CHAPTER 3
Partnership Liquidation
EXERCISES
Exercise 3 - 1Aguilar Benito Casimiro David
Capital balances before liquidation P 11,000 P 10,300 P 13,700 P 9,000
Loan from partners 2,000
Total partners’ interest P 13,000 P 10,300 P 13,700 P 9,000
Loss on realization (P46,000 – P12,000) (13,600) ( 10,200) ( 6,800) ( 3,400)
Balances P( 600) P 100 P 6,900 P 5,600
Additional loss to partners 600 ( 300) ( 200) ( 100)
Balances --- P ( 200) P 6,700 P 5,500
Additional loss to partners 200 ( 133) ( 67)
Distribution of cash to partners --- --- 6,567 5,433
Exercise 3 - 2
Duque Espino Felipe Total
Original investments P 50,000 P 22,500 P 20,000 P 92,500
Net profit for 2011 15,000 7,500 7,500 30,000
Drawings in 2011 ( 15,000) ( 10,000) ( 10,000) ( 35,000)
Total partners’ interest before dissolution P 50,000 P 20,000 P 17,500 P 87,500
Net assets distributed to partners ( 32,500) ( 16,250) ( 16,250) ( 65,000)
Balances P 17,500 P 3,750 P 1,250 P 22,500
Loss to partners distributed 2:1:1 ( 11,250) ( 5,625) ( 5,625) ( 22,500)
Cash settlement among partners P 6,250 P( 1,875) P( 4,375) ---
Exercise 3 - 3
1. Guarin, Capital 1,500
Receivable from Guarin 1,500
To offset receivable from Guarin against his capital.
2. Salary Payable to Henson 500
Henson, Capital 500
To include salary payable to Henson to his interest.
3. Henson, Capital (P24,500 x 40%) 9,800
Guarin, Capital (P24,500 x 60%) 14,700
Loss from Liquidation 24,500
To distribute loss from liquidation to partners.
4. Henson, Capital (P9,500 + P500 - P9,800) 200
Guarin, Capital (P18,000 - P1,500 - P14,700) 1,800
Exercise 3 - 4
1. Ibarra Javier Katindig
Original investment P 60,000 P 54,000 P 16,000
Net loss for six months* (18,000) (12,000) ( 6,000)
Loss on realization (P121,000 - P49,000 = P72,000) (36,000) (24,000) (12,000)
Balances P 6,000 P 18,000 P( 2,000)
Additional loss to partners ( 1,200) ( 800) 2,000
Cash distribution to Ibarra ( 4,800)
* Total capital, March 1 (P60,000 + P54,000 + P16,000) P130,000
Net assets, Aug. 31 (P5,000 + P121,000 - P32,000) 94,000
Net loss P 36,000
2. Book value of other assets P121,000
Total loss on realization
Capital balance of Katindig after dist. of net loss P 10,000
Excess of personal liabilities over personal assets ( 5,000)
Maximum amount of loss that can be absorbed by Katindig P 5,000
Fractional share of Katindig 1/6__ ( 30,000)
Cash that must be realized on sale of other assets P 91,000
Exercise 3 – 5
1. Book value of other assets (P459,000 – P3,000) P456,000
Cash realized:
Accounts receivable [P180,000 – (P60,000 x 20%)] P168,000
Merchandise inventory 75,000
Prepaid advertising 2,400
Machinery and equipment (P120,000 x 60%) 72,000 317,400
Loss on realization P138,600
Lesaca – Manalo Partnership Statement of Liquidation
December 31, 2012
Other Liabilities Capital
Cash Assets AP NP Lesaca Manalo
Balances before liquidation P 3,000 P456,000 P60,000 P258,000 P90,000 P 51,000 Sale of assets and distribution
of loss 317,400 ( 456,000) ( 55,440) ( 83,160) Balances P320,400 P60,000 P258,000 P34,560 (P32,160) Payment of liabilities ( 320,400) ( 59,400) ( 258,000) ( 1,200) ( 1,800) Balances P600 P33,360 (P33,960) Additional investment by Manalo 12,000 12,000 Balances P 12,000 P 600 P33,360 (P21,960) Payment of liabilities ( 600) ( 600) Balances P 11,400 P33,360 (P21,960)
Additional loss to Lesaca ( 21,960) 21,960 Payment to Lesaca P 11,400 P11,400
AA1 - Chapter 3 (2012 edition) page 43
Exercise 3 – 6
Nocum Oliva Pascua Quinto
Capital balances before liquidation P180,000 P300,000 P240,000 (P 33,000)
Restricted interest – possible loss
Non-cash assets P600,000
Liquidation expenses 9,000
Unrecorded liabilities 15,000
Total P624,000 ( 156,000) ( 156,000) ( 156,000) ( 156,000)
Balances P 24,000 P144,000 P 84,000 (P189,000)
Restricted interest – possible loss to Nocum, Oliva and Pascua for the
deficiency of Quinto ( 63,000) ( 63,000) ( 63,000) 189,000
Balances (P 39,000) P 81,000 P 21,000 -
Restricted interest – possible loss to Oliva and Pascua for the deficiency of
Nocum 39,000 ( 19,500) ( 19,500)
Exercise 3 - 8
Rama, Sison and Toledo Cash Priority Program
PAYMENTS
Rama Sison Toledo Rama Sison Toledo
Capital balances P30,000 P70,000 P40,000
Add Loan balances 20,000 20,000 30,000
Total partners’ interest P50,000 P90,000 P70,000
Profit and loss ratio 40% 40% 20%
Loss absorption balance P125,000 P225,000 P350,000
Allocation I – Cash to Toledo reducing LAB to an amount reported for Sison
(P125,000 x 20%) (125,000) P25,000
Balances P125,000 P225,000 P225,000
Allocation II - Cash to Sison & Toledo reducing LAB to an amount reported for Rama
P100,000 x 40% (100,000) P40,000
P100,000 x 20% (100,000) 20,000
Balances P125,000 P125,000 P125,000 P40,000 P45,000
Allocation III - Further cash distribution may be made in the P & L ratio
Exercise 3-9
1. Julian, Lagman and Magno
Cash Priority Program January 1, 2012
PAYMENTS
Julian Lagman Magno Julian Lagman Magno Capital balances before liquidation P 36,000 P 54,000 P18,000
Add Note payable to Magno 14,000 Total partners’ interest P 36,000 P 54,000 P 32,000 Profit and loss ratio 3/10 3/10 4/10 Loss absorption balances P120,000 P180,000
(60,000)
P80,000 Allocation I – Cash to Lagman reducing
LAB to an amount reported for Julian
(P60,000 x 3/10) P18,000
Balances P120,000 P120,000 P80,000 Allocation II – Cash to Julian & Lagman
reducing LAB to an amount reported for
Magno (P40,000 x 3/10) ( 40,000) (40,000) P12,000 12,000 Balances P80,000 P80,000 P80,000 P12,000 P20,000 - Allocation III – Further cash distributions
AA1 - Chapter 3 (2012 edition) page 46
2. Julian, Lagman and Magno
Statement of Liquidation January to March, 2012
Other NP to CAPITAL
Cash Assets Liabilities Magno Julian Lagman Magno Balances before liquidation P12,000 P146,000 P36,000 P14,000 P36,000 P54,000 P18,000
January:
Sale of assets and
distribution of loss 30,000 ( 38,000) ( 2,400) ( 2,400) ( 3,200) Payment of liquidation expenses ( 3,600) ( 1,080) (1,080 (1,440) Payment of liabilities ( 36,000) (36,000) Distribution of cash to partners (sch. 1) ( 2,400) (2,400) Balances P108,000 P14,000 P32,520 P48,120 P13,360 February:
Sale of assets and
distribution of gain 44,000 (35,000) 2,700 2,700 3,600 Payment of liquidation expenses (8,400) (2,520) (2,520) (3,360) Distribution of cash to partners (sch. 2) (35,600) (10,000) (25,600) Balances P73,000 P14,000 P22,700 P22,700 P13,600 March:
Sale of assets and
distribution of loss 36,000 (73,000) (11,100) (11,100) (14,800) Balances P36,000 P14,000 P11,600 P11,600 P(1,200) Offset of loan against
deficiency ( 1,200) 1,200
Final payment to partners (P36,000) (P12,800) (P11,600 (P11,600
Schedule 1 Installment Liquidation
January 31, 2012
Amount Julian Lagman Mango
Cash available P2,400
Allocation I – Payable to Lagman P2,400 P2,400
Schedule 2 Installment Liquidation
February 28, 2012
Amount Julian Lagman Mango
Cash available P35,600 Allocation I – Balance Payable to Lagman 18,000-2,400 15,600 P20,000 P10,000 P15,600 10,000 Allocation II – Payable to Julian and
Lagman
3. Journal entries January Cash 30,000 Julian, Capital 2,400 Lagman, Capital 2,400 Magno, Capital 3,200 Other Asset 38,000 Julian, Capital 1,080 Lagman, Capital 1,080 Magno, Capital 1,440 Cash 3,600 Liabilities 36,000 Cash 36,000 Lagman, Capital 2,400 Cash 2,400 February Cash 44,000 Other assets 35,000 Julian, Capital 2,700 Lagman, Capital 2,700 Magno, Capital 3,600 Julian, Capital 2,520 Lagman, Capital 2,520 Magno, Capital 3,360 Cash 8,400 Julian. Capital 10,000 Lagman, Capital 25,600 Cash 35,600 March Cash 36,000 Julian, Capital 11,100 Lagman, Capital 11,100 Magno, Capital 14,800 Other assets 73,000
Note Payable to Magno 1,200
Magno, Capital 1,200
Note Payable to Magno 12,800
Julian, Capital 11,600
Lagman, Capital 11,600
AA1 - Chapter 3 (2012 edition) page 48
Exercise 3 - 10
U, V and W Co. Cash Priority Program
PAYMENTS
Urbe Villa Waldo Urbe Villa Waldo Capital balances P 11,200 P13,000 P 5,800
Profit and loss ratio 4/7 2/7 1/7 Loss absorption balance P 19,600 P 45,500 P 40,600 Allocation I - Cash to Villa reducing
LAB to an amount reported for
Waldo (P4,900 x 2/7) ( 4,900) P 1,400 Balances P 19,600 P 40,600 P 40,600
Allocation II - Cash to Villa & Waldo reducing LAB to an amount reported for Urbe
P21,000 x 2/7 ( 21,000) 6,000
P21,000 x 1/7 (21,000) P 3,000 Balances P 19,600 P 19,600 P 19,600 P 7,400 P 3,000 Allocation III - Further cash distribution
may be made in the P & L ratio
2. Book value of assets (P11,200 + P13,000 + P5,800) P 30,000
Loss on realization:
Capital balance of Urbe prior to realization P 11,200
Cash to be received by Urbe 10,000
Share of Urbe in the loss on realization P 1,200
Fractional share of Urbe 4/7_ 2,100
Cash to be realized of the sale of assets P 27,900
3. Allocation III - P3,200 ÷ 4/7 = P5,600 x 1/7 P 800
Allocation II 3,000
Total cash received by Waldo P 3,800
4. Book value of assets P 30,000
Total cash available
Allocation I P 1,400 Allocation II - P1,800 - P1,400 = P400 ÷ 2/3 600 2,000 Loss on liquidation P 28,000 Exercise 3 – 11 Partnership Books 1. Inventories 90,000
Capital Adjustment Account 90,000
2. Accumulated Depreciation 160,000
Equipment 80,000
Capital Adjustment Account 80,000
3. Goodwill 56,000
Capital Adjustment Account 56,000
4. Capital Adjustment Account 226,000
Belen, Capital (3/4) 169,500
Bgnes, Capital (1/4) 56,500
5. Colored Co. Share Capital 980,000
Allowance for Uncollectible Accounts 12,000
Accounts Payable 104,000 Accounts Receivable 124,000 Inventories 296,000 Equipment 520,000 Goodwill 156,000 6. Belen, Capital 563,500 Bagnes, Capital 458,500 Cash 42,000
Colored Co. Share Capital 980,000
New Corporation’s Books
1. Authorized to issue 50,000 shares of P50 par value Ordinary Share Capital.
2. Cash 700,000
Ordinary Share Capital 500,000
PIC in Excess of Par 200,000
3. Accounts Receivable 124,000
Inventories 296,000
Equipment 520,000
Goodwill 156,000
Allowance for Doubtful Accounts 12,000
Accounts Payable 104,000
Ordinary Share Capital 700,000
AA1 - Chapter 3 (2012 edition) page 54
Problem 3 – 2 (Case 3 – cont.)
Calma, Daza and Esteban
Schedule of Cash Distribution to Partners
Calma Daza Esteban
Capital balances before cash distribution P 27,000 P ( 3,000) P 46,000
Add loan balance 8,000
Total partners’ interest P 27,000 P ( 3,000) P 54,000
Restricted interest - possible loss to Calma and Esteban
in the ratio of 2:1 if Daza fails to pay his deficiency ( 2,000) 3,000 ( 1,000)
Free interests - amounts to be paid to partners P 25,000 - P 53,000
Payment to apply on:
Loan P 8,000
Capital P 25,000 45,000
Problem 3 – 2 (Case 4 – cont.)
Calma, Daza and Esteban
Schedule of Cash Distribution to Partners
Calma Daza Esteban
Capital balances before cash distribution P 9,000 P (21,000) P 37,000
Add loan balance 8,000
Total partners’ interest P 9,000 P (21,000) P 45,000
Restricted interest - possible loss to Calm and Esteban in
the ratio of 2:1 if Daza fails to pay his deficiency (14,000) 21,000 ( 7,000)
Balances P( 5,000) - P 38,000
Restricted interest - possible loss to Esteban if Calma fails to pay his deficiency
5,000 -
( 5,000)
Free interests - amounts to be paid to partners - - -
Payment to apply on:
Loan P 8,000
Capital 25,000
Problem 3 - 3 1. a. Cash 48,000 Accumulated Depreciation 25,000 Fuentes, Capital (P72,000 x 5/15) 24,000 Goco, Capital (P72,000 x 5/15) 24,000 Herrera, Capital (P72,000 x 3/15) 14,400 Isla, Capital (P72,000 x 2/15) 9,600 Merchandise Inventory 55,000 Accounts Receivable 60,000 Store Fixtures 30,000 b. Accounts Payable 76,000 Cash (P28,000 + P48,000) 76,000 c. Fuentes, Capital 4,500 Herrera, Capital 2,700 Isla, Capital 1,800 Goco, Capital 9,000 d. Fuentes, Capital 1,500 Isla, Capital 600 Herrera, Capital 2,100 e. Fuentes, Loan 2,000 Isla, Loan 3,000 Fuentes, Capital 2,000 Isla, Capital 3,000 f. Cash 6,000 Fuentes, Capital 1,000 Herrera, Capital 5,000 g. Accounts Payable 4,000 Cash 4,000 h. Isla, Loan 2,000 Cash 2,000 2. a. Accounts Payable 4,000 Fuentes, Capital 4,000 b. Isla, Loan 2,000 Fuentes, Capital 3,000 Herrera, Capital 5,000
AA1 - Chapter 3 (2012 edition) page 59 3. a. Accounts Payable 4,000 Herrera, Capital 4,000 b. Isla, Capital 2,000 Fuentes, Capital 1,000 Herrera, Capital 1,000
Schedule to support the entries in Requirement 1
L O A N C A P I T A L Fuentes Isla Fuentes Goco Herrera Isla Balances before liquidation P 2,000 P 5,000 P27,000 P15,000 P10,000 P 9,000 Distribution of loss ( 24,000) ( 24,000) ( 14,400) ( 9,600) Balances P 2,000 P 5,000 P 3,000 P( 9,000) P( 4,400) P( 600) Additional loss for the
deficiency of Goco ( 4,500) 9,000 ( 2,700) ( 1,800) Balances P 2,000 P 5,000 P( 1,500) - P( 7,100) P( 2,400) Additional loss for the
deficiency of Herrera ( 1,500) 2,100 ( 600) Balances P 2,000 P 5,000 P( 3,000) - P( 5,000) P( 3,000) Offset against debit balance
in capital account ( 2,000) ( 3,000) 2,000 - 3,000 Balances - P 2,000 P( 1,000) P( 5,000) - Additional investment by
Partners 1,000 5,000
Problem 3 -5
JKLM Trading Co.
Schedule To Accompany Statement of Liquidation Amounts to be Paid to Partners
February 28, 2012
Jocson Kaimo Legarda Manabat
Capital balances before dist. of cash P 19,128 P 88,992 P 101,532 P 22,878
Add Loan balances 15,000
Total partners’ interest P 34,128 P 88,992 P 101,532 P 22,878
Restricted interest - possible loss if
nothing is realized on remaining assets ( 25,494) ( 38,241) ( 38,241) ( 25,494)
Balances P 8,634 P 50,751 P 63,291 P( 2,616)
Restricted interest - additional possible loss if Manabat is unable to pay his
deficiency (20:30:30) ( 654) ( 981) ( 981) 2,616
Free interest - payments to partners P 7,980 P 49,770 P 62,310 -
Payment to apply on
Loan P 7,980
Capital P 49,770 P 62,310 -
Total cash distribution P 7,980 P 49,770 P 62,310 -
JKLM Trading Co.
Schedule To Accompany Statement of Liquidation Amounts to be Paid to Partners
March 31, 2012
Jocson Kaimo Legarda Manabat
Capital balances before dist. of cash P 18,348 P 38,052 P 38,052 P 22,098
Add Loan balance 7,020
Total partners’ interest P 25,368 P 38,052 P 38,052 P 22,098
Restricted interest - possible loss if
nothing is realized on remaining assets ( 16,524) ( 24,786) ( 24,786) (16,524)
Free interest - payment to partners P 8,844 P 13,266 P 13,266 P 5,574
Payment to apply on:
Loan P 7,020
Capital 1,824 P 13,266 P 13,266 P 5,574
AA1 - Chapter 3 (2012 edition) page 64
Problem 3 – 6
QRS Partnership
Schedule to Accompany Statement of Liquidation Amounts to be Paid to Partners
July 31, 2012
Quizon Roman Silva
Balances before cash distribution P116,250 P159,750 P151,500
Add Loan balance 150,000
Total partners’ interest P116,250 P309,750 P151,500
Restricted interest – possible loss of P480,000 on remaining unsold assets and cash
withheld of P30,000 ( 255,000) ( 153,000) ( 102,000)
Balances ( P138,750) P156,750 P 49,500
Restricted interest – possible loss of P138,750
to Roman and Silva 138,750 ( 83,250) ( 55,500)
Balances - P 73,500 (P 6,000)
Restricted interest – possible loss to Roman ( 6,000) 6,000
Payment to Roman to apply on loan P 67,500
QRS Partnership
Schedule to Accompany Statement of Liquidation Amounts to be Paid to Partners
August 31, 2012
Quizon Roman Silva
Balances before cash distribution P 93,000 P145,800 P142,200
Add Loan balance 82,500
Total partners’ interest P 93,000 P228,300 P142,200
Restricted interest – possible loss of P375,000 on remaining unsold assets and cash
withheld of P30,000 ( 202,500) ( 121,500) ( 81,000)
Balances ( P109,500) P106,800 P 61,200
Restricted interest – possible loss of P109,500
to Roman and Silva 109,500 ( 65,700) ( 43,800)
Payment to Roman to apply on loan and to Silva
Problem 3 - 7
Requirement 1
Tabora, Ureta and Veloso Cash Priority Program
January 1, 2012
P A Y M E N T S
Tabora Ureta Veloso Tabora Ureta Veloso
Capital balances P120,000 P 90,000 P 40,000
Loan balances 45,000 30,000 13,000
Total partners’ interest P165,000 P120,000 P 53,000
Profit and loss ratio 50% 30% 20%
Loss absorption balance P330,000 P400,000 P265,000
Allocation I - Cash to Ureta to reduce LAB to amount
reported for Tabora ( 70,000) P21,000
Balances P330,000 P330,000 P265,000
Allocation II - Cash to Tabora and Ureta to reduce LAB to
amount reported for Veloso ( 65,000) ( 65,000) P32,500 19,500
Balances P265,000 P265,000 P265,000 P32,500 P40,500
Allocation III - Further cash distribution may be made based on P & L ratio Requirement 2
Amount Tabora Ureta Veloso
January:
Cash available P15,000
Allocation I - payable to Ureta 15,000 P15,000
February:
Cash available P40,000
Allocation I - Bal. payable to Ureta 6,000 P 6,000
Allocation II - Payable to Tabora and
Ureta in the ratio of 50:30 P34,000 P21,250 12,750
P21,250 P18,750
March:
Cash available P90,000
Allocation II – Balance 18,000 P11,250 P 6,750
Allocation III - Based on P & L ratio P72,000 36,000 21,600 P14,400
P47,250 P28,350 P14,400
April:
Cash available P30,000
AA1 - Chapter 3 (2012 edition) page 69 Problem 3 – 8 (cont.) Requirement 3 January: a. Cash 112,000 Accounts Receivable 112,000 b. Neri, Capital 2,200 Ordan, Capital 1,100 Pacia, Capital 1,100 Cash 4,400 c. Accounts Payable 38,000 Cash 38,000 d. Pacia, Loan 9,000 Pacia, Capital 7,000 Cash 16,000 February: a. Cash 36,000 Accounts Receivable 36,000 b. Neri, Capital 1,400 Ordan, Capital 700 Pacia, Capital 700 Cash 2,800 c. Accounts Payable 39,000 Cash 38,000 Neri, Capital 500 Ordan, Capital 250 Pacia, Capital 250
d. Salary Payable to Neri 6,000
Neri, Capital 1,400 Ordan, Capital 3,700 Pacia, Capital 8,700 Cash 19,800 March: a. Cash 35,000 Neri, Capital 4,000 Ordan, Capital 2,000 Pacia, Capital 2,000 Accounts Receivable 43,000 b. Neri, Capital 2,000 Ordan, Capital 1,000 Pacia, Capital 1,000 Cash 4,000
c. Neri, Capital 39,500
Ordan, Capital 19,750
Pacia, Capital 19,750
Cash 79,000
Problem 3 - 9
Requirement 1 Wilson, Yase and Zapata Cash Distribution Schedule
June 30, 2012
P AY M E N T S
Wilson Yase Zapata Wilson Yase Zapata
Capital balances P 67,000 P 45,000 P 31,500
Receivable from partners 12,000 7,500
Total partners’ interest P 55,000 P 45,000 P 24,000
Profit and loss ratio 50% 30% 20%
Loss absorption balance P110,000 P150,000 P120,000
Allocation I - Cash to Yase to reduce LAB
to amt. reported for Zapata 30,000 P 9,000
Balances P110,000 P120,000 P120,000
Allocation II - Cash to Zapata and Yase to reduce LAB
to amt. reported for Wilson 10,000 10,000 3,000 P 2,000
Balances P110,000 P110,000 P110,000
Allocation III - Based on P & L ratio (P6,000 + P100,000 -
P17,000 = P89,000 - P14,000) P37,500 22,500 15,000
AA1 - Chapter 3 (2012 edition) page 71
Problem 3 – 9 Requirement No 2
Wilson, Yase and Zapata Cash Distribution Schedule
July 1 - September 30, 2012
Liabilities Wilson Yase Zapata
Capital balances before liquidation P 17,000 P 55,000 P 45,000 P 24,000
July - Dist. of loss on sale of assets (1) (4,750) (2,850) (1,900)
Liquidation expenses (500) (300) (200)
Payment of liabilities (17,000)
Payment to partners (2) (6,500)
Balances - P 49,750 P 35,350 P 21,900
Aug.- Liquidation expenses (750) (450) (300)
Equipment taken by Zapata (10,000)
Gain on transfer of eqt. to Zapata 3,000 1,800 1,200
Payment to Yase (3) (4,000)
Balances - P 52,000 P 32,700 P 12,800
Sept- Dist. of loss on sale of assets (4) (10,000) (6,000) (4,000)
Liquidation expenses (500) (300) (200)
Final distribution to partners - P41,500 P26,400 P8,600
(1) (P22,000 + P14,000) - (P16,500 + P10,000) = P9,500 loss on sale of assets
(2) (P6,000 + P26,500 - P1,000 - P17,000) - P8,000 cash withheld = P6,500 cash dist. Req. 1
(3) schedule of cash distribution below8,000 – 1,500 – 2,500 = P4,000
(4) (P99,000 - P4,000 BV of equipment taken by Zapata) - P75,000 = P20,000 loss on sale
(5) (P2,500 + P75,000 – P1,000 = P76,500
Schedule of Cash Distribution August 31, 2012
Wilson Yase Zapata Wilson Yase Zapata
Capital balances after dist.
of equipment to Zapata P 52,000 P 36,700 P 12,800
Profit and loss ratio 50% 30% 20%
Loss absorption balance P104,000 P122,333 P 64,000
Allocation I - Cash to Yase to reduce LAB to
amt. reported for Wilson 18,333 P 5,500
Balances P104,000 P104,000 P 64,000
Allocation II - Cash to Wilson & Yase to reduce LAB to
amount reported for Zapata 40,000 40,000 P20,000 12,000
Balances P 64,000 P 64,000 P 64,000 P20,000 P 17,500
Problem 3 - 9 - Requirement 3
Amount Wilson Yase Zapata
Cash available in September P76,500
Allocation I – Balance 1,500 P 1,500
Allocation II 32,000 P 20,000 12,000
Balance - Allocation III P43,000 21,500 12,900 P 8,600
P 41.500 P 26,400 P 8,600
Problem 3 -10
Arceo, Basco and Cervo
Statement of Changes in Partners’ Capital For the Period January 1, 2010 to May 31, 2012
Arceo Basco Cervo Total
2010:
Original investment P50,000 P30,000 P 80,000
Distribution of net income (sch. 1) 15,200 12,800 28,000
Drawings (7,000) (6,000) (13,000)
Balance, December 31 P58,200 P36,800 P 95,000
2011:
Investment of Cervo (sch. 2) (9,100) (4,900) P54,000 40,000
Distribution of net loss (4,200) (3,000) (4,800) (12,000)
Drawings (4,900) (3,900) (4,200) (13,000)
Balances, December 31 P40,000 P25,000 P45,000 P110,000
2012:
Distribution of cash in Feb. (sch. 3) (5,000) (5,000) (10,000)
Distribution of cash in April (sch. 4) (7,000) (5,000) (8,000) (20,000)
Balances P28,000 P20,000 P32,000 P 80,000
Sale of assets & distribution of loss
in May (sch. 5) (17,500) (12,500) (20,000) (50,000)
Final cash distribution P 10,500 P 7,500 P 12,000 P 30,000
Schedule 1 - Distribution of 2010 net income
Arceo Basco Total
Salaries P10,000 P10,000 P20,000
Remainder – 65%:35% 5,200 2,800 8,000
Total P15,200 P12,800 P28,000
Schedule 2 - Admission of Cervo
Total capital before admission of Cervo P 95,000
Investment of Cervo 40,000
Total capital P135,000
Interest acquired by Cervo 40%
Capital credit of Cervo P 54,000
Investment of Cervo 40,000
AA1 - Chapter 3 (2012 edition) page 73
Schedule 3 - Cash distribution in February 2012
Arceo Basco Cervo
Capital balances before dist. of cash P40,000 P25,000 P45,000
Restricted interest - possible loss if nothing
is realized on remaining assets (P100,000) 35,000 25,000 40,000
Free interest - amount to be paid to partners P 5,000 P --- P 5,000
Schedule 4 - Cash distribution in April 2012
Arceo Basco Cervo
Capital balances before dist. of cash P 35,000 P25,000 P40,000
Restricted interest - possible loss if nothing
is realized on remaining assets (P80,000) 28,000 20,000 32,000
Free interest - amount to be paid to partners P 7,000 P 5,000 P 8,000
Schedule 5 - Loss on realization of assets in May 2012
Capital balances equal to net assets P80,000
Cash realized on sale of assets 30,000
Loss on realization P50,000 Problem 3-11 Partnership Books 1. Inventories 60,000 Prepaid Expenses 3,000 Goodwill 243,000 Accrued Expenses 6,000 Leony, Capital 200,000 Espie, Capital 100,000
2. Rover Corp. Share Capital 4,500,000
Accounts Payable 600,000
Accrued Expenses 6,000
Allowance for Uncollectible Accounts 120,000
Cash 450,000
Accounts Receivable 660,000
Inventories 1,350,000
Prepaid Expenses 3,000
Furniture and Equipment 2,520,000
Goodwill 243,000
3. Leony, Capital 2,600,000
Espie, Capital 1,900,000
Corporation’s Books
1. Cash 450,000
Accounts Receivable 660,000
Inventories 1,350,000
Prepaid Expense 3,000
Furniture and Equipment 2,520,000
Goodwill 243,000
Allowance for Uncollectible Accounts 120,000
Accounts Payable 600,000
Accrued Expenses 6,000
Ordinary Share Capital 4,500,000
2. Land 3,600,000
Cash 1,500,000
Pre-Operating Expenses 450,000
Ordinary Share Capital 4,800,000
PIC in Excess of Par 750,000
Rover Corporation Statement of Financial Position
July 1, 2012
Assets Liabilities and Shareholders’ Equity
Cash P 1,950,000 Accounts Payable P 600,000 Accounts Receivable (net of Allow Accrued Expenses 6,000 of P120,000) 540,000 Total Liabilities P 606,000 Inventories 1,350,000 Shareholders’ Equity
Prepaid Expenses 3,000 Ordinary Share Capital P9,300,000 Land 3,600,000 PIC in Excess of Par 750,000 Furniture and Equipment 2,520,000 Retained Earnings (deficit) (450,000) Goodwill 243,000 Total Shareholders’ Equity P9,600,000 Total Assets P10,206,000 Total liabilities and SH equity P10,206,000
MULTIPLE CHOICE
1. D
2. D
3. C
4. C Share on loss on realization
(P39,000 + P4,800 – P33,000) P10,800
Percentage ownership of Imperial ÷ 20%
Total loss on realization P54,000
5. C Total capital P70,000
Cash available 28,000
AA1 - Chapter 3 (2012 edition) page 75
6. A Gueco Tiangco Bacelo
Capital bal. before liquidation P 40,000 P 25,000 P 5,000
Loss on realization ( 21,000) (14,000) ( 7,000)
Balances P 19,000 P 11,000 P( 2,000)
Add’l loss to Gueco & Tiangco
for the deficiency of Barcelo ( 1,200) ( 800) 2,000
Cash distribution to partners P 17,800 P 10,200 P ---0---
7. D Total capital (P360,000 + P72,000) P432,000
Total liabilities 84,000
Total loss on liquidation P516,000
8. A Alarcon Baretto Coronel
Capital balances P 100,000 P 80,000 P 300,000
Drawing ( 60,000) ( 40,000) (20,000)
Distribution of net income 24,000 24,000 24,000
Loss on liquidation (172,000) (172,000) (172,000)
Balances P(108,000 P(108,000) P 132,000
Additional loss to partners 108,000 ( 54,000) ( 54,000)
Cash to be distributed to Coronel
P 78,000
9. D Total capital P40,000
Loans from partners 7,500
Total partners’ interest P47,500
Cash available to partners (P37,500 – P28,500) 9,000
Total loss on realization P38,500
10 C Doria Elma
Capital balances before liquidation P 24,500 P 15,500
Loan balances 4,000 3,500
Total partners’ interest P 28,500 P 19,000
Loss on realization ( 23,100) ( 15,400)
Balances – cash to be paid to partners P 5,400 P 3,600
11 A Total assets = Total capital + Total liabilities
= P60,000 + P 3,000 P 63,000
Less Cash = P3,000 + P22,200 – P23,200 ___2,000
Book value of noncash assets P 61,000
12 D P61,000 – P23,200 = P37,800 x 3/21 P 5,400
13 B Jurado Katindig Lazaro Marcelo Capital balances P 1,000 P25,000 P25,000 P 9,000 Loss on realization ( 5,400) ( 7,200) ( 10,800) ( 14,400) P( 4,400) P(17,800) P14,200 P( 5,400) Additional loss 4,400 3,920 ( 5,880) 5,400 Payment to Lazaro P 8,320
14 C Total credits equal debits (P130,000 + P44,000 + P90,000) P264,000
Less Cash 40,000
Book value of other assets P224,000
Loss on realization [(P50,000 + P17,600 – P55,200)/40%] 31,000
Cash received from sale of other assets P193,000
15 A 16 A
17 B Esper Ester Ethel Elmer
Capital and loan balances P 50,000 P50,000 P50,000 P 75,000
Loss on realization (112,000) ( 56,000) ( 56,000) ( 56,000)
P(62,000) P(6,000) P(6,000) P19,000
Additional loss (3,000) 6,000 ( 1,500) (1,500)
Amt to be rec.from the part. P 17,500
Personal assets 200,000 P217,500 18 B Urbe Viray Initial investment P 137,500,000 P 137,500,000 Purchases ( 1,237,500,000) ( 495,000,000) Sales 1,339,250,000 462,000,000 Interest ( 2,200,000) ( 1.375,000) Dividends 1,100,000 2,750,000 Cash held P 238,150,000 P 105,875,000 Equal share 172,012,500 172,012,500
Cash received (paid) (P 66,137,500) P 66,137,500
19 C Delia Irma Flora
Capital balances before liquidation P480,000 P135,000 P165,000
Loss on liquidation (P180,000) ( 72,000) ( 90,000) ( 18,000)
Cash to be received by Delia P408,000
20 A Delia Irma Flora
Capital balances before liquidation P480,000 P135,000 P165,000
Loss on liquidation (P540,000) ( 216,000) ( 270,000) ( 54,000)
P264,000 (P135,000) P111,000
Add’l loss to Delia & Flora ( 108,000) 135,000 ( 27,000)
AA1 - Chapter 3 (2012 edition) page 77
21 B Delia Irma Flora
Capital balances before liquidation P480,000 P135,000 P165,000
Loss on liquidation (P180,000) ( 72,000) ( 90,000) ( 18,000)
Balances P408,000 P 45,000 P147,000
Possible loss if remaining
inventories are not sold (192,000) ( 240,000) ( 48,000)
Balances P216,000 (P195,000) P 99,000
Add’ loss to Delia & Flora ( 156,000) 195,000 ( 39,000)
Distribution of cash to partners P 60,000 - P 60,000
22 D 23 B
24 A Estrada Fortun Gener
Balances before liquidation P 40,000 P 65,000 P 48,000
Loss on sale of assets - P40,000 ( 16,000) (16,000) ( 8,000)
Possible loss if nothing is realized
on remaining assets - P90,000 ( 36,000) (36,000) (18,000)
Balances P( 12,000) P 13,000 P 22,000
Add’l possible loss to Fortun and
Gener for deficiency of Estrada 12,000 ( 8,000) ( 4,000)
Balances - cash to be distributed P --- P 5,000 P 18,000
25 B Capital balance of Gener before distribution of cash P 18,000
Share in the cash to be withheld for possible liquidation
expenses - P3,000 x 20%/60% ( 1,000)
Cash to be received by Gener P 17,000
26 C The remaining cash will be distributed according to profit and loss ratio. Thus
the P14,000 will be distributed as follows: Estrada - P14,000 x 40% = P5,600 Fortun - P14,000 x 40% = P5,600 Gener - P14,000 x 20% = P2,800
27 C Total capital before drawing and net loss P 135,000
Drawing ( 10,000)
Net loss for the year ( 20,000)
Total liabilities 5,000
Total assets P 110,000
Cash on hand ( 700)
Amount of noncash assets before liquidation P 109,300
28 D Capital balance of Aguila before dist. of net loss P 25,000
Share in net loss (P20,000 x 60%) ( 12,000)
Capital balance of Aguila before liquidation P 13,000
Cash to be received by Aguila 19,000
Share of Aguila in the gain on sale of other assets P 6,000
Percentage share of Aguila ÷ 60%
Total gain on sale of other assets P 10,000
Book value of other assets 109,300
Cash to be realized from sale of other assets P 119,300
PAYMENTS
29 D Aguila Baldres Corpuz Aguila Baldres Corpuz Capital balances P 25,000 P 50,000 P 60,000
Drawing (10,000)
Net loss ( 12,000) ( 5,000) ( 3,000) Total partners’ interest P 13,000 P 45,000 P 47,000 Profit and loss ratio ÷ 60% ÷ 25% ÷ 15% Loss absorption bal. P 21,667 P180,000 P313,333
Alloc. I - Cash to Corpuz (133,333) P 20,000 Balances P 21,667 P180,000 P180,000
Alloc. II -Cash to Baldres and Corpuz
(158,333) (158,333) P 39,583 23,750 Balances P 21,667 P 21,667 P 21,667 - P 39,583 P43,750 Alloc. III - Based on
P & L ratio
Cash received by Corpuz P 33,000
Cash received from Allocation I ( 20,000)
Cash received from Allocation Ii P 13,000
Fractional share (B – 25% and C -15%) ÷ 15/40
Total cash distributed P 34,667
Fractional share of Baldres x 25/40
Cash received by Baldres P 21,667
PAYMENTS
30 B Nera Ochoa Perez Nera Ochoa Perez Capitals and loans P450,000 P250,000 P250,000
P & L Ratio 30% 50% 20% Loss Absorption Balance 1,500,000 P500,000 1,250,000 Alloc. I- Cash to Nera
P250,000 x 30% 250,000 P75,000 1,250,000 P500,000 1,250,000
Alloc. II- Cash to Nera & Perez P750,000 x 30%
225,000
P750,000 x 20% P750,000 P750,000 P150,000 P 500,000 P500,000 P500,000 P300,000 - P150,000 Alloc. III – P & L Ratio
AA1 - Chapter 3 (2012 edition) page 79
31 B Amount Priority Nera Ochoa Perez Creditor Cash Available P650,000 Priority creditor 500,000 P500,000 P150,000 Alloc. I 75,000 P75,000 Alloc. II P 75,000 45,000 P30,000 P500,000 P120,000 - P30,000
32 D
33 A Reyes (20%) Santos (40%) Torres (40%)
Net capital balances P100,000 P440,000 P310,000 Possible loss of P120,000 + P170,000 +
P400,000 + P10,000 = P700,000
( 140,000) (280,000) ( 280,000) Balances (P 40,000) P160,000 P 30,000 Possible loss from Reyes debit balance 40,000 ( 20,000) ( 20,000)` Cash distribution --- P140,000 P 10,000
34 D
PAYMENTS
35 C Roger Sergio Tito Roger Sergio Tito Capital balances
P108,000 P120,000 P129,000 Add Loan 30,000
Total partners’ interest P108,000 P150,000 P129,000 Divided by P & L ratio 30% 50% 20% Loss absorption capacity P360,000 P300,000 P645,000
Allocation 1 ( 285,000) P57,000
Balances P360,000 P300,000 P360,000
Allocation II ( 60,000) ( 60,000) P18,000 12,000 P300,000 P300,000 P300,000 P18,000 - P69,000 Allocation III – P & L ratio
36 B Roger Sergio Tito
Amount available P72,000
Allocation 1 to Tito 57,000 P57,000
Allocation II – 30%, 20% P15,000 P9,000 6,000
P9,000 P63,000
37 D Roger Sergio Tito
Amount available P120,000
Allocation II – Balance 15,000 P 9,000 P 6,000
Allocation III P105,000 31,500 P52,500 21,000
38 D Jacinto Mapa Magno
Capital balances P400,000 P600,000 P1,000,000
Revaluation of assets 200,000 200,000 200,000
Adjusted capital P600,000 P800,000 P1,200,000
Par of capital stock ÷ P100 ÷ P100 ÷ P100
Shares of stock to be rec’d by partners 6,000 sh. 8,000 sh 12,000 sh
39 A Capital balances P260,000 Adjustment in assets (P20,000 – P10,000 – P3,000) 7,000 Adjusted capital P267,000 40 B Total capital (P94,800 + P214,200) P309,000 Adjustments in assets (P6,600 – P20,000 – P22,000) ( 35,400) Adjusted capital P273,600
Ordinary Share Capital (720 x 2 x P10) 14,400
Preference Share Capital P259,200
Ordinary shares (P14,400 / P10) 1,440 sh..
Preference shares (P259,200 / P100) 2,592 sh.
41 B
Roldan Moises
Capital balances before incorporation P94,800 P214,200
Adjustment in assets ( 11,800) ( 23,600)
Adjusted capital P83,000 P190,600
Ordinary Share Capital (720 @P10) 7,200 7,200
Preference Share Capital P75,800 P183,400
Preference shares 758 1,834
