advanced accounting lupisan

CHAPTER 3Partnership Liquidation

EXERCISES

Exercise 3 - 1

Aguilar Benito Casimiro DavidCapital balances before liquidation P 11,000 P 10,300 P 13,700 P 9,000Loan from partners 2,000Total partners’ interest P 13,000 P 10,300 P 13,700 P 9,000Loss on realization (P46,000 – P12,000) (13,600) ( 10,200) ( 6,800) ( 3,400)Balances P( 600) P 100 P 6,900 P 5,600Additional loss to partners 600 ( 300) ( 200) ( 100)Balances -------- P ( 200) P 6,700 P 5,500Additional loss to partners 200 ( 133) ( 67)Distribution of cash to partners --------- --------- 6,567 5,433

Exercise 3 - 2

Duque Espino Felipe TotalOriginal investments P 50,000 P 22,500 P 20,000 P 92,500Net income for 2007 15,000 7,500 7,500 30,000Drawings in 2007 ( 15,000) ( 10,000) ( 10,000) ( 35,000)Total partners’ interest before dissolution P 50,000 P 20,000 P 17,500 P 87,500Net assets distributed to partners ( 32,500) ( 16,250) ( 16,250) ( 65,000)Balances P 17,500 P 3,750 P 1,250 P 22,500Loss to partners distributed 2:1:1 ( 11,250) ( 5,625) ( 5,625) ( 22,500)Cash settlement among partners P 6,250 P( 1,875) P( 4,375) ------

Exercise 3 - 3

1. Guarin, Capital 1,500 Receivable from Guarin 1,500 To offset receivable from Guarin against his capital.

2. Salary Payable to Henson 500 Henson, Capital 500 To include salary payable to Henson to his interest.

3. Henson, Capital (P24,500 x 40%) 9,800Guarin, Capital (P24,500 x 60%) 14,700 Loss from Liquidation 24,500 To distribute loss from liquidation to partners.

4. Henson, Capital (P9,500 + P500 - P9,800) 200Guarin, Capital (P18,000 - P1,500 - P14,700) 1,800 Cash 2,000

Exercise 3 - 41. Ibarra Javier Katindig

AA1 - Chapter 3 (2008 edition) page 2

Original investment P 60,000 P 54,000 P 16,000Net loss for six months* (18,000) (12,000) ( 6,000)Loss on realization (P121,000 - P49,000 = P72,000) (36,000) (24,000) (12,000)Balances P 6,000 P 18,000 P( 2,000)Additional loss to partners ( 1,200) ( 800) 2,000Cash distribution to Ibarra ( 4,800)

* Total capital, March 1 (P60,000 + P54,000 + P16,000) P130,000

Net assets, Aug. 31 (P5,000 + P121,000 - P32,000) 94,000Net loss P 36,000

2. Book value of other assets P121,000Total loss on realization Capital balance of Katindig after dist. of net loss P 10,000 Excess of personal liabilities over personal assets ( 5,000) Maximum amount of loss that can be absorbed by Katindig P 5,000 Fractional share of Katindig 1/6__ ( 30,000)Cash that must be realized on sale of other assets P 91,000

Exercise 3 – 51. Book value of other assets (P459,000 – P3,000) P456,000

Cash realized: Accounts receivable [P180,000 – (P60,000 x 20%)] P168,000 Merchandise inventory 75,000 Prepaid advertising 2,400 Machinery and equipment (P120,000 x 60%) 72,000 317,400Loss on realization P138,600

Lesaca – Manalo PartnershipStatement of Liquidation

December 31, 2008

Other Liabilities CapitalCash Assets AP NP Lesaca Manalo

Balances before liquidation P 3,000 P456,000 P60,000 P258,000 P90,000 P 51,000Sale of assets and distribution of loss

317,400 ( 456,000)

( 55,440) ( 83,160)

Balances P320,400 P60,000 P258,000 P34,560 (P32,160)Payment of liabilities ( 320,400

)( 59,400) ( 258,000

)( 1,200) ( 1,800)

Balances P600 P33,360 (P33,960)Additional investment by Manalo

12,000 12,000

Balances P 12,000 P 600 P33,360 (P21,960)Payment of liabilities ( 600) ( 600)Balances P 11,400 P33,360 (P21,960)Additional loss to Lesaca ( 21,960) 21,960Payment to Lesaca P 11,400 P11,400

Exercise 3 – 6Nocum Oliva Pascua Quinto


Capital balances before liquidation P180,000 P300,000 P240,000 (P 33,000) Restricted interest – possible loss Non-cash assets P600,000 Liquidation expenses 9,000 Unrecorded liabilities 15,000 Total P624,000 ( 156,000) ( 156,000) ( 156,000) ( 156,000)Balances P 24,000 P144,000 P 84,000 (P189,000)Restricted interest – possible loss to Nocum, Oliva and Pascua for the deficiency of Quinto ( 63,000) ( 63,000) ( 63,000) 189,000Balances (P 39,000) P 81,000 P 21,000 -Restricted interest – possible loss to Oliva and Pascua for the deficiency of Nocum 39,000 ( 19,500) ( 19,500) Safe payment - P 61,500 P 1,500 -

Exercise 3 - 8 Rama, Sison and Toledo

Cash Priority Program


PAYMENTS

Rama Sison Toledo Rama Sison ToledoCapital balances P30,000 P70,000 P40,000Add Loan balances 20,000 20,000 30,000Total partners’ interest P50,000 P90,000 P70,000Profit and loss ratio 40% 40% 20%Loss absorption balance P125,000 P225,000 P350,000Allocation I – Cash to Toledo reducing LAB to an amount reported for Sison (P125,000 x 20%) (125,000) P25,000Balances P125,000 P225,000 P225,000Allocation II - Cash to Sison & Toledo reducing LAB to an amount reported for Rama P100,000 x 40% (100,000) P40,000 P100,000 x 20% (100,000) 20,000Balances P125,000 P125,000 P125,000 P40,000 P45,000Allocation III - Further cash distribution may be made in the P & L ratio

Exercise 3-91. Julian, Lagman and Magno

Cash Priority ProgramJanuary 1, 2008

PAYMENTSJulian Lagman Magno Julian Lagman Magno

Capital balances before liquidation P 36,000 P 54,000 P18,000Add Note payable to Magno 14,000Total partners’ interest P 36,000 P 54,000 P 32,000Profit and loss ratio 3/10 3/10 4/10Loss absorption balances P120,000 P180,000

(60,000)

P80,000Allocation I – Cash to Lagman reducing

LAB to an amount reported for Julian (P60,000 x 3/10) P18,000

Balances P120,000 P120,000 P80,000Allocation II – Cash to Julian & Lagman

reducing LAB to an amount reported for Magno (P40,000 x 3/10) ( 40,000) (40,000) P12,000 12,000

Balances P80,000 P80,000 P80,000 P12,000 P20,000 -Allocation III – Further cash distributions

may be made in the P & L ratio

2. Julian, Lagman and MagnoStatement of LiquidationJanuary to March, 2008


Other NP to PAYMENTSCash Assets Liabilities Magno Julian Lagman Magno

Balances before liquidation P12,000 P146,000 P36,000 P14,000 P36,000 P54,000 P18,000January: Sale of assets and dist. Of

loss 30,000 ( 38,000) ( 2,400) ( 2,400) ( 3,200) Payment of liquidation

expenses ( 3,600) ( 1,080) (1,080 (1,440) Payment of liabilities ( 36,000) (36,000) Distribution of cash to

partners (sch. 1) ( 2,400) (2,400)Balances P108,000 P14,000 P32,520 P48,120 P13,360February: Sale of assets and

distribution of gain 44,000 (35,000) 2,700 2,700 3,600 Payment of liquidation

expenses (8,400) (2,520) (2,520) (3,360) Distribution of cash to

partners (sch. 2) (35,600) (10,000) (25,600)Balances P73,000 P14,000 P22,700 P22,700 P13,600March: Sale of assets and

distribution of loss 36,000 (73,000) (11,100) (11,100) (14,800) Balances P36,000 P14,000 P11,600 P11,600 P(1,200) Offset of loan against

deficiency ( 1,200) 1,200Final payment to partners (P36,000) (P12,800) (P11,600

)(P11,600

)

Schedule 1Installment Liquidation

January 31, 2008

Amount Julian Lagman Mango Cash available P2,400Allocation I – Payable to Lagman P2,400 P2,400

Schedule 2Installment Liquidation

February 29, 2008

Amount Julian Lagman Mango Cash available P2,400Allocation I – Balance Payable to Lagman P2,400

P20,000 P10,000

P2,400

10,000Allocation II – Payable to Julian and

LagmanP10,000 P25,600 -

3. Journal entriesJanuary Cash 30,000

Julian, Capital 2,400


Lagman, Capital 2,400Magno, Capital 3,200 Other Asset 38,000

Julian, Capital 1,080Lagman, Capital 1,080Magno, Capital 1,440 Cash 3,600

Liabilities 36,000 Cash 36,000

Lagman, Capital 2,400 Cash 2,400

February Cash 44,000 Other assets 35,000 Julian, Capital 2,700 Lagman, Capital 2,700 Magno, Capital 3,600

Julian, Capital 2,520Lagman, Capital 2,520Magno, Capital 3,360 Cash 8,400

Julian. Capital 10,000Lagman, Capital 25,600 Cash 35,600

March Cash 36,000Julian, Capital 11,100Lagman, Capital 11,100Magno, Capital 14,800 Other assets 73,000

Note Payable to Magno 1,200 Magno, Capital 1,200

Note Payable to Magno 12,800Julian, Capital 11,600Lagman, Capital 11,600 Cash 36,000

Exercise 3 - 10 U, V and W Co.

Cash Priority Program PAYMENTS


Urbe Villa Waldo Urbe Villa WaldoCapital balances P 11,200 P13,000 P 5,800Profit and loss ratio 4/7 2/7 1/7Loss absorption balance P 19,600 P 45,500 P 40,600Allocation I - Cash to Villa reducing LAB to an amount reported for Waldo (P4,900 x 2/7) ( 4,900) P 1,400Balances P 19,600 P 40,600 P 40,600Allocation II - Cash to Villa & Waldo reducing LAB to an amount reported for Urbe P21,000 x 2/7 ( 21,000) 6,000 P21,000 x 1/7 (21,000) P 3,000Balances P 19,600 P 19,600 P 19,600 P 7,400 P 3,000Allocation III - Further cash distribution may be made in the P & L ratio

2. Book value of assets P 30,000Loss on realization: Capital balance of Urbe prior to realization P 11,200 Cash to be received by Urbe 10,000 Share of Urbe in the loss on realization P 1,200

Fractional share of Urbe 4/7_ 2,100Cash to be realized of the sale of assets P 27,900

3. Allocation III - P3,200 ÷ 4/7 = P5,600 x 1/7 P 800 Allocation II 3,000

Total cash received by Waldo P 3,800

4. Book value of assets P 30,000Total cash available Allocation I P 1,400 Allocation II - P1,800 - P1,400 = P400 ÷ 2/3 600 2,000Loss on liquidation P 28,000

Exercise 3 – 11Partnership Books1. Inventories 90,000

Capital Adjustment Account 90,000

2. Accumulated Depreciation 160,000 Equipment 80,000 Capital Adjustment Account 80,000

3. Goodwill 56,000 Capital Adjustment Account 56,000 P980,000 – P924,000 = P56,000

4. Capital Adjustment Account 226,000 Belen, Capital (3/4) 169,500 Bgnes, Capital (1/4) 56,500


5. Colored Co. Stocks 980,000Allowance for Uncollectible Accounts 12,000Accounts Payable 104,000 Accounts Receivable 124,000 Inventories 296,000 Equipment 520,000 Goodwill 156,000

6. Belen, Capital 563,500Bagnes, Capital 458,500 Cash 42,000 Colored Co. Stocks 980,000

New Corporation’s Books1. Authorized to issue 50,000 shares of P50 par value Ordinary Share Capital.

2. Cash 700,000 Ordinary Share Capital 500,000 PIC in Excess of Par 200,000

3. Accounts Receivable 124,000Inventories 296,000Equipment 520,000Goodwill 156,000 Allowance for Doubtful Accounts 12,000 Accounts Payable 104,000 Ordinary Share Capital 700,000 PIC in Excess of Par 280,000

Problem 3 – 2 (Case 3 – cont.)

Calma, Daza and EstebanSchedule of Cash Distribution to Partners


Calma Daza EstebanCapital balances before cash distribution P 27,000 P ( 3,000) P 46,000Add loan balance 8,000Total partners’ interest P 27,000 P ( 3,000) P 54,000Restricted interest - possible loss to Calma and Esteban in the ratio of 2:1 if Daza fails to pay his deficiency ( 2,000) 3,000 ( 1,000)Free interests - amounts to be paid to partners P 25,000 - P 53,000Payment to apply on: Loan P 8,000 Capital P 25,000 45,000Cash distribution P 25,000 - P 53,000

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

Problem 3 – 2 (Case 4 – cont.)

Calma, Daza and EstebanSchedule of Cash Distribution to Partners

Calma Daza EstebanCapital balances before cash distribution P 9,000 P (21,000) P 37,000Add loan balance 8,000Total partners’ interest P 9,000 P (21,000) P 45,000Restricted interest - possible loss to Calm and Esteban in the ratio of 2:1 if Daza fails to pay his deficiency (14,000) 21,000 ( 7,000)

Balances P( 5,000) - P 38,000Restricted interest - possible loss to Esteban if Calma fails to pay his deficiency

5,000 -

( 5,000)

Free interests - amounts to be paid to partners - - -Payment to apply on: Loan P 8,000 Capital 25,000Cash distribution - - P 33,000

Chapter 3 – Partnership LiquidationSuggested Answers page

Problem 3 - 3

1. a. Cash 48,000Accumulated Depreciation 25,000Fuentes, Capital (P72,000 x 5/15) 24,000Goco, Capital (P72,000 x 5/15) 24,000Herrera, Capital (P72,000 x 3/15) 14,400Isla, Capital (P72,000 x 2/15) 9,600 Merchandise Inventory 55,000 Accounts Receivable 60,000 Store Fixtures 30,000

b. Accounts Payable 76,000 Cash (P28,000 + P48,000) 76,000

c. Fuentes, Capital 4,500Herrera, Capital 2,700Isla, Capital 1,800 Goco, Capital 9,000

d. Fuentes, Capital 1,500Isla, Capital 600 Herrera, Capital 2,100

e. Fuentes, Loan 2,000Isla, Loan 3,000 Fuentes, Capital 2,000 Isla, Capital 3,000

f. Cash 6,000 Fuentes, Capital 1,000 Herrera, Capital 5,000

g. Accounts Payable 4,000 Cash 4,000

h. Isla, Loan 2,000 Cash 2,000

2. a. Accounts Payable 4,000 Fuentes, Capital 4,000

b. Isla, Loan 2,000Fuentes, Capital 3,000 Herrera, Capital 5,000

Problem 3 – 3 (cont.)


3. a. Accounts Payable 4,000 Herrera, Capital 4,000

b. Isla, Capital 2,000 Fuentes, Capital 1,000 Herrera, Capital 1,000

Schedule to support the entries in Requirement 1

L O A N C A P I T A LFuentes Isla Fuentes Goco Herrera Isla

Balances before liquidation P 2,000 P 5,000 P27,000 P15,000 P10,000 P 9,000Distribution of loss ( 24,000) ( 24,000) ( 14,400) ( 9,600)Balances P 2,000 P 5,000 P 3,000 P( 9,000) P( 4,400) P( 600)Additional loss for the deficiency of Goco ( 4,500) 9,000 ( 2,700) ( 1,800)Balances P 2,000 P 5,000 P( 1,500) - P( 7,100) P( 2,400)Additional loss for the deficiency of Herrera ( 1,500) 2,100 ( 600)Balances P 2,000 P 5,000 P( 3,000) - P( 5,000) P( 3,000)Offset against debit balance in capital account ( 2,000) ( 3,000) 2,000 - 3,000Balances - P 2,000 P( 1,000) P( 5,000) -Additional investment by partners 1,000 5,000Payment to Isla - P 2,000 - - - -


Problem 3 -5

JKLM Trading Co.Schedule To Accompany Statement of Liquidation

Amounts to be Paid to PartnersFebruary 28, 2008

Jocson Kaimo Legarda ManabatCapital balances before dist. of cash P 19,128 P 88,992 P 101,532 P 22,878Add Loan balances 15,000Total partners’ interest P 34,128 P 88,992 P 101,532 P 22,878Restricted interest - possible loss if nothing is realized on remaining assets ( 25,494) ( 38,241) ( 38,241) ( 25,494)Balances P 8,634 P 50,751 P 63,291 P( 2,616)Restricted interest - additional possible loss if Manabat is unable to pay his deficiency (20:30:30) ( 654) ( 981) ( 981) 2,616Free interest - payments to partners P 7,980 P 49,770 P 62,310 -

Payment to apply on Loan P 7,980 Capital P 49,770 P 62,310 -Total cash distribution P 7,980 P 49,770 P 62,310 -

JKLM Trading Co.Schedule To Accompany Statement of Liquidation

Amounts to be Paid to PartnersMarch 31, 2008

Jocson Kaimo Legarda ManabatCapital balances before dist. of cash P 18,348 P 38,052 P 38,052 P 22,098Add Loan balance 7,020Total partners’ interest P 25,368 P 38,052 P 38,052 P 22,098Restricted interest - possible loss if nothing is realized on remaining assets ( 16,524) ( 24,786) ( 24,786) (16,524)Free interest - payment to partners P 8,844 P 13,266 P 13,266 P 5,574

Payment to apply on: Loan P 7,020 Capital 1,824 P 13,266 P 13,266 P 5,574 Total cash distribution P 8,844 P 13,266 P 13,266 P 5,574

AA1 -Chapter 3 – Partnership LiquidationSuggested Answers page

Problem 3 – 6QRS Partnership

Schedule to Accompany Statement of LiquidationAmounts to be Paid to Partners

July 31, 2008 Quizon Roman Silva

Balances before cash distribution P116,250 P159,750 P151,500Add Loan balance 150,000Total partners’ interest P116,250 P309,750 P151,500Restricted interest – possible loss of P480,000 on remaining unsold assets and cash withheld of P30,000 ( 255,000) ( 153,000) ( 102,000)Balances ( P138,750) P156,750 P 49,500Restricted interest – possible loss of P138,750 to Roman and Silva 138,750 ( 83,250) ( 55,500)Balances - P 73,500 (P 6,000)Restricted interest – possible loss to Roman ( 6,000) 6,000Payment to Roman to apply on loan P 67,500

QRS PartnershipSchedule to Accompany Statement of Liquidation

Amounts to be Paid to PartnersAugust 31, 2008

Quizon Roman SilvaBalances before cash distribution P 93,000 P145,800 P142,200Add Loan balance 82,500Total partners’ interest P 93,000 P228,300 P142,200Restricted interest – possible loss of P375,000 on remaining unsold assets and cash withheld of P30,000 ( 202,500) ( 121,500) ( 81,000)Balances ( P109,500) P106,800 P 61,200Restricted interest – possible loss of P109,500 to Roman and Silva 109,500 ( 65,700) ( 43,800)Payment to Roman to apply on loan and to Silva to apply on capital - P 41,100 P 17,400


Problem 3 - 7 Requirement 1

Tabora, Ureta and VelosoCash Priority Program

January 1, 2008 P A Y M E N T S

Tabora Ureta Veloso Tabora Ureta VelosoCapital balances P120,000 P 90,000 P 40,000Loan balances 45,000 30,000 13,000Total partners’ interest P165,000 P120,000 P 53,000Profit and loss ratio 50% 30% 20%Loss absorption balance P330,000 P400,000 P265,000Allocation I - Cash to Ureta to reduce LAB to amount reported for Tabora ( 70,000) P21,000Balances P330,000 P330,000 P265,000Allocation II - Cash to Tabora and Ureta to reduce LAB to amount reported for Veloso ( 65,000) ( 65,000) P32,500 19,500Balances P265,000 P265,000 P265,000 P32,500 P40,500Allocation III - Further cash distribution may be made based on P & L ratio

Requirement 2Amount Tabora Ureta Veloso

January: Cash available P15,000 Allocation I - payable to Ureta 15,000 P15,000February: Cash available P40,000 Allocation I - Bal. payable to Ureta 6,000 P 6,000 Allocation II - Payable to Tabora and Ureta in the ratio of 50:30 P34,000 P21,250 12,750

P21,250 P18,750March: Cash available P90,000 Allocation II - Balance 18,000 P11,250 P 6,750 Allocation III - Based on P & L ratio P72,000 36,000 21,600 P14,400

P47,250 P28,350 P14,400April: Cash available P30,000 Allocation III - Based on P & L ratio 30,000 P15,000 P 9,000 P 6,000


Problem 3 – 8 (cont.)Requirement 1January: a. Cash 112,000

Accounts Receivable 112,000

b. Neri, Capital 2,200Ordan, Capital 1,100Pacia, Capital 1,100 Cash 4,400

c. Accounts Payable 38,000 Cash 38,000

d. Pacia, Loan 9,000Pacia, Capital 7,000 Cash 16,000

February: a. Cash 36,000 Accounts Receivable 36,000

b. Neri, Capital 1,400Ordan, Capital 700Pacia, Capital 700

Cash 2,800

c. Accounts Payable 39,000 Cash 38,000 Neri, Capital 500 Ordan, Capital 250 Pacia, Capital 250

d. Salary Payable to Neri 6,000Neri, Capital 1,400Ordan, Capital 3,700Pacia, Capital 8,700 Cash 19,800

March: a. Cash 35,000Neri, Capital 4,000Ordan, Capital 2,000Pacia, Capital 2,000 Accounts Receivable 43,000

b. Neri, Capital 2,000Ordan, Capital 1,000Pacia, Capital 1,000 Cash 4,000


c. Neri, Capital 39,500 Ordan, Capital 19,750

Pacia, Capital 19,750 Cash 79,000

Problem 3 - 9

Requirement 1 Wilson, Yuson and ZapataCash Distribution Schedule

June 30, 2008 P AY M E N T S

Wilson Yuson Zapata Wilson Yuson ZapataCapital balances P 67,000 P 45,000 P 31,500Receivable from partners 12,000 7,500Total partners’ interest P 55,000 P 45,000 P 24,000Profit and loss ratio 50% 30% 20%Loss absorption balance P110,000 P150,000 P120,000Allocation I - Cash to Yuson to reduce LAB to amt. reported for Zapata 30,000 P 9,000Balances P110,000 P120,000 P120,000Allocation II - Cash to Zapata and Yuson to reduce LAB to amt. reported for Wilson 10,000 10,000 3,000 P 2,000Balances P110,000 P110,000 P110,000Allocation III - Based on P & L ratio (P6,000 + P100,000 - P17,000 = P89,000 - P14,000)

P37,500 22,500 15,000

TOTALS P37,500 P 34,500 P17,000


Problem 3 – 9 Requirement No 2 Wilson, Yuson and Zapata

Cash Distribution ScheduleJuly 1 - September 30, 2008

Liabilities Wilson Yuson ZapataCapital balances before liquidation P 17,000 P 55,000 P 45,000 P 24,000July - Dist. of loss on sale of assets (1) (4,750) (2,850) (1,900) Liquidation expenses (500) (300) (200) Payment of liabilities (17,000) Payment to partners (2) (6,500)Balances - P 49,750 P 35,350 P 21,900Aug.- Liquidation expenses (750) (450) (300) Equipment taken by Zapata (10,000) Gain on transfer of eqt. to Zapata (3,000) (1,800) (1,200) Payment to Yuson (3) (4,000)Balances - P 52,000 P 32,700 P 12,800Sept- Dist. of loss on sale of assets (4) (10,000) (6,000) (4,000) Liquidation expenses (500) (300) (200)Final distribution to partners - P41,500 P26,400 P8,600 (1) (P22,000 + P14,000) - (P16,500 + P10,000) = P9,500 loss on sale of assets(2) (P6,000 + P26,500 - P1,000 - P17,000) - P8,000 cash withheld = P6,500 cash dist. Req. 1(3) schedule of cash distribution below8,000 – 1,500 – 2,500 +4,000(4) (P99,000 - P4,000 BV of equipment taken by Zapata) - P75,000 = P20,000 loss on sale

Schedule of Cash DistributionAugust 31, 20068

Wilson Yuson Zapata Wilson Yuson ZapataCapital balances after dist. of equipment to Zapata P 52,000 P 36,700 P 12,800Profit and loss ratio 50% 30% 20%Loss absorption balance P104,000 P122,333 P 64,000Allocation I - Cash to Yuson to reduce LAB to amt. reported for Wilson 18,333 P 5,500Balances P104,000 P104,000 P 64,000Allocation II - Cash to Wilson & Yuson to reduce LAB to amount reported for Zapata 40,000 40,000 P20,000 12,000Balances P 64,000 P 64,000 P 64,000 P20,000 P 17,500Allocation III – P & L ratio

Problem 3 - 9 - Requirement 3 Amount Wilson Yuson Zapata


Cash available in September P76,500Allocation I – Balance 1,500 P 1,500Allocation II 32,000 P 20,000 12,000Balance - Allocation III P43,000 21,500 12,900 P 8,600

P 41.500 P 26,400 P 8,600

Problem 3 -10Arceo, Basco and Cervo

Statement of Changes in Partners’ CapitalFor the Period January 1, 2006 to May 31, 2008

Arceo Basco Cervo Total2006: Original investment P50,000 P30,000 P 80,000 Distribution of net income (sch. 1) 15,200 12,800 28,000 Drawings (7,000) (6,000) (13,000) Balance, December 31 P58,200 P36,800 P 95,0002007: Investment of Cervo (sch. 2) (9,100) (4,900) P54,000 40,000 Distribution of net loss 4,200 3,000 4,800 12,000 Drawings (4,900) (3,900) (4,200) (13,000) Balances, December 31 P40,000 P25,000 P45,000 P110,0002008: Distribution of cash in Feb. (sch. 3) (5,000) (5,000) (10,000) Distribution of cash in April (sch. 4) (7,000) (5,000) (8,000) (20,000) Balances P28,000 P20,000 P32,000 P 80,000 Sale of assets & distribution of loss in May (sch. 5) (17,500) (12,500) (20,000) (50,000) Final cash distribution P 10,500 P 7,500 P 12,000 P 30,000

Schedule 1 - Distribution of 2006 net incomeArceo Basco Total

Salaries P10,000 P10,000 P20,000Remainder – 65%:35% 5,200 2,800 8,000Total P15,200 P12,800 P28,000

Schedule 2 - Admission of CervoTotal capital before admission of Cervo P 95,000Investment of Cervo 40,000Total capital P135,000Interest acquired by Cervo 40%Capital credit of Cervo P 54,000Investment of Cervo 40,000Bonus to Cervo from old partners (shared 65%:35%) P 14,000Schedule 3 - Cash distribution in February

Arceo Basco Cervo


Capital balances before dist. of cash P40,000 P25,000 P45,000Restricted interest - possible loss if nothing is realized on remaining assets (P100,000) 35,000 25,000 40,000Free interest - amount to be paid to partners P 5,000 P ------ P 5,000

Schedule 4 - Cash distribution in April

Arceo Basco CervoCapital balances before dist. of cash P 35,000 P25,000 P40,000Restricted interest - possible loss if nothing is realized on remaining assets (P80,000) 28,000 20,000 32,000Free interest - amount to be paid to partners P 7,000 P 5,000 P 8,000

Schedule 5 - Loss on realization of assets in May

Capital balances equal to net assets P80,000Cash realized on sale of assets 30,000Loss on realization P50,000

Problem 3-11Partnership Books1. Inventories 60,000

Prepaid Expenses 3,000Goodwill 243,000 Accrued Expenses 6,000 Leony, Capital 200,000 Espie, Capital 100,000

2. Rover Corp. Stocks 4,500,000Accounts Payable 600,000Accrued Expenses 6,000Allowance for Uncollectible Accounts 120,000 Cash 450,000 Accounts Receivable 660,000 Inventories 1,350,000 Prepaid Expenses 3,000 Furniture and Equipment 2,520,000 Goodwill 243,000

3. Leony, Capital 2,600,000Espie, Capital 1,900,000 Rover Corp. Stocks 4,500,000

Corporation’s Books1. Cash 450,000

Accounts Receivable 660,000Inventories 1,350,000


Prepaid Expense 3,000Furniture and Equipment 2,520,000Goodwill 243,000 Allowance for Uncollectible Accounts 120,000 Accounts Payable 600,000

Accrued Expenses 6,000 Ordinary Share Capital 4,500,000

2. Land 3,600,000Cash 1,500,000Pre-Operating Expenses 450,000 Ordinary Share Capital 4,800,000 PIC in Excess of Par 750,000

Rover CorporationStatement of Financial Position

July 1, 2008

Assets Liabilities and Shareholders’ EquityCash P 1,950,000 Accounts Payable P 600,000 Accounts Receivable (net of Allow Accrued Expenses 6,000 of P120,000) 540,000 Total Liabilities P 606,000Inventories 1,350,000 Shareholders’ EquityPrepaid Expenses 3,000 Ordinary Share Capital P9,300,000Land 3,600,000 PIC in Excess of Par 750,000Furniture and Equipment 2,520,000 Retained Earnings (deficit) (450,000)Goodwill 243,000 Total Shareholders’ Equity P9,600,000Total Assets P10,206,000 Total liabilities and SH equity P10,206,000

MULTIPLE CHOICE

1. D2. D3. C4. C Share on loss on realization

(P39,000 + P4,800 – P33,000) P10,800Percentage ownership of Imperial ÷ 20%Total loss on realization P54,000

5. A Total capital P70,000Cash available 28,000Loss on realization P42,000

6. B Gueco Tiangco BacelonCapital bal. before liquidation P 40,000 P 25,000 P 5,000Loss on realization ( 21,000) (14,000) ( 7,000)


Balances P 19,000 P 11,000 P( 2,000)Add’l loss to Gueco & Tiangco for the deficiency of Barcelon ( 1,200) ( 800) 2,000Cash distribution to partners P 17,800 P 10,200 P ---0---

7. D Total capital (P360,000 + P72,000) P432,000 Total liabilities 84,000Total loss on liquidation P516,000

8. A Alarcon Baretto CoronelCapital balances P 100,000 P 80,000 P 300,000Drawing ( 60,000) ( 40,000) (20,000)Distribution of net income 24,000 24,000 24,000Loss on liquidation (172,000) (172,000) (172,000)Balances P(108,000 P(108,000) P 132,000Additional loss to partners 108,000 ( 54,000) ( 54,000)Cash to be distributed to Coronel

P 78,000

9. C Total capital P40,000Loans from partners 7,500Total partners’ interest P47,500Cash available to partners (P37,500 – P28,500) 9,000Total loss on realization P38,500

10 C Doria ElmaCapital balances before liquidation P 24,500 P 15,500Loan balances 4,000 3,500Total partners’ interest P 28,500 P 19,000Loss on realization ( 23,100) ( 15,400)Balances – cash to be paid to partners P 5,400 P 3,600

11 C Total assets = Total capital + Total liabilities = P60,000 + P 3,000 P 63,000Less Cash = P3,000 + P22,200 – P23,200 ___2,000Book value of noncash assets P 61,000

12 C P61,000 – P23,200 = P37,800 x 3/21 P 5,400

13 B Jurado Katindig Lazaro MarceloCapital balances P 1,000 P25,000 P25,000 P 9,000Loss on realization ( 5,400) ( 7,200) ( 10,800) ( 14,400)

P( 4,400) P(17,800) P14,200 P( 5,400)


Additional loss 4,400 3,920 ( 5,880) 5,400Payment to Lazaro P 8,320

14 C Total credits equal debits (P130,000 + P44,000 + P90,000) P264,000Less Cash 40,000Book value of other assets P224,000Loss on realization [(P50,000 + P17,600 – P55,200)/40%] 31,000Cash received from sale of other assets P193,000

15 A16 A17 B Esper Ester Ethel Elmer

Capital balances P 50,000 P50,000 P50,000 P 75,000Loss on realization (112,000) ( 56,000) ( 56,000) ( 56,000)

P(62,000) P(6,000) P(6,000) P19,000Additional loss (3,000) 6,000 ( 1,500) (1,500)Amt to be rec.from the part. P 17,500

200,000P217,500

18 D Urbe VirayInitial investment P 137,500,000 P 137,500,000Purchases ( 1,237,500,000) ( 495,000,000)Sales 1,339,250,000 462,000,000Interest ( 2,200,000) ( 1.375,000) Dividends 1,100,000 2,750,000Cash held P 238,150,000 P 105,875,000Equal share 172,012,500 172,012,500Cash received (paid) (P 66,137,500) P 66,137,500

19 C Delia Erma FloraCapital balances before liquidation P480,000 P135,000 P165,000Loss on liquidation (P180,000) ( 72,000) ( 90,000) ( 18,000)Cash to be received by Delia P408,000

20 A Delia Erma FloraCapital balances before liquidation P480,000 P135,000 P165,000Loss on liquidation (P540,000) ( 216,000) ( 270,000) ( 54,000)

P264,000 (P135,000) P111,000Add’l loss to Delia & Flora ( 108,000) 135,000 ( 27,000)Cash to be received by Flora P 84,000

21 D Delia Erma FloraCapital balances before liquidation P480,000 P135,000 P165,000Loss on liquidation (P180,000) ( 72,000) ( 90,000) ( 18,000)Balances P408,000 P 45,000 P147,000


Possible loss if remaining inventories are not sold (192,000) ( 240,000) ( 48,000)Balances P216,000 (P

195,000) P 99,000

Add’ loss to Delia & Flora ( 156,000) 195,000 ( 39,000)Distribution of cash to partners P 60,000 - P 60,000

22 D23 B24 A Estrada Fortuna Gener

Balances before liquidation P 40,000 P 65,000 P 48,000Loss on sale of assets - P40,000 ( 16,000) (16,000) ( 8,000)Possible loss if nothing is realized on remaining assets - P90,000 ( 36,000) (36,000) (18,000)Balances P( 12,000) P 13,000 P 22,000 Add’l possible loss to Fortuna and Gener for deficiency of Estrada 12,000 ( 8,000) ( 4,000) Balances - cash to be distributed P --------- P 5,000 P 18,000

25 B Capital balance of Gener before distribution of cash P 18,000Share in the cash to be withheld for possible liquidation expenses - P3,000 x 20%/60% (shared by Fortuna & Gener)

( 1,000)

Cash to be received by Gener P 17,00026 D 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

27 C Total capital before drawing and net loss P 135,000Drawing ( 10,000)Net loss for the year ( 20,000)Total liabilities 5,000Total assets P 110,000Cash on hand ( 700)Amount of noncash assets before liquidation P 109,300

28 C Capital balance of Aguila before dist. of net loss P 25,000Share in net loss (P20,000 x 60%) ( 12,000) Capital balance of Aguila before liquidation P 13,000Cash to be received by Aguila 19,000Share of Aguila in the gain on sale of other assets P 6,000Percentage share of Aguila ÷ 60% Total gain on sale of other assets P 10,000Book value of other assets 109,300Cash to be realized from sale of other assets P 119,300

PAYMENTS29 D Aguila Balweg Corpuz Aguila Balweg Corpuz

Capital balances P 25,000 P 50,000 P 60,000


Drawing (10,000)Net loss ( 12,000) ( 5,000) ( 3,000)Total partners’ interest P 13,000 P 45,000 P 47,000Profit and loss ratio ÷ 60% ÷ 25% ÷ 15%Loss absorption bal. P 21,667 P180,000 P313,333Alloc. I - Cash to Corpuz (133,333) P 20,000Balances P 21,667 P180,000 P180,000Alloc. II -Cash to Balweg and Corpuz

(158,333) (158,333) P 39,583 23,750

Balances P 21,667 P 21,667 P 21,667 P 39,583 P43,750Alloc. III - Based on P & L ratio

Cash received by Corpuz P 33,000Cash received from Allocation I ( 20,000)Cash received from Allocation Ii P 13,000Fractional share (B – 25% and C -15%) ÷ 15/40 Total cash distributed P 34,667Fractional share of Balingit x 25/40Cash received by Balingit P 21,667

30 B Vulnerability Ranking

Nera - P450,000 / 30% = P150,000 3Ochoa - P250,000 / 50% = P 50,000 1Perez - P250,000 / 20% = P125,000 2

31 D Priority Nera Ochoa Perez PerezCreditors Capital Capital Loan Capital

1st P500,000 100%next P75,000 100%next P375,000 60% 26.67% 13.33%Remainder 30% 50% 20.00%

32 A Nera Ochoa Perez TotalEquities P450,000 P250,000 P250,000 P950,000Loss to absorb Ochoa ( 150,000) ( 250,000) ( 100,000) ( 500,000)Balances P300,000 ------ P150,000 P450,000 Loss to absorb Perez ( 225,000) (150,000) ( 375,000)Balance P 75,000 ------ ---- P 75,000

33 C Reyes (20%) Santos (40%) Torres (40%)Net capital balances P100,000 P440,000 P310,000Possible loss of P700,000 ( 140,000) (280,000) ( 280,000)Balances (P 40,000) P160,000 P 30,000Possible loss from Reyes debit balance 40,000 ( 20,000) ( 20,000)`Cash distribution ------ P140,000 P 10,000

34 D Roger Sergio Tito Roger Sergio Tito35 C Capital balances P108,000 P120,000 P129,000

Add Loan 30,000


Total partners’ interest P108,000 P150,000 P129,000Divided by P & L ratio 30% 50% 20%Loss absorption capacity P360,000 P300,000 P645,000Allocation 1 ( 285,000) P57,000Balances P360,000 P300,000 P360,000Allocation II ( 60,000) ( 60,000) P18,000 12,000

P300,000 P300,000 P300,000 P18,000 - P69,000 Allocation III – P & L ratio

36 B Roger Sergio TitoAmount available P72,000Allocation 1 to Tito 57,000 P57,000Allocation II – 30%, 20% P15,000 P9,000 6,000

P9,000 P63,000

37 A Roger Sergio TitoAmount available P120,000Allocation II – Balance 15,000 P 9,000 P 6,000Allocation III P105,000 31,500 P52,500 21,000

P40,500 P52,500 P27,000

38 D Jacinto Mapa MagnoCapital balances P400,000 P600,000 P1,000,000Revaluation of assets 200,000 200,000 200,000Adjusted capital P600,000 P800,000 P1,200,000Par of capital stock ÷ P100 ÷ P100 ÷ P100Shares of stock to be rec’d by partners 6,000 sh. 8,000 sh 12,000 sh

39 C Capital balances P260,000Adjustment in assets (P20,000 – P10,000 – P3,000) 7,000Adjusted capital P267,000

40 B Total capital (P94,800 + P214,200) P309,000Adjustments in assets (P6,600 – P20,000 – P22,000) ( 35,400)Adjusted capital P273,600Ordinary Share Capital (720 x 2 x P10) 14,400Preference Share Capital P259,200

Ordinary shares (P14,400 / P10) 1,440 sh..Preference shares (P259,200 / P100) 2,592 sh.

41 C Roldan MoisesCapital balances before incorporation P94,800 P214,200Adjustment in assets ( 11,800) ( 23,600)Adjusted capital P83,000 P190,600


Ordinary Share Capital (720 @P10) 7,200 7,200Preference Share Capital P75,800 P183,400

Preference shares 758 1,834Ordinary shares 720 720

advanced accounting lupisan

Documents

p 600p33

additional loss

total loss

distribution of loss

total capital

net assets

capital p9

total partners interestp