KSA EP

Chapter

Page 1 of

Practical Accounting 2

Partnerships Liquidation - Lecture

Review Class: May 7, 2010 12:00 2:00 P.M.

1: a
Capital balances before realization
Loss on liquidation, P40,000
Cash distribution

PAR
P 20,000
( 20,000)
P

BOOGIE
P 16,000
( 12,000)
P 4,000

BIRDIE
P 10,000
( 8,000)
P 2,000

Capital balances before liquidation

Gain of P10,000 (150,000-140,000)
Cash distribution

PING
P 50,000
__6,000
P 56,000

PANG
P 50,000
__2,000
P 52,000

PONG
P 10,000
__2,000
P 12,000

Capital balances before liquidation

Loss of P40,000 (P140,000-P100,000)
Cash distribution

PING
P 50,000
( 24,000)
P 26,000

PANG
P 50,000
( 8,000)
P 42,000

PONG
P 10,000
( 8,000)
P 2,000

Capital balances before liquidation

Loss of P70,000 (P140,000-P70,000)
Balances
Absorption of Pong's deficiency, 6:2
Cash distribution

PING
P 50,000
( 42,000)
P8,000
( 3,000)
P 5,000

PANG
P 50,000
( 14,000)
P 36,000
( 1,000)
P 35,000

PONG
P 10,000
( 14,000)
( 4,000)
__4,000

COLT
MARK
Capital balances before liquidation (net of loans)P290,000 P200,000
Loss of P130,000, 4:3:3
( 52,000)
( 39,000)
Cash distribution
P238,000
P161,000

CLOCK
P220,000
( 39,000)
P181,000

2: c

3: b

4: a

5: b

6: c
Capital balances before liquidation
Loss of P60,000, 40:50:10
Cash distribution

JONAS
P160,000
( 24,000)
P136,000

CARLOS
P 45,000
( 30,000)
P 15,000

TOMAS
P 55,000
( 6,000)
P 49,000

Capital balances before liquidation

Loss of P100,000, 4:3:3
Cash distribution

ARIEL
P40,000
( 40,000)
P

BERT
P180,000
( 30,000)
P150,000

CESAR
P 30,000
( 30,000)
P

7: a

8: A
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Capital balances before realization

Additional investment by Nory for
the unpaid liabilities (33,000-18,000)
Loss on realization (schedule 1)
Payment by Oscar to Nory
Schedule 1
Total capital before liquidation
Unpaid liabilities
Total loss on realization

NORY
P23,000

OSCAR
P 13,500

15,000
( 30,900)
P 7,100

( 20,600)
( P7,100)
P 36,500
15,000
P 51,500

Payment by solvent partner is only up to deficit of remaining partner, meaning only to make
account zero and does not received anything considering he (insolvent partner) should suppose to
pay instead the partnership.
9: C

Capital balances before liquidation (net)

Loss on realization (schedule 1) P27,500
Balances, cash distribution

BLACK
P99,000
( 13,750)
P85,250

Schedule 1:
Capital balances of white (net)
Cash received by White
White's share of total loss (30%)

WHITE
P 91,500
( 8,250)
P 83,250

GREEN
P138,000
_( 5,500)
P132,500

P 91,500
_83,250
P 8,250

Total loss on realization (P8,250/39%)

P 27,500

10: c
Capital balances before liquidation (net)
Loss on realization, P63,600
Balances
Unrecorded liabilities, P500
Balances
Elimination of Nora's deficiency
Payment to partners

ANA
P27,000
( 25,320)
P 1,680
( 200)
P 1,480
( 1,380)
P 100

EVA
P 43,000
( 25,320)
P 17,680
( 200)
P 17,480
( 1,380)
P 16,100

NORA
P 10,000
( 12,660)
( 2,660)
( 100)
( 2,760)
__2,760
P

ARIES
P33,500
( 22,500)
P11,000

LEO
P 49,000
( 13,500)
P 35,500

TAURUS
P 36,500
( 9,000)
P 27,500

(Nora is deficient partner)

11: d not in the choices (change Taurus to 40,500)
Capital balances before liquidation (net)
Loss on realization (schedule 1) P45,000
Payment to partners

Schedule 1:

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Taurus capital (net)

Payment to Taurus
Share of total loss (20%)

P36,500
( 27,500)
P 9,000

Total loss on realization (9,000/20%)

P45,000

12: c
Capital balances, June 11
Net loss from operation (squeeze)
Capital balances, August 30 before
liquidation (48,500-25,600)
Loss on realization (47,500-30,000)
Balances
Additional investment by Olga
Balances
Elimination of Olga's deficiency
Payment to partners

TOTAL
P32,700
( 9,800)

MONA
P15,000
( 4,200)

NORA
P13,500
( 2,800)

OLGA
P 4,200
( 2,800)

P22,900
( 17,500)
P 5,400
_1,500
P 6,900
______
P 6,900

P10,800
( 7,500)
P 3,300
_____
P 3,300
( 1,260)
P 2,040

P10,700
( 5,000)
P 5,700
_____
P 5,700
( 840)
P 4,860

P 1,400
( 5,000)
( 3,600)
_1,500
( 2,100)
_2,100
P

Capital balances before liquidation

Operating loss, P21,000
Drawings
Loans
Loss on realization, P12,000
Balances
Absorption of Tita's deficiency
Payment to Nora

RITA
P49,000
( 3,500)
( 10,000)

( 2,000)
P33,500
__1,500
P32,000

SARA
P18,000
( 7,000)
( 15,000)
8,000
( 4,000)
P

_____
P

TITA
P10,000
( 10,500)
( 20,000)
25,000
( 6,000)
( 1,500)
_1,500
P

CLARO
P45,000

PEDRO
P27,000

ANDRO
P50,000

( 24,000)
P21,000

( 24,000)
P 3,000

( 12,000)
P38,000

TOTAL
P47,500
( 38,500)
P 9,000

MONA
P28,500
( 23,100)
P 5,400

LISA
P19,000
( 15,400)
P 3,600

13: b

14: a
Capital balances before liquidation
Loss on realization
Accounts Receivable (P50,000 X 40%)
Investment (P30,000 - P20,000)
Equipment (P60,000-P30,000)
Total
Payment to partners

P20,000
10,000
_30,000
P60,000

15: c
Capital balances before liquidation (inclusive loans)
Loss on realization, (squeeze)
Capital balances - cash distribution
Cash after realization
Less Liabilities (P36,000-P7,500)
Total capital after realization

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P 37,500
( 28,500)
P 9,000

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Page 4 of

Installment
1. B
Capital balances before liquidation
Loan balances
Total interest
Possible loss (40,000+10,000)
Balances
Additional loss to RJ & SJ, 5:3
Cash distribution

RJ
P22,000
_10,000
32,000
( 25,000)
7,000
( 1,250)
P 5,750

SJ
P30,000
______
30,000
( 15,000)
15,000
( 750)
P14,250

TJ
P 8,000
______
8,000
( 10,000)
( 2,000)
__2,000
P

Capital balances
Loan balances
Total interest
Possible loss (23,000-6,000)
Balances
Additional loss to BR, CR, DR, 3:2:1
Balances
Additional loss to CR & DR, 2:1
Payment to partners

AR
P 5,500
_1,000
6,500
( 6,800)
( 300)
___300

_____
P

BR
P 5,150
_____
5,150
( 5,100)
50
( 150)
( 100)
___100
P

CR
P 6,850
_____
6,850
( 3,400)
3,450
( 100)
3,350
_( 67)
P 3,283

Total liabilities
Total Capital
Total Assets

P 1,000
_22,000
P23,000

Capital balances before liquidation

Loss on realization, P40,000
Capital balances before cash distribution
Possible loss, P90,000
Balances
Additional loss to Lim & Wan, 4:2
Cash distribution

TAN
P40,000
( 16,000)
24,000
( 36,000)
( 12,000)
_12,000
P

LIM
P65,000
( 16,000)
49,000
( 36,000)
13,000
( 8,000)
P 5,000

WAN
P48,000
( 8,000)
40,000
( 18,000)
22,000
( 4,000)
P18,000

Capital balances before cash distribution

Possible loss (90,000+3,000)
Balances
Additional loss to Lim & Wan, 4:2
Cash distribution

TAN
P24,000
( 37,200)
( 13,200)
_13,200
P

LIM
P49,000
( 18,600)
30,400
( 8,800)
P21,600

WAN
P40,000
( 18,600)
21,400
_( 4,400)
P17,000

CARPIO
P72,000
( 5,000)

LOBO
P54,000
( 5,000)

2. A
DR
P 4,500
_____
4,500
( 1,700)
2,800
( 50)
2,750
_( 33)
P 2,717

4. A

5. B

6. D
Tan (14,000 X 40%)
Lim (14,000 X 40%)
Wan (14,000 X 20%)

P5,600
P5,600
P2,800

7. A
Capital balances before liquidation
Goodwill written-off

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Page 5 of
Cash balance
Possible loss (100,000+10,000), 110,000
Capital balances before liquidation
Additional loss to Carpio
Cash distribution

67,000
( 55,000)
12,000
( 6,000)
P 6,000

49,000
( 55,000)
( 6,000)
__6,000
P

Capital balances before liquidation

Loss on realization (120,000-90,000)
Liquidation expenses, P2,000
Capital balances before cash distribution
Loan balances
Total interest
Possible Loss (210,000-120,000)
Balances
Additional loss to Santos & Hervas
Cash distribution

JACOB
P40,000
( 15,000)
( 1,000)
24,000
__8,000
32,000
( 45,000)
( 13,000)
_13,000
P

SANTOS
P72,000
( 9,000)
( 600)
62,400
_____
62,400
27,000
35,400
( 7,800)
P27,600

HERVAS
P 7,000
( 6,000)
( 400)
63,600
_____
63,600
( 18,000)
45,600
( 5,200)
P40,400

Capital balances before liquidation

Salary payable
Balances
Loss on realization (P2,400)
Balances
Liquidation expenses (P600)
Balances
Loan balances
Total interest
Possible Loss (126,000-18,000)
Balances
Additional loss to A & C
Balances
Additional loss to C
Cash distribution

A
B
P16,200
P12,000
_____ __________
16,200
12,000
( 600)
( 600)
15,600
11,400
( 150)
( 150)
15,450
11,250
12,000
14,400
27,450
25,650
( 27,000)
( 27,000)
450
( 1,350)
( 780)
__1,350
( 330)

___330
_____
P

C
P37,700
160
37,860
( 600)
37,260
( 150)
37,110
_____
37,110
( 27,000)
10,110
( 780)
9,330
( 330)
P 9,000

D
P17,700
___240
17,940
( 600)
17,340
( 150)
17,190
__9,600
26,790
( 27,000)
( 210)
____210

_____
P

Total interest
Profit and Loss ratio
Loan absorption balances
Priority I - to Sy
Balances
Priority II - to Sy & Less
Total

DY
P22,000
2/4
44,000
_____
44,000
_____
P44,000

8. D

9. D

10. A
BALANCES
SY
P15,500
1/4
62,000
( 6,000)
56,000
( 12,000)
P44,000

LEE
P14,000
1/4
56,000
_____
56,000
( 12,000)
P44,000

CASH PAYMENTS

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Page 6 of
DY
Priority I - to Sy (6,000 X 1/4)
Priority II - to Sy (12,000 X 1/4)
to Lee (12,000 X 1/4)
Total

_____
P

Further cash distribution, profit and loss ratio

Cash distribution to Dy
Divided by Dy's Profit and Loss ratio
Amount in excess of P7,560
Total payment under priority I & II
Total cash distribution to partner

SY
1,500
3,000
_____
P 4,500

LEE

_3,000
P 3,000

P 6,250
2/4
12,500
__7,500
P20,000

11. D
Cash before liquidation
Cash realized
Total
Less: Payment of liquidation expense
Payment of liability
Payment to partners (Q 5-10)
Cash withheld

P12,000
_32,000
44,000
P 1,000
5,400
20,000

_26,400
P17,600

12. C
Loss absorption balances:
Cena (18,000/50%)
Batista (27,000/30%)
Excess of Batista
Multiply by Batista's Profit & Loss ratio
Priority I to Batista

P36,000
90,000
54,000
____30%
P16,200

13. C
Capital balances
Loan balances
Total interest
Divided by Profit and Loss Ratio
Loss Absorption balances
Priority I to CC
Balances
Priority II to BB & CC, 2:1
Total interest

AA
P15,000
10,000
25,000
2/5
62,500
_____
62,500
_____
P62,500

AA
Priority I to CC (12,500 X 1/5)
Priority II to BB (25,000 X 2/5)
to CC (25,000 X 1/5)
Total
Priority III P/L Ratio
Cash distribution to CC:

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____
P

BALANCES
BB
P30,000
_5,000
35,000
2/5
87,520
_____
87,520
( 25,000)
P62,500

CC
P10,000
10,000
20,000
1/5
100,000
( 12,500)
100,000
( 25,000)
P62,500

CASH PAYMENTS
BB
CC

2,500
10,000

_____
_5,000
P10,000
P 7,500

2010 PICPA-EPKSA CPA Review, [07MAY10]

Page 7 of
Priority I
Priority II (12,000-2,500) X 1/3
Total cash paid to CC

P2,500
3,167
P5,667

14. C
JJ
P 60,000
_18,000
_78,000
____40%
195,000
______
195,000
______
195,000
______
P195,000

Capital balances
Loan balances
Total interest
Divided by Profit and Loss Ratio
Loss Absorption balances
Priority I to LL
Balances
Priority II to LL, MM, 15:10
Balances
Priority II to KK, LL, MM, 35:15:10
Total

JJ
Priority I to LL (30,000 X 15%)
Priority II to LL (30,000 X 15%)
to MM (30,000 X 10%)
Priority II to KK (75,000 X 35%)
to LL (75,000 X 15%)
to MM (75,000 X 10%)
Total

______
P

BALANCES
KK
LL
P 64,500
P 54,000
_30,000
______
_94,500
_54,000
_____35%
_____15%
270,000
360,000
______
( 60,000)
270,000
300,000
______
( 30,000)
270,000
270,000
( 75,000)
( 75,000)
P195,000
P195,000
CASH PAYMENT
KK
LL

9,000

4,500

1,750

11,250
______
______
P 1,750
P 24,750

MM
P 30,000
______
_30,000
_____10%
300,000
______
300,000
( 30,000)
270,000
( 75,000)
P195,000

MM

3,000

___7,500
P 10,500

Further cash distribution, Profit and Loss ratio

Cash distribution to Partners (P38,100-9,000), P29,100

Priority I to LL
Priority II to LL, MM, 15:10
Priority II to KK, LL, MM, 35:15:10
(29,100-16,500), 12,600
Cash distribution

JJ

_____
P

KK

MM

LL
P 9,000
4,500

3,000

TOTAL
P 9,000
7,500

__7,350
P 7,350

___3,150
P 16,650

__2,100
P 5,100

__12,600
P 29,100

ARCE
P 20,000
_10,000
_32,000
_____50%
64,000
______
64,000

BALANCES
BELLO
P 24,900
______
_24,900
_____30%
83,000
( 8,000)
75,000

CRUZ
P 15,000
______
_15,000
_____20%
75,000
______
75,000

5-15: a

Capital balances
Loan balances
Total interest
Divided by Profit and Loss Ratio
Loss Absorption balances
Priority I to Bello
Balances

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Page 8 of
Priority II to Bello & cruz, 3:2
Total

______
P 64,000

( 11,000)
P 64,000

( 11,000)
P 64,000

88

Chapter 5

ARCE
P - I to Bello (8,000 X 30%)
P - II to Bello (11,000 X 30%)
to Cruz (11,000 X 20%)
Total

_____
P

CASH PAYMENTS
BELLO
CRUZ
2,400

3,300

_____
_2,200
P 5,700
P2,200

Further Cash distribution, Profit and Loss ratio

Based on the above cash priority program, the P2,000 is only a partial payment to Bello who is
entitled to a maximum of P2,400 under Priority I. Only after satisfying Priority I, Cruz will receive
payment and only after P7,900 has been distributed to Bello and Cruz will Arce receive payment.
Therefore no payments are made to Arce and Cruz.

5-16: a
Cash paid to Arce
Divide by Profit & Loss ratio
Amount in excess of P7,900
Add: cash paid under PI and PII
Total cash distribution to partners
Cash paid to Creditor (30,000-10,000)
Total
Less cash before realization
Cash realized from sale of asset

P2,000
_____5%
40,000
_7,900
47,900
20,000
67,900
_6,000
P61,900

Cash distribution to Cruz

Divide by profit and loss ratio
Cash distribution under Priority II
Multiply by Bello's Profit and Loss ratio
Cash distribution to Bello under Priority II
Cash distribution to Bello under Priority I
Total cash distribution to Bello

P 6,200
2/5
15,500
3/5
9,300
__2,400
P11,700

5-17: b

5-18: b

Total Interest
Profit and Loss ratio
Loss absorption balances
Priority I - to Nieka
Total

BALANCES
CASH PAYMENT
MONZON
NIEVA
MONZON
NIEVA
P22,500
P17,500
_____60%
_____40%
37,500
43,750
______
( 6,250)
_____
_2,500
P37,500
P37,500
P

P2,500

Further cash distribution - Profit and Loss ratio

All the P2,000 should be paid Nieva, since she is entitled to P2,500 under Priority I
Partnership Liquidation by Installment

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89

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Page 9 of

5-19: b
Cash distribution
PI to Nieva (2,500-2,000)
Balances, 6:40
Cash distribution

CASH MONZON
P12,500

( 500)

_12,000
__7,200
P

P 7,200

NIEVA

500
_4,800
P5,300

5-20: a
Cash before liquidation
June: Cash realized
Payment to creditor
Payment to Partners
Cash balances, June 30
July: Cash realized
Payment of liquidation expense
Payment to Partners
Cash balances, July 31
Aug: Cash realized
Cash distribution for August,
Profit and Loss ratio
Distribution to Partners - August
Monzon (22,500 X 60%)
Nieva (22,500 x 40%)

CONFIDENTIAL: For PICPA-EPKSA and Authorized Users Only

P 5,000
18,000
( 20,000)
__2,000
1,000
12,000
( 500)
( 12,500)

_22,500
P22,500
P13,500
P 9,000

2010 PICPA-EPKSA CPA Review, [07MAY10]