VII. LEARNING ACTIVITIES
Activity 1. Lump Sum Liquidation with Gain on Realization
After several years of operations, the partnership of Ana, Bada and Cada is to be liquidated. After
making the closing entries on June 20, 2016, the following accounts remain open:
Cash
Non-Cash Assets
Liabilities
Ana, Capital
Bada, Capital
50,000
2,350,000
400,000
900,000
500,000
Cada, Capital
600,000
The non-cash assets are sold for P2,650,000. Profits and losses are shared equally.
Required:
Prepare a statement of partnership liquidation and the entries to record the following:
Ana, Bada, Cada
Cash
50,000
Non- cash
2,350,000
Liabilities
400,000
Ana, Capita
900,000
Bada, Capital
500,000
Cada, Capital
600,000
Non-cash assets are sold P 2,650,000, Profits and Losses are shared equally
1. Sale of all non-cash assets.
For the month of June 20,2016
Cash
2,650,000
Gain
300,000
Non- cash assets
2,350,000
2. Distribution of gain on realization to the partners.
Ana
Bada
Cada
Total
Opening balances
900,000
500,000 600,000 2,000,000
Gain on sale
+ 100,000 + 100,000 + 100,000 300,000
Total
1,000,000
600,000
700,000
Allocation of gain of the sale journal
Ana, Capital
100,000
Bada,Capital
100,000
Cada, Capital
100,000
Gain on Sale
300,000
Total
300,000 300,000
3. Payment of liabilities.
Liabilities 50,000
Cash
50,000
Total
50,000
50,000
After the sale of non-cash assets , the cash available to the partnership is the opening balance of
50,000 plus cash from the disposal of the non-cash assets of 300,000 which equals a total of 350,000 .
This cash is used to settle the liabilities of 400,000 which is higher than the cash available to the
partnership. Remaining debt/liabilities of the partnership is 50,000.
4. Distribution of cash to the partners.
Ana, Capital
∅
Bada, Capital
∅
Cada, Capital
Cash
Total
∅
∅
∅
∅
Summary Allocation
Opening
Cash
Balances
50,000
Cell no.
2,650,000
Cash
Pay Liabilities
Remaining Cash
Total
350,000
0
0
Non cash
2,350,000
+300,000
Liabilities
400,000
Ana
900,000
100,000
Bada
Cada
500,000 600,000
100,000 100,000
50,000
(16,667)
0
0
(16,667) (16,667)
0
0
0
0