Accountancy Department

ADVANCED FINANCIAL ACCOUNTING

PARTNERSHIP LIQUIDATION
QUIZZER

Problem A. The partnership of Art and Raffy has been very unprofitable for the last
three years. After closing the partnership books on December 31, 2015 the partners
decided to liquidate before partnership assets will be totally exhausted. The balances
sheet of the partnership as of December 31, 2015 is shown below:

ASSETS
Cash P10,000
Noncash assets 1,520,000
Total assets P1,530,000

LIABILITIES AND CAPITAL

Liabilities P1,060,000
Art, capital 300,000
Raffy, capital 170,000
Total P1,530,000

Additional information:
a. Art is personally insolvent while Raffy is solvent.
b. An offer equivalent to 75% of the carrying value of the non-cash asset is accepted by
the partners.
c. All liabilities including unrecorded utilities bill amounting to P7,500 is paid.
d. Liquidation expenses amounting to P12,000 was paid.
e. The profit and loss sharing is 40:60 for Art and Raffy, respectively.

Required: Determine the amount payable to each partner.

Problem B. ABC Partnership is winding up its affairs and submitted the following trial
balance at April 30, 2016:

DEBIT CREDIT
Cash P60,000
Accounts receivable 220,000
Inventory 140,000
Property, plant and equipment 990,000
Amie loan 120,000
Cathie loan 75,000
Accounts payable 470,000
Bobie loan 70,000
Amie capital (50%) 400,000
Bobie capital (30%) 400,000
Cathie capital (20%) 265,000
Total P1,605,000 P1,605,000

The partners liquidated the partnership and cash is distributed to the partners at the end
of each month. Summary of transactions follows:

1st month
a. Only 70% of the receivable is collected, the balance is uncollectible.
b. P100,000 is received from the entire inventory.
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 c. 50% of the property, plant and equipment is realized at P350,000.
d. Liquidation expenses of P10,000 is paid.
e. P300,000 of accounts payable is paid.
f. P20,000 is reserved for liquidation expenses.
g. The balance of cash is paid to partners.

2nd month
a. The remaining PPE is realized at P300,000.
b. Liquidation expenses of P20,000 is paid.
c. Unrecorded liabilities of P10,000 is paid.
d. The remaining accounts payable is paid.
e. Balance, to partners.

Required: Prepare a schedule showing how the cash available in the first
month ans sevond month is distributed to the partners using: (a) Periodic
Schedule of Payment and (b) Cash Priority Program.

Problem C. On January 1, 2016, ACJ Partnership entered into liquidation. The partners
capital balances on this date were as follows: A (25%) P2,500,000 ; C (35%) P5,400,000 ;
J (40%) P3,700,000. The partnership has liabilities amounting to P4,400,000, including a
loan from C P600,000. Cash on hand before the start of liquidation is P800,000.

With the information given, answer the following independent situations:

(1) Non-cash assets amounting to P7,400,000 were sold at book value and the rest of
the non cash assets were sold at a loss of 4,200,000. How much cash will be distributed
to the partners?

(2) After exhausting the non-cash assets of the partnership, assuming all partners has
personal assets more than their personal liabilities. How much cash must be invested by
the partners to satisfy the claims of the outside creditors and pay the amount due to the
partner/s?

(3) If C received P2,255,000, how much was the loss from the realization of the non-cash
assets?

Problem D. On January 1, 2016, Hell Lo Kitty Partnership entered in to liquidation. The

partnerscapital balances on this date were as follows: Hell (25%) P500,000 ; Lo (35%)
P1,200,000 ; Kitty (40%) P900,000. The partnership has liabilities amounting to
P1,400,000, including a loan from Lo P200,000. Cash on hand before the start of
liquidation is P300,000. If Lo received P525,000, how much was the loss from the
realization of the non-cash assets?

Problem E. AK, BS and CM are partners in business being liquidated. The partnership
has cash of P132,000 noncash assets with a book value of P1,584,000 and liabilities of
P1,039,500. The following data relates to the partners as of June 1, 2014: AK has capital
balance of P775,500, personal assets of P165,000, personal liabilities of P82,500.

BS extended a loan to the partnership in the amount of P82,500, deficit of P231,000,

personal assets of P247,500, personal liabilities of 99,000. CM has a capital balance of
49,500, personal assets of P412,500 and personal liabilities of P247,500. Their profit and
loss ratio is 3:1:1, AK, BS and CM respectively.

On June 12, 2014, assets with a book value P495,000 were sold for P330,000 cash. The
proceeds were used to pay off liabilities of the partnership. During the remainder of June,
no additional assets were realized and outside creditors began to pressure the
partnership for payment. On July 3, the partners agreed to contribute personal assets, to
whatever extent possible, in order to eliminate their respective deficit. Shortly thereafter,
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assets with book value of P330,000 and a fair value of P379,500 were distributed to AK.
Assuming additional noncash assets with book value of P660,000 were sold in July for
P891,000. How much cash would be distributed to CM?

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K.T. Tegio