Académique Documents
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Culture Documents
Problem I
1: Gain on Realization Fully Allocated to Partners Capital Balances.
QRS Partnership
Statement of Realization and Liquidation
November 1 30, 20x4
Balances before
liquidation
Realization and
distribution
of gain
Balances after realization
Payment of liabilities
Balances after payment of
liabilities
Payment to partners loan
Balances after payment
of
partners loans
Payment to partners capital
Cash
NonCash
Assets
24,000
84,000
Liabilitie
s
Q, Loan
Q,
Capital
30%)
R,
Capital
(50%)
S,
Capital
(20%)
12,000
2,400
9,600
48,000
36,000
_____
12,000
(12,000
)
______
2,400
3,600
13,200
6,000
54,000
2,400
38,400
108,000
2,400
13,200
54,000
38,400
(2,400)
(2,400)
______
______
96,000
120,000
(84,000
)
(12,000)
105,600
(105,600
)
13,200
(13,200
)
54,000
(54,000
)
_______
38,400
(38,40
0)
24,000
48,000
72,000
NonCash
Assets
Liabilitie
s
84,000
12,000
(84,000
)
____
_
12,000
(12,000
)
Q, Loan
Q,
capital
(30%)
R,
Capital
(50%)
S,
Capital
(20%)
2,400
9,600
48,000
36,000
______
2,400
(10,800
)
(1,200)
(18,000
)
30,000
(7,200)
28,800
Payment of liabilities
Balances after payment of
liabilities
(12,000)
60,000
2,400
(1,200)
30,000
28,800
_______
1,200
_______
_______
60,000
(1,200)
1,20
0
(1,20
0)
30,000
28,800
_______
______
30,000
(30,000
)
28,800
(28,80
0)
(1,200)
58,800
(58,800)
Cas
NonCash
Assets
Liabilitie
s
24,000
84,000
12,000
2,400
36,000
(84,000
)
_____
___
________
h
Balances before
liquidation
Realization and
distribution
of loss
Q, Loan
R,
Capital
(50%)
S,
Capital
(20%)
9,600
48,000
36,000
(24,000
)
(9,600)
2,400
(14,400
)
( 4,800
)
24,000
26,400
________
_______
_______
_______
( 4,800)
2,40
0
24,000
26,400
_______
_______
48,000
(2,400)
24,000
26,400
__2,400
2,400
_______
_______
24,000
(24,000
)
26,40
0
(26,40
0)
60,000
Payment of liabilities
Balances after payment of
liabilities
(12,000)
48,000
2,400
_______
(2,400)
Q,
capital
(30%)
12,000
(12,000
)
50,400
(50,400)
Balances before
liquidation
Realization and
distribution
of gain
Cash
NonCash
Assets
24,000
84,000
12,000
2,400
42,000
(84,000
)
_______
________
12,000
(12,000
)
66,000
Payment of liabilities
Balances after payment of
liabilities
Offset loan versus deficit
Balances after offsetting
Additional loss due to
insolvency of Q
Balances after additional ,
Loss
Payment to partners capital
(12,000)
Liabilitie
s
54,000
_______
54,000
Q, Loan
Q,
capital
(30%)
R,
Capital
(50%)
S,
Capital
(20%)
9,600
48,000
36,000
(21,000
)
(8,400)
2,400
(12,600
)
( 3,000
)
27,000
27,600
_______
_______
_______
_______
2,400
(2,400)
(3,000)
2,400
( 600)
27,000
______
27,000
27,600
______
27,600
600
( 429)
( 171)
26,571
(26,571
)
27,429
(27,42
9)
_______
54,000
(54,000)
Non-
Liabilitie
Q, Loan
Q,
R,
S,
Cash
Assets
Balances before
liquidation
Realization and
distribution
of gain
capital
(30%)
24,000
84,000
12,000
2,400
24,000
(84,000
)
_______
_______
12,000
(12,000
)
48,000
Payment of liabilities
Balances after payment of
liabilities
(12,000)
36,000
______
36,000
Capital
(50%)
Capital
(20%)
9,600
48,000
36,000
(30,00
0)
(12,00
0)
2,400
(18,000
)
( 8,400
)
18,000
24,000
_______
_______
_______
2,400
(2,400
)
( 8,400)
18,000
24,000
2,400
(6,000)
,
______
_______
18,000
24,000
_3,600
_______
______
_______
39,600
_ 3,600
(2,400
)
18,000
24,000
______
2,400
(1,714)
( 686)
16,286
(16,286
)
23,314
(23,31
4)
39,600
(39,600)
Balances before
liquidation
Payment of liquidation
expenses
Balances after payment of
liquidation expenses
Write-off goodwill and
prepaid expenses
Balances after write-offs
Realization and
distribution
of loss
Balances after realization
Payment of liabilities
Balances after payment of
Liabilities
Cash
NonCash
Assets
24,000
84,000
12,000
(14,400)
______
________
________
(4,320)
(7,200)
(2,880)
12,000
2,400
_______
84,000
(72,000
)
5,280
(21,600
)
40,800
(36,000
)
33,120
(14,40
0)
9,60
0
12,000
12,000
(16,320
)
4,80
0
18,720
1,200
(12,000
)
( 3,240
)
( 19,560
)
( 5,400
)
(
600
)
( 2,160
)
________
_______
________
_______
2,400
(19,560
)
(2,400)
9,60
0
10,800
(10,800)
-0-
______
-017,76
0
Liabilitie
s
Q, Loan
Q,
capital
(30%)
2,400
9,600
48,000
36,000
_______
________
2,400
_______
________
12,000
(10,800
)
2,400
1,200
_______
1,200
_______
R,
Capital
(50%)
S,
Capital
(20%)
16,560
600)
16,560
2,400
_______
_______
(17,160
)
( 600)
16,560
17,160
600
______
17,76
0
(1,200)
16,56
0
1,200
16,560
(1,200)
_______
16,560
(16,56
0)
(16,560)
Balances before
liquidation
Increase in equipment
Decrease in furniture
Balances after revaluation
Refund of prepaid
expenses
Balances after refunds
NonCash
Assets
Cash
24,000
______
24,000
_6,960
30,960
Liabilitie
s
Q, Loan
84,000
1,200
(600)
84,600
12,000
2,400
_______
12,000
______
(8,400)
76,200
(10,200
)
30,96
0
66,000
32,400
(66,000
)
63,360
Payment of liabilities
Balances after payment of
liabilities
(12,000)
Q,
capital
(30%)
R,
Capital
(50%)
S,
Capital
(20%)
______
2,400
9,600
360
_(180)
9,780
48,000
600
(300)
48,300
36,000
240
(120)
36,120
_______
12,000
______
2,400
_(432)
9,348
(720)
47,580
(288)
35,832
_______
______
_____
(7,200)
(3,000)
9,34
8
40,380
32,832
( 10,08
0)
(
732
)
( 16,800
)
( 8,064
)
23,580
26,112
_______
12,000
2,400
_______
______
12,000
(12,000
)
2,400
51,360
2,400
_______
(
732
)
_______
( 732)
732
51,360
1,668
(1,668)
49,692
23,580
26,112
(49,692)
(23,580
)
(26,11
2)
Payment to partnerscapitals
Problem II
_______
(1,668)
23,580
_______
26,112
______
______
23,580
26,112
______
_______
DISCOUNT PARTNERSHIP
Schedule of Partnership Liquidation
January 14, 20x4
Capital Balances
Explanation
Balances before realization
Cash
Other Liabilities
Assets
P120,000 P(40,000
P25,000
Dawso
n
P(31,000
Feeney
Hardin
P(9,000)
P(65,000
Sales of noncash assets
Balances
Payment of liabilities
Balances
Allocation of Hardin's debit
balance
Balances
60,000
_____
(120,000)
0
85,000
______ __________
45,000
0
__________
P
0
18,000
40,000
________
________
0 (13,000) (41,000)
________
9,000
(40,000)
(40,000)
__________
45,000
0
(45,000)
P
0
24,000
18,000
(13,000) (41,000)
9,000
______
3,857
5,143(9,000)
0
(9,143) (35,857)
0
______
0
9,143
0
35,857
0
________
P
0
Problem III
1.
CDG Partnership
Statement of Realization and Liquidation
Lump-sum Liquidation on December 10, 20X6
Preliquidation balances
Sale of assets and
distribution
of P215,000 loss
Cash
Noncash
Assets
25,000
475,000
260,000
285,000
(475,000
)
-0-
Liabilitie
s
(270,00
0)
(270,00
0)
(120,00
0)
43,000
(77,000)
Capital Balances
Dan
Gail
40%
40%
(50,000)
(60,000)
86,000
86,000
36,000
25,000
310,000
26,000
(25,000)
-0-
(270,00
0)
Distribution of deficit of
insolvent partner:
20/60(P1,000)
40/60(P1,000)
(77,000)
36,000
1,000
(1,000)
333
667
310,000
Contribution by Dan to
remedy deficit
Carlos
20%
-0-
(270,00
0)
(76,667)
36,667
346,667
36,667
-0-
(36,667)
-0-
(270,00
0)
(76,667)
-0-
-0-
Payment to creditors
(270,000
)
76,667
Payment to partner
270,000
-0-
-0-
(76,667)
-0-
-0-
(76,667
)
Post-liquidation balances
76,667
-0-
-0-
-0-
-0-
-0-
02.
CDG Partnership
Net Worth of Partners
December 10, 20X6
Personal assets, excluding
partnership capital interests
Personal liabilities
Personal net worth, excluding
partnership capital interests, Dec. 1, 20X6
Contribution to partnership
Liquidating distribution from partnership
Net worth, December 10, 20X6
Carlos
Dan
250,000
(230,000)
300,000
(240,000)
350,000
(325,000)
20,000
60,000
(36,667)
-023,333
25,000
(25,000)
-0-0-
76,667
96,667
Gail
This computation assumes that no other events occurred in the 10-day period that changed
any of the partners personal assets and personal liabilities. In practice, the accountant
must be sure that a computation of net worth is current and timely.
The table shows the effects of the transactions between the partnership and each partner. A
presumption of this table is that the personal creditors of Dan or Gail would not seek court
action to block the settlement transactions with the partnership. Upon winding up and
liquidation, the partnership does not have any priority to the partners personal assets.
Thus, the personal creditors may seek to block the transactions with the partnership in order
to provide more resources from which they can be paid. A partner who fails to remedy his or
her deficit can be sued by the other partners who had to make additional contributions or
even by a partnership creditor if the failed partner is liable to the partnership creditor. But
those claims are not superior to the other claims to the partners individual assets.
When accountants provide professional services to partnerships and to its partners, the
accountant should expect, at some time, legal suits involving the partnership and/or
individual partners. A strong and thorough understanding of the legal and accounting
foundations of partnerships will be very important to that accountant.
Problem IV
Cash
Beginning balances
Liquidation expense
Sale of non-cash assets
Payment of liabilities
Contribution by Flowers
Allocation of Flower's
deficit
Distribution to partners
Ending balances
Problem V
P
25,000
(20,000)
160,000
(165,00
0)
10,00
0
(10,000)
0
Noncash
Assets
Liabilitie
P200,00
0
(200,00
0)
P165,00
0
(165,00
0)
(6,000)
0
0
P(10,00
0)
(4,000)
(8,000)
10,000
12,000
0
0
Cash
Liabilities
Able
Bower
Cramer
Beginning:
Payment of liabilities
Cramer/Bower pay in
from personal worth
to cover
deficit balances:
Payment of liabilities
Allocation of
deficit balances:
Able paid:
P20,000
(20,000)
P
0
P(30,000)
20,000
P(10,000)
P(10,000)
P5,000
P15,000
P(10,000)
P5,000
P15,000
12,000
P12,000
(10,000)
P 2,000
________
P(10,000)
10,000
P
0
________
P(10,000)
(2,000)
P3,000
(10,000)
P 5,000
P(10,000)
P3,000
P 5,000
________
0
8,000
P (2,000)
2,000
P
0
(3,000)
P
0
______
P 2,000
(2,000)
P
0
P
P
Problem VI
Answer:
Cash
70,000
Arthur, Capital
6,000
Baker, Capital
15,000
Casey, Capital
9,000
Other Assets
To record realization of assets at a loss of $30,000, divided
among Arthur, Baker, and Casey in 2:5:3 ratio, respectively.
Trade Accounts Payable
Cash
To record payment of liabilities.
65,000
Arthur, Capital
Loan Receivable from Arthur
To offset Arthur's loan account against Arthur's capital
account.
20,000
Arthur, Capital
Loan Payable to Baker
Casey, Capital
Cash
To record payments to partners, computed as follows:
14,000
20,000
1,000
Arthur
P70,000
Baker
P80,000
30,000
(5,000)
0
100,000
65,000
20,000
35,000
Casey
P55,000
(20,000)
(6,000)
P44,000
(15,000)
(9,000)
P95,000 P46,000
(30,000)
P14,000
(75,000) (45,000)
P20,000 P 1,000
25%
Lang
30,000
25%
Maas
P 130,000
( 30,000
0
) ( 30,000
P 100,000
) (
P
( 45,000
P 55,000
) (
P
Loss to eliminate
Neal
14
.
JJ
Total
310,000
60,000
90,000
) (
P
120,000
190,000
90,000
0
) (
P
135,000
55,000
CC
TT
Total
Profit ratio
40%
50%
10%
100%
Prior capital
(160,000)
(45,000)
(55,000)
(260,000)
24,000
(136,000)
30,000
(15,000)
6,000
(49,000)
60,000
(200,000)
Loss on sale
of inventory
15.
50%
Neal
150,000
Prior capital
Loss on sale
of inventory
Allocate Charles'
capital deficit:
JJ = .40/.50
TT = .10/.50
(160,000)
(45,000)
(55,000)
(260,000)
72,000
(88,000)
90,000
45,000
18,000
(37,000)
180,000
(80,000)
36,000
(52,000)
(45,000)
-0-
9,000
(28,000)
(80,000)
40,000
(26,000)
14,000
10,000
15,000
(15,600)
( 5,600)
(10,400)
4,600
(4,000)
10,000
5,600
( 1,600)
3,000
18. a
T
40,000
(31,950)
8,050
10,000
15,000
(19,170)
( 9,170)
(12,780)
2,220
(6,550)
1,500
( 400)
1,100
Additional loss
9,170
(2,620)
( 400)
400
19. b
K
Capital before
realization
Liquidation expenses
60,000
40,000
80,000
(2,000)
( 4,000)
(24,000)
( 4,000
)
(48,000)
( 48,000
)
28,000
Capital before
realization
Loss on sale (2:4:4)
34,000
( 4,000)
30,000
H
80,000
(61,000)
19,000
( 4,000)
15,000
(12,000)
12,000
( 8,000)
20,000
J
110,000
140,000
(122,000)
(122,00
0)
(12,000)
18,000
12,000
( 8,000)
10,000
Total
330,00
0
(305,00
0)
25,000
22. a
130,000
(6,000)
(132,00
0)
( 8,00
0)
(264,000)
434,000
170,000
23. b
Ding
Total
Capital before
realization
Loss on sale (4:2:2:2)
-0-
Laurel
67,000
60,000
(52,800)
7,200
Safe payments
108,000
( 26,400)
40,600
( 4,700)
Ezzard
17,000
96,000
(26,400)
(26,400
)
( 9,400)
69,600
( 2,350)
2,500
( 9,400)
38,250
Tillman
240,00
0
(132,00
0)
108,00
0
( 2,350)
67,250
26. c
Gonda
60,000
(15,000)
45,000
Loan
Total interests
Loss on sale (5:3:2) - [90,000
26,000]
( 22,500)
47,500
Total
Capital
Herron
70,000
40,000
________
40,000
(32,000)
Morse
40,000
(12,500)
27,500
15,000
_______
15,000
( 19,200)
5,000
Total
170,00
0
(50,000
)
120,00
0
F
60,000
5,000
5,000
10,000
65,000
(64,000
)
(12,800)
8,000
Possible insolvency (5:3)
(1,750)
6,250
_______
6,250
Additional investment
( 4,200)
( 2,800)
2,800
( 1,050)
( 5,250)
5,250
1,000
0
1,000
5,250
6,250
27. b
28. a
Since the partnership currently has total capital of P350,000, the P150,000 that is
available would indicate maximum potential losses of P200,000 that is hypothetically
split among the partners.
White
Sands
Luke
Total
50,000
(60,000)
(10,000)
10,000
Safe payments
150,000
100,000
200,000
( 40,000)
60,000
(2,857)
57,143
(100,00
0)
100,000
(7,143)
92,857
350,00
0
(200,00
0)
150,00
0
0
3,000
1,000
1,000
1,000
Withdrawal of equipment:
Accumulated depreciation (8,000 3,000)
Hob, capital
Equipment
30. b
5,000
13,000
18,000
Accumulated depreciation
70,000
K, capital (P150,000 + P10,000 + P10,000 P70,000)
100,000
Machinery, at cost
150,000
Rice [P110,000 (P150,000 P70,000)] x 1/3
10,000
Long [P110,000 (P150,000 P70,000)] x 1/3
10,000
31. c
Capital before
realization
Loss on sale
(35%:35%:30%)
90,000
(42,000)
48,000
Total
60,000
30,000
180,000
(42,000)
(36,000)
18,000)
( 6,000)
*(120,0
00)
60,000
Quiz - IV
1. Zero/nil
Capital before
realization
Loss on sale (3:2:1:4))
110,000
65,000
(15,000)
(60,000
)
5,000
25,000
(45,000)
( 30,000)
(20,000)
80,000
(20,000)
85,000
( 5,714)
74,286
( 4,286)
70,000
100,000
( 2,857)
82,143
( 2,143)
80,000
Capital before
realization
Liquidation expenses
Loss on sale (134 - 434)
A
80,000
(3,600)
(90,000)
(13,600)
90,000
(2,400)
(60,000)
27,600
40,000
(10,000)
30,000
B
C
130,000
(6,000)
(300,000
)
(176,00
0)
H
10,000
(6,000)
15,000
(4,000)
4,000
11,000
13. P34,000
Capital before
realization
Liquidation expenses
Loss on sale (300 - 180)
60,000
40,000
80,000
(2,000)
( 4,000)
( 4,000
)
(48,000)
( 48,000
)
(24,000)
( 6,429)
6,429
28,000
34,000
(12,000)
Additional investment
_____
12,000
______
28,000
34,000
14. P25,000
Cash, beginning
Payment of liquidation expenses
Payment of liabilities
Payment to partners
15. P15,000
Capital before
realization
Loss on sale (4:2:1:3)
P90,000
( 5,000)
( 60,000)
P25,000
B
25,000
(60,000)
(35,000)
110,000
100,000
65,000
( 30,000)
(15,000)
(45,000
)
85,000
20,000
80,000
(35,000)
(11,667)
( 5,833)
15,000
68,333
79,167
2,500
16. P2,500 - refer to No. 15
17. Page, P68,3333 and Larry, P79,167 refer to No.15
18. Bond: P225,000; Hamm: P115,000; Zell: P 0
Bonds capital balance...................................................
P300,000
Less: Bonds share of P140,000 loss in liquidation
(P140,000 50%) ..........................................................
(70,000)
_____
P230,000
Less: Bonds share of Zells capital deficiency of
P8,000 (5/8 of P8,000)....................................................
( 5,000)
P225,000
19. Alexa: P25,000; Bell: P75,000; Graham: P0
20. Jody, P5,200; Kane, P64,800; Lark, P10,000
Balance, May 1
Plant sold
Inventory sold
Balances before
distribution
Offset loans
Pay creditors
Partner equity
Possible loss:
Plant assets
Distribution
Assets
250,000
10,000
6,000)
254,000
26,000)
88,000) (
140,000
(
(
60,000)
80,000
30%
Jody
32,000
3,000
1,800 )
33,200
10,000 )
Debts
88,000
88,000
25%
Lark
40,000
2,500
1,500 )
41,000
16,000 )
91,800
88,000 )
23,200
(
18,000 )
5,200
45%
Kane
90,000
4,500
2,700 )
91,800
(
27,000 )
64,800
25,000
(
15,000 )
10,000
Cash
Jan 1 Balance
3,000
NonCash
Assets
33,000
First
Rank
Debt
9,00
0
30%
Oak
Equity
2,000
20%
Nebe
Equity
4,000
50%
Pang
Equity
21,000
Sale of assets
Subtotal
17,000
20,000
( 15,000 )
18,000
600
2,600
9,00
0
400
4,400
1,000
22,000
Nebe
Equity
4,400
) ( 3,600
)
800
(
800
0
Pang
Equity
22,000
) ( 9,000
13,000
) ( 2,000
11,000
)
)
Ide
Capital
(
60,000
Cash
50,000
40,000
90,000
90,000
2,000
92,000
92,000
( 92,000
0
4,000
7,500
3,500
Jen
Capital
106,000
Total
50,000
106,000
) ( 12,500 )
)
93,500
2,000
Write-off Hanly
Distribute cash
40,000
( 20,000 )
20,000
(
0
(
Write-off Ide
Hanlys personal
contribution
Hanly
Capital
4,000
1,500
1,500
0
Theories
Completion Statements
1. a. partnership creditors other than partners
b. partners loansif subordinated
c. partners capital
2. statement of realization and liquidation
3. schedule of safe payments
4. marshalling of assets
5. rule of setoff
6. legal recourse against
7. bringing the capital balances into the profit and loss ratio
40,000
90,000
90,000
2,000
)
(
(
93,500
1,500
92,000
92,000
92,000
0
) ( 92,000 )
0
92,000
True or False
8.
True
9.
False
10
.
11
.
12
.
False
False
True
13
.
14
.
15
.
16
.
17
.
True
False
False
True
True
18
.
19
.
20
.
21
.
22
.
False
True
True
False
True
23
.
24
.
25
.
26
.
27
.
False
True
False
True
True
28
.
29
.
30
.
31
.
32
.
True
False
False
33
.
34
.
35
.
True
True
False
False
False
36
.
37
.
38
.
39
.
40
.
A
A
C
D
C
41
.
42
.
43
.
44
.
45
.
b
d
b
d
b
4
6.
4
7.
4
8.
4
9.
5
0.
c
a
c
d
b
51
.
52
.
b
a