Partnership Liquidation: Exercises and Solutions | Exercises Accounting

1. Gardo and Gordo formed a partnership on July 1, 2011 to operate two stores to be managed by

each of them. They invested P30,000 and P20,000 and agreed to share earnings 60% and 40%

respectively. All their transactions were for cash, and all their subsequent transactions were

handled through their respective bank accounts as summarized below:

Gardo Gordo

Cash receipts P79,100 P65,245

Cash disbursements 62,275 70,695

On October 31, 2011, all remaining noncash assets in the two stores were sold for cash of

P60,000. The partnership was dissolved, and cash settlement was effected. In the distribution of

the P60,000 cash, Gardo received

a. P24,000

b. P26,000

c. P34,000

d. P36,000

In the distribution of the P60,000 cash, Gardo received P26,000, computed as follows:

Total Gardo Gordo

Initial contributions P 50,000 P30,000 P20,000

Equiv. Investments (payments) 132,970 62,275 70,695

Equiv. Withdrawals (receipts) (144,345) (79,100) (65,245)

Balances before profit share P 38,625 P13,175 P25,450

Profit (P60,000-P38,625), 6:4 21,375 12,825 8,550

Distribution of P60,000 cash P 60,000 P26,000 P34,000

2. The partner AA, Bida, Cita, and Dina, who share profits and losses in the respective ratio of

3:3:2:2, decided to liquidate their partnership. Just prior to liquidation, they prepared the following

summary balance sheet:

Cash P 100,000 Liabilities P 750,000

Other assets 1,800,000 Bida, loan 160,000

Dina, loan 50,000

AA, capital 420,000

Bida, capital 215,000

Cita, capital 205,000

Dina, capital 100,000

Total P1,900,000 Total P1,900,000

The noncash assets realized P800,000. If all the partners are personally solvent,

deficiency/deficiencies, resulting from the liquidation process, will require additional cash from:

a. Bida at P85,000 and Dina at P100,000

b. Bida at P85,000

c. Dina at P50,000

d. None of the above

If all the partners are personally solvent, deficiency/deficiencies resulting from the liquidation process, will require

additional cash from Dina in the amount of P50,000, computed as follows:

AA Bida Cita Dina

Capital balances P420,000 P215,000 P205,000 P100,000

Loan balances - 160,000 - 50,000

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Gardo and Gordo formed a partnership on July 1, 2011 to operate two stores to be managed by each of them. They invested P30,000 and P20,000 and agreed to share earnings 60% and 40% respectively. All their transactions were for cash, and all their subsequent transactions were handled through their respective bank accounts as summarized below: Gardo Gordo Cash receipts P79,100 P65, Cash disbursements 62,275 70, On October 31, 2011, all remaining noncash assets in the two stores were sold for cash of P60,000. The partnership was dissolved, and cash settlement was effected. In the distribution of the P60,000 cash, Gardo received a. P24, b. P26, c. P34, d. P36, In the distribution of the P60,000 cash, Gardo received P26,000, computed as follows: Total Gardo Gordo Initial contributions P 50,000 P30,000 P20, Equiv. Investments (payments) 132,970 62,275 70, Equiv. Withdrawals (receipts) (144,345) (79,100) (65,245) Balances before profit share P 38,625 P13,175 P25, Profit (P60,000-P38,625), 6:4 21,375 12,825 8, Distribution of P60,000 cash P 60,000 P26,000 P34,
The partner AA, Bida, Cita, and Dina, who share profits and losses in the respective ratio of 3:3:2:2, decided to liquidate their partnership. Just prior to liquidation, they prepared the following summary balance sheet: Cash P 100,000 Liabilities P 750, Other assets 1,800,000 Bida, loan 160, Dina, loan 50, AA, capital 420, Bida, capital 215, Cita, capital 205, Dina, capital 100, Total P1,900,000 Total P1,900, The noncash assets realized P800,000. If all the partners are personally solvent, deficiency/deficiencies, resulting from the liquidation process, will require additional cash from: a. Bida at P85,000 and Dina at P100, b. Bida at P85, c. Dina at P50, d. None of the above If all the partners are personally solvent, deficiency/deficiencies resulting from the liquidation process, will require additional cash from Dina in the amount of P50,000, computed as follows: AA Bida Cita Dina Capital balances P420,000 P215,000 P205,000 P100, Loan balances - 160,000 - 50,

Total interests P420,000 P375,000 P205,000 P150, Less: share in realization Loss of P1,000,000 at 3:3:2:2 300,000 300,000 200,000 200, Balance (deficiency) P120,000 P P 75,000 P 5,000 P(50,000)

The balance sheet of the partnership of Salve, Gilda, and Nora, who share profits and losses in the respective ratio of 5:3:2, follows: Assets Liabilities and Capital Cash P 30,000 Liabilities P 50, Other assets 320,000 Salve, capital 80, Gilda, capital 115, Nora, capital 05, Total P350,000 P350, The partners agreed to liquidate the partnership by installments. Immediately there was a realization of P100,000 cash from selling other assets with a book value of P150,000. Of the cash available, the priority is the payment of the liabilities and the balance is to be distributed to the partners. How should the remaining cash be distributed. a. Salve, P50,000; Gilda, P30,000; and, Nora, P20,000. b. Salve, P40,000; Gilda, P24,000; and, Nora, P16,000. c. Salve, P--- 0 ---; Gilda, P31,000; and, Nora, P49,000. d. Salve, P--- 0 ---; Gilda, P48,000; and, Nora, P32,000. The remaining cash is distributed as Salve, P0; Gilda, P31,000; and, Nora, P49,000, respectively, computed as follows: Salve Gilda Nora Capital balances P 80,000 P115,000 P105, Realization loss ( 5:3:2) (P150,000–P100,000) (25,000) ( 15,000) ( 10,000) Theoretical loss on other asset(P320,000-P150,000) (85,000) ( 51,000) ( 34,000) Balances before distribution P(30,000) P 49,000 P 61, Salve’s deficiency at 3:2 30,000 ( 18,000) ( 12,000) Cash distribution P - 0 - P 31,000 P 49,
4 - 6 questions are based on the following data from the records of ABC Partnership: ABC Partnership Balance Sheet December 31, 2010

Assets

Cash P 2, Other Noncash Assets 28, Total P 30,

Liabilities & Net Worth

Liabilities P 5, A, loan 2,

Cash received by C in January P – 0 –

X, Y and Z have capital balances of P40,000, P50,000, and P18,000 and a profit-sharing ratio of 4:2:1, respectively. If X received P8,000 upon liquidation of the partnership, the total amount received by all the partners was: a. P108, b. P 56, c. P 52, d. P 24, The total amount received by all of the partners, if X received P8,000 upon liquidation of the partnership was P52,000, computed as follows: X, capital P40, Less: Amount rec’d in liquidation 8, X’s share in liquidation loss P32, Total capital of the three partners P108, Less: Total liquidation loss (P32,000  4 x 7) 56, Total amount received by all of the partners P 52,
Assume the same facts above, except that X received P26,000 as a result of the liquidation. Z received, as part of the liquidation, the amount of: a. P26, b. P14, c. P18, d. P14, Assuming the facts given in No. 17, except that X received P26,000 as a result of the liquidation, as part of the liquidation Z received the amount of P14,500, computed as follows: X, capital P40, Less: Amount rec’d in liquidation 26, X’s share in liquidation loss P14, Z, capital P18, Less: Share in liquidation loss (P14,0004 x 1) 3, Amount received by Z in liquidation P14,
Sanchez and Tan are partners sharing profits equally and with capital balances, respectively, of P750,000 and P500,000. The firm owes Tan P200,000, as evidenced by a promissory note. Upon liquidation, cash of P300,000 becomes available for distribution to the partners. In the final cash distribution, the respective shares of Sanchez and Tan will be: a. P150,000 and P150, b. P175,000 and P125, c. P200,000 and P100, d. P275,000 and P 25, The respective shares of Sanchez and Tan in the final cash distribution will be P175,000 and P125,000, respectively, computed as follows: Total Sanchez Tan Capital balances P1,250,000 P750,000 P500, Note payable to Tan 200,000 - 200, Total interest P1,450,000 P750,000 P700, Realization loss, equally: P1,450,000 – P300,000 (P1,150,000) (575,000) (575,000) Share in final distribution P 300,000 P175,000 P125,

After operating for five years, the partnership of Remy and Martin, who share profits and loses equally, had balances as follows: Net assets P130, Remy, capital 85, Martin, capital 45, If liquidation takes place at this time and the assets are realized at book value, Remy and Martin would be entitled to receive: a. P65,000 and P65,000, respectively. b. P85,000 and P45,000, respectively. c. P90,000 and P40,000, respectively. d. P97,500 and P32,500, respectively. If liquidation takes place and assets are realized at book value, the partners would receive cash distributions equal to their recorded capital balances in final liquidation.

Partnership Liquidation: Exercises and Solutions, Exercises of Accounting

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Assets

Liabilities & Net Worth