and equities of the Queen, Reed, and Stac Partnership at the
end of its fiscal year on October 31, 20x5 are as follows:
The partners decide to liquidate the partnership. They estimate that the
noncash assets, other than the loan to Reed, can be converted into
P100,000 cash over the two-months period ending December 31, 20x5.
Cash is to be distributed to the appropriate parties as it becomes available
during the liquidation process. The partner most vulnerable to partnership
losses on liquidation is:
b. Reed d. Stac
(Adapted)
Answer: (b)
The most vulnerable is the partner with the lowest absorption ability. In order to
determine their vulnerability to possible losses, the equity of each partner is
divided by his or her profit sharing ratio to identify the maximum loss that a partner
could absorb without reducing his or her equity below zero. The vulnerability ranks
indicate that Reed is most vulnerable to losses because his equity would be
reduced to zero with a total partnership loss on liquidation of P50,000.
149. Using the same information in No. 148, and P65,000 is available for first
distribution, it should be paid to:
(Adapted)
Answer: (d)