Advance Accounting -LUPISAN-CHAPTER 3.pdf

CHAPTER 3 Partnership Liquidation EXERCISES Exercise 3 - 1 Capital balances before liquidation Loan from partners Total partners’ interest Loss on realization (P46,000 – P12,000) Balances Additional loss to partners Balances Additional loss to partners Distribution of cash to partners

Aguilar P 11,000 2,000 P 13,000 (13,600) P( 600) 600 --------

Benito P 10,300

Casimiro P 13,700

David P 9,000

---------

P 10,300 ( 10,200) P 100 ( 300) P ( 200) 200 ---------

P 13,700 ( 6,800) P 6,900 ( 200) P 6,700 ( 133) 6,567

P 9,000 ( 3,400) P 5,600 ( 100) P 5,500 ( 67) 5,433

Duque P 50,000 15,000 ( 15,000) P 50,000 ( 32,500) P 17,500 ( 11,250) P 6,250

Espino P 22,500 7,500 ( 10,000) P 20,000 ( 16,250) P 3,750 ( 5,625) P( 1,875)

Felipe P 20,000 7,500 ( 10,000) P 17,500 ( 16,250) P 1,250 ( 5,625) P( 4,375)

Total P 92,500 30,000 ( 35,000) P 87,500 ( 65,000) P 22,500 ( 22,500) ------

Exercise 3 - 2 Original investments Net income for 2007 Drawings in 2007 Total partners’ interest before dissolution Net assets distributed to partners Balances Loss to partners distributed 2:1:1 Cash settlement among partners Exercise 3 - 3 1.

2.

3.

Guarin, Capital Receivable from Guarin To offset receivable from Guarin against his capital.

1,500 1,500

Salary Payable to Henson Henson, Capital To include salary payable to Henson to his interest.

500 500

Henson, Capital (P24,500 x 40%) Guarin, Capital (P24,500 x 60%) Loss from Liquidation To distribute loss from liquidation to partners.

Henson, Capital (P9,500 + P500 - P9,800) Guarin, Capital (P18,000 - P1,500 - P14,700) Cash Exercise 3 - 4 1.

9,800 14,700 24,500

4.

200 1,800 2,000 Ibarra

Javier

Katindig

AA1 - Chapter 3 (2008 edition)

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Original investment Net loss for six months* Loss on realization (P121,000 - P49,000 = P72,000) Balances Additional loss to partners Cash distribution to Ibarra *

2.

P 60,000 (18,000) (36,000) P 6,000 ( 1,200) ( 4,800)

Total capital, March 1 (P60,000 + P54,000 + P16,000) Net assets, Aug. 31 (P5,000 + P121,000 - P32,000) Net loss

P 54,000 (12,000) (24,000) P 18,000 ( 800)

P130,000 94,000 P 36,000

Book value of other assets Total loss on realization Capital balance of Katindig after dist. of net loss Excess of personal liabilities over personal assets Maximum amount of loss that can be absorbed by Katindig Fractional share of Katindig Cash that must be realized on sale of other assets

Exercise 3 – 5 1. Book value of other assets (P459,000 – P3,000) Cash realized: Accounts receivable [P180,000 – (P60,000 x 20%)] Merchandise inventory Prepaid advertising Machinery and equipment (P120,000 x 60%) Loss on realization

P 16,000 ( 6,000) (12,000) P( 2,000) 2,000

P121,000 P 10,000 ( 5,000) P 5,000 1/6__

( 30,000) P 91,000

P456,000 P168,000 75,000 2,400 72,000

317,400 P138,600

Lesaca – Manalo Partnership Statement of Liquidation December 31, 2008 Cash Balances before liquidation Sale of assets and distribution of loss Balances Payment of liabilities Balances Additional investment Manalo Balances Payment of liabilities Balances Additional loss to Lesaca Payment to Lesaca

P 3,000 317,400

Other Assets

Liabilities AP NP

Capital Lesaca

Manalo

P456,000 ( 456,000 )

P60,000

P258,000

P90,000 ( 55,440)

P 51,000 ( 83,160)

P60,000 ( 59,400)

P258,000 ( 258,000 )

P34,560 ( 1,200)

(P32,160) ( 1,800)

P33,360

(P33,960) 12,000

P33,360

(P21,960)

P33,360 ( 21,960) P11,400

(P21,960) 21,960

P320,400 ( 320,400 )

P600 by

12,000 P 12,000 ( 600) P 11,400

P (

600 600)

P 11,400

Exercise 3 – 6 Capital balances before liquidation Restricted interest – possible loss

Nocum P180,000

Oliva P300,000

Pascua P240,000

Quinto (P 33,000)

AA1 - Chapter 3 (2008 edition)

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Non-cash assets P600,000 Liquidation expenses 9,000 Unrecorded liabilities 15,000 Total P624,000 Balances Restricted interest – possible loss to Nocum, Oliva and Pascua for the deficiency of Quinto Balances Restricted interest – possible loss to Oliva and Pascua for the deficiency of Nocum Safe payment

( 156,000) P 24,000

( 156,000) P144,000

( 156,000) P 84,000

( 156,000) (P189,000)

( 63,000) (P 39,000)

( 63,000) P 81,000

( 63,000) P 21,000

189,000 -

( 19,500) P 61,500

( 19,500) P 1,500

39,000 -

-

Exercise 3 - 8 Rama, Sison and Toledo Cash Priority Program PAYMENTS Capital balances

Rama P30,000

Sison P70,000

Toledo P40,000

Rama

Sison

Toledo

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Add Loan balances Total partners’ interest Profit and loss ratio Loss absorption balance Allocation I – Cash to Toledo reducing LAB to an amount reported for Sison (P125,000 x 20%) Balances Allocation II - Cash to Sison & Toledo reducing LAB to an amount reported for Rama P100,000 x 40% P100,000 x 20% Balances Allocation III - Further cash distribution may be made in the P & L ratio Exercise 3-9 1.

Balances before liquidation January: Sale of assets and dist. Of loss

20,000 P90,000 40% P225,000

30,000 P70,000 20% P350,000

P125,000

P225,000

(125,000) P225,000

P25,000

(100,000) P125,000

P125,000

P40,000 (100,000) P125,000

20,000 P45,000

P40,000

Julian, Lagman and Magno Cash Priority Program January 1, 2008

Capital balances before liquidation Add Note payable to Magno Total partners’ interest Profit and loss ratio Loss absorption balances Allocation I – Cash to Lagman reducing LAB to an amount reported for Julian (P60,000 x 3/10) Balances Allocation II – Cash to Julian & Lagman reducing LAB to an amount reported for Magno (P40,000 x 3/10) Balances Allocation III – Further cash distributions may be made in the P & L ratio

2.

20,000 P50,000 40% P125,000

Julian P 36,000

Lagman P 54,000

P 36,000 3/10 P120,000

P 54,000 3/10 P180,000

Magno P18,000 14,000 P 32,000 4/10 P80,000

P120,000

(60,000) P120,000

P80,000

( 40,000) P80,000

(40,000) P80,000

P80,000

Julian

PAYMENTS Lagman Magno

P18,000

P12,000 P12,000

12,000 P20,000

-

Julian, Lagman and Magno Statement of Liquidation January to March, 2008 Cash P12,000

Other Assets P146,000

30,000

( 38,000)

Liabilities P36,000

NP to Magno P14,000

Julian P36,000 ( 2,400)

PAYMENTS Lagman Magno P54,000 P18,000 ( 2,400)

( 3,200)

AA1 - Chapter 3 (2008 edition)

Payment of liquidation expenses Payment of liabilities Distribution of cash to partners (sch. 1) Balances February: Sale of assets and distribution of gain Payment of liquidation expenses Distribution of cash to partners (sch. 2) Balances March: Sale of assets and distribution of loss Balances Offset of loan against deficiency Final payment to partners

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( 3,600) ( 36,000)

( 1,080)

(1,080

(1,440)

P32,520

(2,400) P48,120

P13,360

2,700

2,700

3,600

(2,520)

(2,520)

(3,360)

P14,000

(10,000) P22,700

(25,600) P22,700

P13,600

P14,000

(11,100) P11,600

(11,100) P11,600

(14,800) P(1,200)

(P11,600 )

(P11,600 )

(36,000)

( 2,400) P108,000 44,000

P14,000

(35,000)

(8,400) (35,600) P73,000 36,000 P36,000

(73,000) ( 1,200) (P12,800)

(P36,000)

1,200

Schedule 1 Installment Liquidation January 31, 2008 Cash available Allocation I – Payable to Lagman

Amount P2,400 P2,400

Julian

Lagman

Mango

P2,400

Schedule 2 Installment Liquidation February 29, 2008 Cash available Allocation I – Balance Payable to Lagman Allocation II – Payable to Julian and Lagman 3. Journal entries January Cash Julian, Capital Lagman, Capital Magno, Capital Other Asset Julian, Capital Lagman, Capital Magno, Capital Cash

Amount P2,400

Julian

P2,400 P20,000

Lagman

Mango

P2,400 P10,000 P10,000

10,000 P25,600

-

30,000 2,400 2,400 3,200 38,000 1,080 1,080 1,440 3,600

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Liabilities Cash

36,000 36,000

Lagman, Capital Cash February

March

2,400 2,400

Cash Other assets Julian, Capital Lagman, Capital Magno, Capital

44,000 35,000 2,700 2,700 3,600

Julian, Capital Lagman, Capital Magno, Capital Cash

2,520 2,520 3,360

Julian. Capital Lagman, Capital Cash

10,000 25,600

Cash Julian, Capital Lagman, Capital Magno, Capital Other assets

36,000 11,100 11,100 14,800

8,400

35,600

73,000

Note Payable to Magno Magno, Capital

1,200

Note Payable to Magno Julian, Capital Lagman, Capital Cash

12,800 11,600 11,600

1,200

36,000

Exercise 3 - 10 U, V and W Co. Cash Priority Program PAYMENTS Capital balances Profit and loss ratio Loss absorption balance Allocation I - Cash to Villa reducing LAB to an amount reported for Waldo (P4,900 x 2/7) Balances Allocation II - Cash to Villa & Waldo reducing LAB to an amount reported for Urbe

Urbe P 11,200 4/7 P 19,600

Villa P13,000 2/7 P 45,500

Waldo P 5,800 1/7 P 40,600

P 19,600

( 4,900) P 40,600

P 40,600

Urbe

Villa

P 1,400

Waldo

AA1 - Chapter 3 (2008 edition)

P21,000 x 2/7 P21,000 x 1/7 Balances Allocation III - Further cash distribution may be made in the P & L ratio

2.

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( 21,000) P 19,600

P 19,600

Book value of assets Loss on realization: Capital balance of Urbe prior to realization Cash to be received by Urbe Share of Urbe in the loss on realization Fractional share of Urbe Cash to be realized of the sale of assets

6,000 (21,000) P 19,600

P 7,400

P 30,000 P 11,200 10,000 P 1,200 4/7_

2,100 P 27,900

3.

Allocation III - P3,200 ÷ 4/7 = P5,600 x 1/7 Allocation II Total cash received by Waldo

P

4.

Book value of assets Total cash available Allocation I Allocation II - P1,800 - P1,400 = P400 ÷ 2/3 Loss on liquidation

P 30,000

Exercise 3 – 11 Partnership Books 1. Inventories Capital Adjustment Account 2.

3.

4.

5.

6.

Accumulated Depreciation Equipment Capital Adjustment Account Goodwill Capital Adjustment Account P980,000 – P924,000 = P56,000

P 3,000 P 3,000

800 3,000 P 3,800

P 1,400 600

2,000 P 28,000

90,000 90,000 160,000 80,000 80,000 56,000 56,000

Capital Adjustment Account Belen, Capital (3/4) Bgnes, Capital (1/4)

226,000

Colored Co. Stocks Allowance for Uncollectible Accounts Accounts Payable Accounts Receivable Inventories Equipment Goodwill

980,000 12,000 104,000

Belen, Capital Bagnes, Capital Cash Colored Co. Stocks

563,500 458,500

169,500 56,500

124,000 296,000 520,000 156,000

42,000 980,000

AA1 - Chapter 3 (2008 edition)

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New Corporation’s Books 1. Authorized to issue 50,000 shares of P50 par value Ordinary Share Capital. 2.

3.

Cash Ordinary Share Capital PIC in Excess of Par

700,000

Accounts Receivable Inventories Equipment Goodwill Allowance for Doubtful Accounts Accounts Payable Ordinary Share Capital PIC in Excess of Par

124,000 296,000 520,000 156,000

500,000 200,000

12,000 104,000 700,000 280,000

Problem 3 – 2 (Case 3 – cont.) Calma, Daza and Esteban Schedule of Cash Distribution to Partners Capital balances before cash distribution Add loan balance Total partners’ interest Restricted interest - possible loss to Calma and Esteban in the ratio of 2:1 if Daza fails to pay his deficiency Free interests - amounts to be paid to partners Payment to apply on: Loan Capital Cash distribution

Calma P 27,000

Daza P ( 3,000)

P 27,000

P ( 3,000)

( 2,000) P 25,000 P 25,000 P 25,000

Esteban P 46,000 8,000 P 54,000

3,000 -

( 1,000) P 53,000

-

P 8,000 45,000 P 53,000

AA1 - Chapter 3 – Partnership Liquidation (2005) Suggested Answers

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Problem 3 – 2 (Case 4 – cont.) Calma, Daza and Esteban Schedule of Cash Distribution to Partners Capital balances before cash distribution Add loan balance Total partners’ interest Restricted interest - possible loss to Calm and Esteban in the ratio of 2:1 if Daza fails to pay his deficiency Balances Restricted interest - possible loss to Esteban if Calma fails to pay his deficiency Free interests - amounts to be paid to partners Payment to apply on: Loan Capital Cash distribution

Calma P 9,000

Daza P (21,000)

P 9,000

P (21,000)

Esteban P 37,000 8,000 P 45,000

(14,000)

21,000

P( 5,000)

-

P 38,000

5,000 -

-

( 5,000) -

-

P 8,000 25,000 P 33,000

-

( 7,000)

Chapter 3 – Partnership Liquidation Suggested Answers

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Problem 3 - 3 1.

a.

b. c.

d.

e.

f.

g. h. 2.

a. b.

Cash Accumulated Depreciation Fuentes, Capital (P72,000 x 5/15) Goco, Capital (P72,000 x 5/15) Herrera, Capital (P72,000 x 3/15) Isla, Capital (P72,000 x 2/15) Merchandise Inventory Accounts Receivable Store Fixtures

48,000 25,000 24,000 24,000 14,400 9,600

Accounts Payable Cash (P28,000 + P48,000)

76,000

55,000 60,000 30,000 76,000

Fuentes, Capital Herrera, Capital Isla, Capital Goco, Capital

4,500 2,700 1,800

Fuentes, Capital Isla, Capital Herrera, Capital

1,500 600

Fuentes, Loan Isla, Loan Fuentes, Capital Isla, Capital

2,000 3,000

Cash Fuentes, Capital Herrera, Capital

6,000

Accounts Payable Cash

4,000

Isla, Loan Cash

2,000

Accounts Payable Fuentes, Capital

4,000

Isla, Loan Fuentes, Capital Herrera, Capital

2,000 3,000

9,000

2,100

2,000 3,000 1,000 5,000 4,000 2,000 4,000

5,000

Problem 3 – 3 (cont.) 3.

a.

Accounts Payable

4,000

Chapter 3 – Partnership Liquidation Suggested Answers

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Herrera, Capital b.

4,000

Isla, Capital Fuentes, Capital Herrera, Capital

2,000 1,000 1,000

Schedule to support the entries in Requirement 1

Balances before liquidation Distribution of loss Balances Additional loss for the deficiency of Goco Balances Additional loss for the deficiency of Herrera Balances Offset against debit balance in capital account Balances Additional investment by partners Payment to Isla

L O A N Fuentes Isla P 2,000 P 5,000

C A P I T A L Goco Herrera P15,000 P10,000 ( 24,000) ( 14,400) P( 9,000) P( 4,400)

P 2,000

P 5,000

Fuentes P27,000 ( 24,000) P 3,000

P 2,000

P 5,000

( 4,500) P( 1,500)

9,000 -

( 2,700) P( 7,100)

( 1,800) P( 2,400)

P 2,000

P 5,000

( 1,500) P( 3,000)

-

2,100 P( 5,000)

( 600) P( 3,000)

( 2,000) -

( 3,000) P 2,000

2,000 P( 1,000)

-

P 2,000

1,000 -

P( 5,000) -

5,000 -

Isla P 9,000 ( 9,600) P( 600)

3,000 -

Chapter 3 – Partnership Liquidation Suggested Answers

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Problem 3 -5 JKLM Trading Co. Schedule To Accompany Statement of Liquidation Amounts to be Paid to Partners February 28, 2008 Capital balances before dist. of cash Add Loan balances Total partners’ interest Restricted interest - possible loss if nothing is realized on remaining assets Balances Restricted interest - additional possible loss if Manabat is unable to pay his deficiency (20:30:30) Free interest - payments to partners Payment to apply on Loan Capital Total cash distribution

Jocson P 19,128 15,000 P 34,128

Kaimo P 88,992

Legarda P 101,532

Manabat P 22,878

P 88,992

P 101,532

P 22,878

( 25,494) P 8,634

( 38,241) P 50,751

( 38,241) P 63,291

( 25,494) P( 2,616)

( 654) P 7,980

( 981) P 49,770

( 981) P 62,310

P 49,770 P 49,770

P 62,310 P 62,310

-

2,616 -

P 7,980 P 7,980

JKLM Trading Co. Schedule To Accompany Statement of Liquidation Amounts to be Paid to Partners March 31, 2008 Capital balances before dist. of cash Add Loan balance Total partners’ interest Restricted interest - possible loss if nothing is realized on remaining assets Free interest - payment to partners Payment to apply on: Loan Capital Total cash distribution

Jocson P 18,348 7,020 P 25,368

Kaimo P 38,052

Legarda P 38,052

Manabat P 22,098

P 38,052

P 38,052

P 22,098

( 16,524) P 8,844

( 24,786) P 13,266

( 24,786) P 13,266

(16,524) P 5,574

P 7,020 1,824 P 8,844

P 13,266 P 13,266

P 13,266 P 13,266

P 5,574 P 5,574

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Problem 3 – 6 QRS Partnership Schedule to Accompany Statement of Liquidation Amounts to be Paid to Partners July 31, 2008 Quizon Roman Balances before cash distribution P116,250 P159,750 Add Loan balance 150,000 Total partners’ interest P116,250 P309,750 Restricted interest – possible loss of P480,000 on remaining unsold assets and cash withheld of P30,000 ( 255,000) ( 153,000) Balances ( P138,750) P156,750 Restricted interest – possible loss of P138,750 to Roman and Silva 138,750 ( 83,250) Balances P 73,500 Restricted interest – possible loss to Roman ( 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, 2008 Quizon Roman Balances before cash distribution P 93,000 P145,800 Add Loan balance 82,500 Total partners’ interest P 93,000 P228,300 Restricted interest – possible loss of P375,000 on remaining unsold assets and cash withheld of P30,000 ( 202,500) ( 121,500) Balances ( P109,500) P106,800 Restricted interest – possible loss of P109,500 to Roman and Silva 109,500 ( 65,700) Payment to Roman to apply on loan and to Silva to apply on capital P 41,100

Problem 3 - 7 Requirement 1 Tabora, Ureta and Veloso

Silva P151,500 P151,500 ( 102,000) P 49,500 ( 55,500) (P 6,000) 6,000

Silva P142,200 P142,200 ( 81,000) P 61,200 ( 43,800) P 17,400

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

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Cash Priority Program January 1, 2008 Capital balances Loan balances Total partners’ interest Profit and loss ratio Loss absorption balance Allocation I - Cash to Ureta to reduce LAB to amount reported for Tabora Balances Allocation II - Cash to Tabora and Ureta to reduce LAB to amount reported for Veloso Balances Allocation III - Further cash distribution may be made based on P & L ratio

Tabora P120,000 45,000 P165,000 50% P330,000

Ureta P 90,000 30,000 P120,000 30% P400,000

Veloso P 40,000 13,000 P 53,000 20% P265,000

P330,000

( 70,000) P330,000

P265,000

( 65,000) P265,000

( 65,000) P265,000

PAYMENTS Tabora Ureta Veloso

P21,000

P265,000

P32,500 P32,500

19,500 P40,500

Requirement 2 Amount January: Cash available Allocation I - payable to Ureta February: Cash available Allocation I - Bal. payable to Ureta Allocation II - Payable to Tabora and Ureta in the ratio of 50:30

P15,000

P40,000 6,000

P 6,000

P34,000

P90,000 18,000 P72,000

April: Cash available Allocation III - Based on P & L ratio

P30,000 30,000

b.

Neri, Capital

Ureta

P15,000 15,000

March: Cash available Allocation II - Balance Allocation III - Based on P & L ratio

Problem 3 – 8 (cont.) Requirement 1 January: a. Cash Accounts Receivable

Tabora

Veloso

P21,250 P21,250

12,750 P18,750

P11,250 36,000 P47,250

P 6,750 21,600 P28,350

P14,400 P14,400

P15,000

P 9,000

P 6,000

112,000 112,000 2,200

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

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Ordan, Capital Pacia, Capital Cash c. d.

February:

a. b.

c.

d.

March:

a.

b.

c.

Accounts Payable Cash Pacia, Loan Pacia, Capital Cash

4,400 38,000 38,000 9,000 7,000 16,000

Cash Accounts Receivable Neri, Capital Ordan, Capital Pacia, Capital Cash Accounts Payable Cash Neri, Capital Ordan, Capital Pacia, Capital Salary Payable to Neri Neri, Capital Ordan, Capital Pacia, Capital Cash Cash Neri, Capital Ordan, Capital Pacia, Capital Accounts Receivable Neri, Capital Ordan, Capital Pacia, Capital Cash Neri, Capital Ordan, Capital Pacia, Capital Cash

Problem 3 - 9 Requirement 1

1,100 1,100

Wilson, Yuson and Zapata

36,000 36,000 1,400 700 700 2,800 39,000 38,000 500 250 250 6,000 1,400 3,700 8,700 19,800 35,000 4,000 2,000 2,000 43,000 2,000 1,000 1,000 4,000 39,500 19,750 19,750 79,000

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

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Cash Distribution Schedule June 30, 2008 Wilson P 67,000 12,000 P 55,000 50% P110,000

Capital balances Receivable from partners Total partners’ interest Profit and loss ratio Loss absorption balance Allocation I - Cash to Yuson to reduce LAB to amt. reported for Zapata Balances P110,000 Allocation II - Cash to Zapata and Yuson to reduce LAB to amt. reported for Wilson Balances P110,000 Allocation III - Based on P & L ratio (P6,000 + P100,000 P17,000 = P89,000 P14,000) TOTALS

Yuson P 45,000 P 45,000 30% P150,000

Zapata P 31,500 7,500 P 24,000 20% P120,000

30,000 P120,000

P120,000

10,000 P110,000

10,000 P110,000

P AY M E N T S Wilson Yuson

Zapata

P 9,000

3,000

P 2,000

P37,500

22,500

15,000

P37,500

P 34,500

P17,000

Problem 3 – 9 Requirement No 2 Wilson, Yuson and Zapata Cash Distribution Schedule July 1 - September 30, 2008 Capital balances before liquidation July - Dist. of loss on sale of assets (1) Liquidation expenses Payment of liabilities

Liabilities P 17,000 (17,000)

Wilson P 55,000 (4,750) (500)

Yuson P 45,000 (2,850) (300)

Zapata P 24,000 (1,900) (200)

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

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Payment to partners (2) Balances Aug.- Liquidation expenses Equipment taken by Zapata Gain on transfer of eqt. to Zapata Payment to Yuson (3) Balances Sept- Dist. of loss on sale of assets (4) Liquidation expenses Final distribution to partners (1) (2) (3) (4)

-

(6,500) P 35,350 (450)

P 49,750 (750) (3,000)

-

(1,800) (4,000) P 32,700 (6,000) (300) P26,400

P 52,000 (10,000) (500) P41,500

-

P 21,900 (300) (10,000) (1,200) P 12,800 (4,000) (200) P8,600

(P22,000 + P14,000) - (P16,500 + P10,000) = P9,500 loss on sale of assets (P6,000 + P26,500 - P1,000 - P17,000) - P8,000 cash withheld = P6,500 cash dist. Req. 1 schedule of cash distribution below8,000 – 1,500 – 2,500 +4,000 (P99,000 - P4,000 BV of equipment taken by Zapata) - P75,000 = P20,000 loss on sale Schedule of Cash Distribution August 31, 20068 Wilson Yuson Zapata

Capital balances after dist. of equipment to Zapata Profit and loss ratio Loss absorption balance Allocation I - Cash to Yuson to reduce LAB to amt. reported for Wilson Balances Allocation II - Cash to Wilson & Yuson to reduce LAB to amount reported for Zapata Balances Allocation III – P & L ratio

P 52,000 50% P104,000

P 36,700 30% P122,333

P 12,800 20% P 64,000

P104,000

18,333 P104,000

P 64,000

40,000 P 64,000

40,000 P 64,000

Wilson

Yuson

P 5,500

P 64,000

P20,000 P20,000

12,000 P 17,500

Problem 3 - 9 - Requirement 3 Cash available in September Allocation I – Balance Allocation II Balance - Allocation III

Amount P76,500 1,500 32,000 P43,000

Wilson

Yuson

Zapata

P 20,000 21,500 P 41.500

P 1,500 12,000 12,900 P 26,400

P 8,600 P 8,600

Problem 3 -10 Arceo, Basco and Cervo Statement of Changes in Partners’ Capital For the Period January 1, 2006 to May 31, 2008 Arceo

Basco

Cervo

Total

Zapata

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

2006: Original investment Distribution of net income (sch. 1) Drawings Balance, December 31 2007: Investment of Cervo (sch. 2) Distribution of net loss Drawings Balances, December 31 2008: Distribution of cash in Feb. (sch. 3) Distribution of cash in April (sch. 4) Balances Sale of assets & distribution of loss in May (sch. 5) Final cash distribution

page

P50,000 15,200 (7,000) P58,200

P30,000 12,800 (6,000) P36,800

P 80,000 28,000 (13,000) P 95,000

(9,100) 4,200 (4,900) P40,000

(4,900) 3,000 (3,900) P25,000

P54,000 4,800 (4,200) P45,000

40,000 12,000 (13,000) P110,000

(5,000) (7,000) P28,000

(5,000) P20,000

(5,000) (8,000) P32,000

(10,000) (20,000) P 80,000

(17,500) P 10,500

(12,500) P 7,500

(20,000) P 12,000

(50,000) P 30,000

Schedule 1 - Distribution of 2006 net income Salaries Remainder – 65%:35% Total

Arceo P10,000 5,200 P15,200

Schedule 2 - Admission of Cervo Total capital before admission of Cervo Investment of Cervo Total capital Interest acquired by Cervo Capital credit of Cervo Investment of Cervo Bonus to Cervo from old partners (shared 65%:35%) Schedule 3 - Cash distribution in February Capital balances before dist. of cash Restricted interest - possible loss if nothing is realized on remaining assets (P100,000) Free interest - amount to be paid to partners

Basco P10,000 2,800 P12,800

Total P20,000 8,000 P28,000

P 95,000 40,000 P135,000 40% P 54,000 40,000 P 14,000 Arceo P40,000

Basco P25,000

Cervo P45,000

35,000 P 5,000

25,000 P ------

40,000 P 5,000

Arceo P 35,000

Basco P25,000

Cervo P40,000

28,000 7,000

20,000 P 5,000

32,000 P 8,000

Schedule 4 - Cash distribution in April Capital balances before dist. of cash Restricted interest - possible loss if nothing is realized on remaining assets (P80,000) Free interest - amount to be paid to partners

P

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

page

Schedule 5 - Loss on realization of assets in May Capital balances equal to net assets Cash realized on sale of assets Loss on realization Problem 3-11 Partnership Books 1. Inventories Prepaid Expenses Goodwill Accrued Expenses Leony, Capital Espie, Capital 2.

3.

60,000 3,000 243,000 6,000 200,000 100,000

Rover Corp. Stocks Accounts Payable Accrued Expenses Allowance for Uncollectible Accounts Cash Accounts Receivable Inventories Prepaid Expenses Furniture and Equipment Goodwill

4,500,000 600,000 6,000 120,000

Leony, Capital Espie, Capital Rover Corp. Stocks

2,600,000 1,900,000

Corporation’s Books 1. Cash Accounts Receivable Inventories Prepaid Expense Furniture and Equipment Goodwill Allowance for Uncollectible Accounts Accounts Payable Accrued Expenses Ordinary Share Capital 2.

P80,000 30,000 P50,000

Land Cash Pre-Operating Expenses Ordinary Share Capital PIC in Excess of Par

450,000 660,000 1,350,000 3,000 2,520,000 243,000

4,500,000 450,000 660,000 1,350,000 3,000 2,520,000 243,000 120,000 600,000 6,000 4,500,000 3,600,000 1,500,000 450,000 4,800,000 750,000

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

page

Rover Corporation Statement of Financial Position July 1, 2008 Assets Cash Accounts Receivable (net of Allow of P120,000) Inventories Prepaid Expenses Land Furniture and Equipment Goodwill Total Assets

P 1,950,000 540,000 1,350,000 3,000 3,600,000 2,520,000 243,000 P10,206,000

Liabilities and Shareholders’ Equity Accounts Payable P 600,000 Accrued Expenses 6,000 Total Liabilities P 606,000 Shareholders’ Equity Ordinary Share Capital P9,300,000 PIC in Excess of Par 750,000 Retained Earnings (deficit) (450,000) Total Shareholders’ Equity P9,600,000 Total liabilities and SH equity P10,206,000

MULTIPLE CHOICE 1. 2. 3. 4.

D D C C

5.

A

6.

B

Share on loss on realization (P39,000 + P4,800 – P33,000) Percentage ownership of Imperial Total loss on realization

P10,800 ÷ 20% P54,000

Total capital Cash available Loss on realization

P70,000 28,000 P42,000

Capital bal. before liquidation Loss on realization Balances Add’l loss to Gueco & Tiangco for the deficiency of Barcelon Cash distribution to partners 7.

D

8.

A

Gueco P 40,000 ( 21,000) P 19,000

Tiangco P 25,000 (14,000) P 11,000

Bacelon P 5,000 ( 7,000) P( 2,000)

( 1,200) P 17,800

( 800) P 10,200

2,000 P ---0---

Total capital (P360,000 + P72,000) Total liabilities Total loss on liquidation

Capital balances Drawing Distribution of net income Loss on liquidation Balances

Alarcon P 100,000 ( 60,000) 24,000 (172,000) P(108,000

P432,000 84,000 P516,000 Baretto P 80,000 ( 40,000) 24,000 (172,000) P(108,000)

Coronel P 300,000 (20,000) 24,000 (172,000) P 132,000

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

Additional loss to partners Cash to be distributed Coronel 9.

C

10

C

page

108,000

Total capital Loans from partners Total partners’ interest Cash available to partners (P37,500 – P28,500) Total loss on realization

C

12

C

13

B

Total assets = Total capital + Total liabilities = P60,000 + P 3,000 Less Cash = P3,000 + P22,200 – P23,200 Book value of noncash assets

Additional loss Payment to Lazaro 14

15 16 17

C

Jurado P 1,000 ( 5,400) P( 4,400) 4,400

P 5,400

Katindig P25,000 ( 7,200) P(17,800) 3,920

Lazaro P25,000 ( 10,800) P14,200 ( 5,880) P 8,320

Total credits equal debits (P130,000 + P44,000 + P90,000) Less Cash Book value of other assets Loss on realization [(P50,000 + P17,600 – P55,200)/40%] Cash received from sale of other assets

A A B Capital balances Loss on realization Additional loss Amt to be rec.from the part.

Esper P 50,000 (112,000) P(62,000) (3,000)

Elma P 15,500 3,500 P 19,000 ( 15,400) P 3,600 P 63,000 ___2,000 P 61,000

P61,000 – P23,200 = P37,800 x 3/21

Capital balances Loss on realization

( 54,000) P 78,000 P40,000 7,500 P47,500 9,000 P38,500

Doria P 24,500 4,000 P 28,500 ( 23,100) P 5,400

Capital balances before liquidation Loan balances Total partners’ interest Loss on realization Balances – cash to be paid to partners 11

( 54,000)

to

Ester P50,000 ( 56,000) P(6,000) 6,000

Ethel P50,000 ( 56,000) P(6,000) ( 1,500)

Marcelo P 9,000 ( 14,400) P( 5,400) 5,400

P264,000 40,000 P224,000 31,000 P193,000

Elmer P 75,000 ( 56,000) P19,000 (1,500) P 17,500

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

page

200,00 0 P217,500 18

19

20

D Initial investment Purchases Sales Interest Dividends Cash held Equal share Cash received (paid)

Urbe P 137,500,000 ( 1,237,500,000) 1,339,250,000 ( 2,200,000) 1,100,000 P 238,150,000 172,012,500 (P 66,137,500)

Capital balances before liquidation Loss on liquidation (P180,000) Cash to be received by Delia

Delia P480,000 ( 72,000) P408,000

Erma P135,000 ( 90,000)

Delia P480,000 ( 216,000) P264,000 ( 108,000)

Erma P135,000 ( 270,000) (P135,000) 135,000

C

A Capital balances before liquidation Loss on liquidation (P540,000) Add’l loss to Delia & Flora Cash to be received by Flora

21

D Capital balances before liquidation Loss on liquidation (P180,000) Balances Possible loss if remaining inventories are not sold Balances Add’ loss to Delia & Flora Distribution of cash to partners

22 23 24

25

D B A

B

Delia P480,000 ( 72,000) P408,000 (192,000) P216,000 ( 156,000) P 60,000

Viray P 137,500,000 ( 495,000,000) 462,000,000 ( 1.375,000) 2,750,000 P 105,875,000 172,012,500 P 66,137,500 Flora P165,000 ( 18,000)

Flora P165,000 ( 54,000) P111,000 ( 27,000) P 84,000 Erma Flora P135,000 P165,000 ( 90,000) ( 18,000) P 45,000 P147,000 ( 240,000) (P 195,000) 195,000 -

Estrada Balances before liquidation P 40,000 Loss on sale of assets - P40,000 ( 16,000) Possible loss if nothing is realized on remaining assets - P90,000 ( 36,000) Balances P( 12,000) Add’l possible loss to Fortuna and Gener for deficiency of Estrada 12,000 Balances - cash to be distributed P --------Capital balance of Gener before distribution of cash Share in the cash to be withheld for possible liquidation

( 48,000) P 99,000 ( 39,000) P 60,000

Fortuna P 65,000 (16,000)

Gener P 48,000 ( 8,000)

(36,000) P 13,000

(18,000) P 22,000

( 8,000) P 5,000

( 4,000) P 18,000 P 18,000

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

26

D

27

C

28

C

29

page

expenses - P3,000 x 20%/60% (shared by Fortuna & Gener) ( 1,000) Cash to be received by Gener P 17,000 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 Fortuna - P14,000 x 40% = P5,600 Gener - P14,000 x 20% = P2,800 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 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 D

Capital balances Drawing Net loss Total partners’ interest Profit and loss ratio Loss absorption bal. Alloc. I - Cash to Corpuz Balances Alloc. II -Cash to Balweg and Corpuz Balances Alloc. III - Based on P & L ratio

Aguila P 25,000

Balweg P 50,000

( 12,000) P 13,000 ÷ 60% P 21,667

( 5,000) P 45,000 ÷ 25% P180,000

P 21,667

P180,000

Corpuz P 60,000 (10,000) ( 3,000) P 47,000 ÷ 15% P313,333 (133,333) P180,000

P 21,667

(158,333) P 21,667

(158,333) P 21,667

Cash received by Corpuz Cash received from Allocation I Cash received from Allocation Ii Fractional share (B – 25% and C -15%) Total cash distributed Fractional share of Balingit Cash received by Balingit 30

B Nera Ochoa

- P450,000 / 30% = P150,000 - P250,000 / 50% = P 50,000

Aguila

Balweg

Corpuz

P 20,000 P 39,583 P 39,583

P 33,000 ( 20,000) P 13,000 ÷ 15/40 P 34,667 x 25/40 P 21,667 Vulnerability Ranking 3 1

23,750 P43,750

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

Perez 31

- P250,000 / 20% = P125,000

D 1st P500,000 next P75,000 next P375,000 Remainder

32

A

page

Priority Creditors 100%

2

Nera Capital

Ochoa Capital

100% 60% 30%

50%

Perez Loan

Perez Capital

26.67%

13.33% 20.00%

Nera Ochoa Perez Total P450,000 P250,000 P250,000 P950,000 ( 150,000) ( 250,000) ( 100,000) ( 500,000) P300,000 -----P150,000 P450,000 ( 225,000) (150,000) ( 375,000) P 75,000 --------P 75,000 Reyes (20%) Santos (40%) Torres (40%) Net capital balances P100,000 P440,000 P310,000 Possible loss of 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 Equities Loss to absorb Ochoa Balances Loss to absorb Perez Balance

33

C

34 35

D C

Capital balances Add Loan Total partners’ interest Divided by P & L ratio Loss absorption capacity Allocation 1 Balances Allocation II

Roger P108,000 P108,000 30% P360,000 P360,000 ( 60,000) P300,000

Sergio P120,000 30,000 P150,000 50% P300,000 P300,000 P300,000

Tito P129,000 P129,000 20% P645,000 ( 285,000) P360,000 ( 60,000) P300,000

Roger

Sergio

P57,000 P18,000 P18,000

-

Allocation III – P & L ratio

36

37

38

B

Roger Amount available Allocation 1 to Tito Allocation II – 30%, 20%

P72,000 57,000 P15,000

Amount available Allocation II – Balance Allocation III

P120,000 15,000 P105,000

A

D Capital balances Revaluation of assets

Sergio

Tito P57,000 6,000 P63,000

P9,000 P9,000 Roger

Sergio

Tito

P 9,000 31,500 P40,500

P52,500 P52,500

P 6,000 21,000 P27,000

Jacinto P400,000 200,000

Tito

Mapa P600,000 200,000

Magno P1,000,000 200,000

12,000 P69,000

AA1 -Chapter 3 – Partnership Liquidation Suggested Answers

Adjusted capital Par of capital stock Shares of stock to be rec’d by partners

page

P600,000 ÷ P100 6,000 sh.

P800,000 ÷ P100 8,000 sh

P1,200,000 ÷ P100 12,000 sh

39

C

Capital balances Adjustment in assets (P20,000 – P10,000 – P3,000) Adjusted capital

P260,000 7,000 P267,000

40

B

Total capital (P94,800 + P214,200) Adjustments in assets (P6,600 – P20,000 – P22,000) Adjusted capital Ordinary Share Capital (720 x 2 x P10) Preference Share Capital

P309,000 ( 35,400) P273,600 14,400 P259,200

Ordinary shares (P14,400 / P10) Preference shares (P259,200 / P100)

1,440 sh.. 2,592 sh.

41

C Capital balances before incorporation Adjustment in assets Adjusted capital Ordinary Share Capital (720 @P10) Preference Share Capital

Roldan P94,800 ( 11,800) P83,000 7,200 P75,800

Moises P214,200 ( 23,600) P190,600 7,200 P183,400

Preference shares Ordinary shares

758 720

1,834 720