BENITEZ, Jewel Ann Q.
Block 6
Problems
I – STATEMENT OF LIQUIDATION; INSTALLMENT SCHEDULE OF SAFE PAYMENTS AND CASH PAYMENT
PRIORITY PROGRAM
1.) Assume T, U, V and W are partners sharing profits of 40%, 20%, 20%, 20%, respectively. On
January 1, 20x4, they agree to liquidate. A balance sheet is prepared on this date is shown as
follows:
ASSETS
Noncash assets …………………………………P 181, 800
TotaL…………………………………………………P 181, 800
20X4
LIABILITIES AND CAPITAL
Liabilities ………………………………….…………..P 84,000
A, loan……………………………………………………….6, 000
D, loan……………………………………………………… 3, 000
A, Capital………………………………………………….26, 400
B, Capital………………………………………………….25, 800
C, Capital………………………………………………….20, 400
D, Capital…………………………………………………16, 200
Total…………………………………………………..P 181,800
CASH
BOOK
CASH
PAYMENT
PROCEEDS
VALUE OF LIQUIDATION
TO
ON SALE OF NONCASH
EXPENSES
CREDITORS
NONCASH
ASSETS
PAID
ASSETS
SOLD
January
P 72, 000
P 90, 000
P 1, 200
P 66, 000
February
21, 600
30, 000
1, 320
18, 000
March
19, 200
24, 000
1, 440
-April
6, 000
19, 800
4, 800
-May
2, 400
18, 000
960
-Distribution of cash to partners are normally done at month-end.
CASH
WITHHELD
P 4, 800
1, 800
1, 200
600
--
PAYMENT
TO
PARTNERS
P 5, 280
18, 360
1, 800
Required:
1. Prepare statement of liquidation for the month of January to May 20x4.
2. Prepare schedule of safe payments to support the distribution of cash payment for the month
January to May 20x4.
3. Prepare cash payment (pre-distrubution) priority program indicating the cash payment to each
partner for the month of January to May 20x4.
4. Using cash payment priority program, indicate the vulnerability rankins for each in the event of
loss suffered by the partnership.
Solution:
CASH
72, 000
(1, 200)
(66, 000)
Bal. 4,800
21, 600
(1, 320)
(18, 000)
Bal. 7,080
NON
CASH
ASSETS
181, 800
(90, 000)
91, 800
(30, 000)
LIABILITIES
A, LOAN
D, LOAN
A,
CAPITAL
(40%)
B,
CAPITAL
(20%)
C,
CAPITAL
(20%)
D,
CAPITAL
(20%)
84, 000
6, 000
3, 000
26, 400
(7, 200)
(480)
25, 800
(3, 600)
(240)
20, 400
(3, 600)
(240)
16, 200
(3, 600)
(240)
(66, 000)
18, 000
6, 000
3, 000
18, 720
(3, 360)
(528)
21, 960
(1, 680)
(264)
16, 560
(1, 680)
(264)
12, 360
(1, 680)
(264)
20, 016
(5, 280)
14, 736
(960)
(288)
14, 616
10, 416
14, 616
(960)
(288)
10, 416
(960)
(288)
13, 488
(5, 688)
7, 800
(2, 760)
(960)
13, 368
(5, 568)
7, 800
(2, 760)
(960)
9, 168
(1, 368)
7, 800
(2, 760)
(960)
(18, 000)
61, 800
0
6, 000
3, 000
14, 832
(5, 280)
Bal. 1,800
19, 200
(1, 440)
61, 800
(24, 000)
0
6, 000
3, 000
14, 832
(1, 920)
(576)
Bal.19,560
37, 800
0
37, 800
(19, 800)
0
6, 000
(2, 736)
3, 264
3, 000
(3, 000)
0
12, 336
(18, 360)
Bal. 1,200
6, 000
(4, 800)
18, 000
0
3, 264
(720)
0
4, 896
4, 080
(360)
4, 080
(360)
4, 080
(360)
18, 000
(18, 000)
0
2, 544
0
3, 720
(3, 120)
(192)
3, 720
(3, 120)
(192)
3, 720
(3, 120)
(192)
0
4, 896
(6, 240)
(384)
1, 728
0
408
408
408
0
0
408
(408)
408
(408)
408
(408)
0
0
0
0
Bal. 2,400
Bal. 1, 800
600
(1, 728)
Bal. 2, 400
12, 336
(5, 520)
(1, 920)
(960)
Bal. 2040
(2040)
Bal. 0
0
0
0
0
Schedule of Safe Payment
A (40%)
14, 832
6, 000
Bal. 20, 832
(24, 720)
(720)
Bal. (4, 608)
4, 608
Bal. 0
B (20%)
20, 016
C (20%)
14, 616
20, 016
(12, 360)
(360)
7, 296
(1, 536)
5, 760
(420)
5, 340
(60)
5, 280
14, 616
(12, 360)
(360)
1, 896
(1, 536)
360
(420)
(60)
60
0
A (40%)
12, 336
6, 000
Bal.18, 366
(15, 600)
B (20%)
13, 488
C (20%)
13, 368
13, 488
(7, 800)
13, 368
(7, 800)
D (20%)
9, 168
3, 000
12, 168
(7, 800)
Bal. 2, 736
5, 688
5, 568
4, 368
A (40%)
4, 896
(3, 264)
Bal. 8, 160
(7, 440)
Bal. 720
B (20%)
4, 080
C (20%)
4, 080
D (20%)
4, 080
4, 080
(3, 720)
360
4, 080
(3, 720)
360
4, 080
(3, 720)
360
A (40%)
26, 400
6, 000
32, 400
÷ .40
Bal. 81, 000
(first)
B (20%)
25, 800
C (20%)
20, 400
25, 800
÷ .20
129, 000
(fourth)
20, 400
÷ .20
102, 000
(third)
D (20%)
16, 200
3, 000
19, 200
÷ .20
96, 000
(second)
Bal. 0
D (20%)
10, 416
3, 000
13, 416
(12, 360)
(360)
696
(1, 536)
(840)
840
0
First Priority: 84, 000 Liability
Second Priority:
B (129, 000 – 102, 000) X .20 =
Third Priority:
B (102, 000 – 96, 000) X .20 =
C (102, 000 – 96, 000) X .20 =
Fourth Priority:
B (96, 000 – 81, 000) X .20 =
C (96, 000 – 81, 000) X .20 =
D (96, 000 – 81, 000) X .20 =
84, 000
5, 400
1, 200
1, 300
3, 000
3, 000
3, 000
TOTAL 100, 800
A
B
C
FEBRUARY
TOTAL
5, 280
5, 280
MARCH
120
1, 200
3, 000
1, 368
5, 688
TOTAL
2, 736
2, 736
D
1, 200
3, 000
1, 368
5, 568
PRIORITY
1
3, 000
1, 368
4, 368
2
3
P&L
II. STATEMENT OF LIQUIDATION – INSTALLMENT; SCHEDULE OF SAFE PAYMENTS
On January 1, 20x4, partners AA, BB and CC, who share profits and losses in the ration of 5:3:2 decide
to liquidate their partnership. The partnership trial balance at this date is as follows:
Accounts
Cash
Accounts receivable
Inventory
Machinery and equipment
Accounts payable
AA, Capital
BB, Capital
CC, Capital
Debit
Credit
P 18, 000
66, 000
52, 000
189, 000
TOTAL
325, 000
P 53, 000
88, 000
110, 000
74, 000
325, 000
The partners plan a program of piecemeal conversion of assets to minimize liquidation losses. All available
cash, less amount retained to provide future expenses, is to be distributed to the partners at the end of
each month. A summary of the liquidation transactions is as follows:
January 20x4
1.)
2.)
3.)
4.)
P 51, 000 was collected on accounts receivable; the balance is uncollectible.
P 38, 000 was received for the entire inventory.
P 2, 000 liquidation expenses were paid.
P 50, 000 was paid to creditors after offset of a P 3, 000 credit memorandum received on January
11, 20x4.
5.) P 10, 000 cash was retained in the business at the end of the month for potential unrecorded
liabilities and anticipated expenses.
February 20x4
6.) P 4, 000 liquidation expenses were paid.
7.) P 6, 000 cash was retained in the business at the end of month for potential unrecorded liabilities
and anticipated expenses.
March 20x4
8.) P 146, 000 was received on sale of all items of machinery and equipment.
9.) P 5, 000 liquidation expenses were paid.
10.) No cash was retained in the business.
Inventory
Machinery
& Equip.
Accounts
payable
52, 000
189, 000
53, 000
52, 000
(52, 000)
189, 000
53, 000
0
0
189, 000
53, 000
Bal. 105, 000
0
0
189, 000
Bal. 105, 000
0
0
189, 000
0
0
189, 000
53, 000
(3, 000)
50, 000
(50, 000)
0
0
0
189, 000
0
74, 000
10, 000
(4, 000)
0
0
189, 000
0
74, 000
Bal. 6, 000
March
6, 000
146, 000
0
0
189, 000
0
0
0
0
0
0
189, 000
(189, 000)
0
0
0
0
0
0
0
0
0
Cash
January
18, 000
51, 000
Bal.69, 000
38, 000
Accounts
Receivable
Bal. 107, 000
(2, 000)
(50, 000)
Bal. 55, 000
66, 000
(66, 000)
0
AA,
BB,
CC,
Capital (5) Capital (3) Capital (2)
88, 000
(7, 500)
80, 500
(7, 000)
110, 000
(4, 500)
105, 500
(4, 200)
74, 000
(3, 000)
71, 000
(2, 800)
73, 500
(1, 000)
72, 500
1, 500
74, 000
101, 300
(600)
100, 700
900
101, 600
68, 200
(400)
67, 800
600
68, 400
74, 000
101, 600
(26, 600)
75, 000
68, 400
(18, 400)
50, 000
74, 000
75, 000
(2, 400)
72, 600
50, 000
(1, 600)
48, 400
74, 000
(21, 500)
52, 500
(2, 500)
50, 000
(50, 000)
0
72, 600
(12, 900)
59, 700
(1, 500)
58, 200
(58, 200)
0
48, 400
(8, 600)
39, 800
(1, 000)
38, 800
(38, 800)
0
(45, 000)
Bal. 10, 000
February
Bal. 152,000
0
(5, 000)
Bal. 147, 000
(147, 000)
Bal. 0
Schedule of Safe Payment
1ST SCHEDULE
2ND SCHEDULE
AA (5)
74, 000
(99, 500)
Bal. (25, 500)
25, 500
BB (3)
101, 600
(59, 700)
41, 900
(15, 300)
CC (2)
68, 400
(39, 800)
28, 600
(10, 200)
Bal. 0
26, 600
18, 400
AA (5)
74, 000
(97, 500)
Bal. (23, 500)
23, 500
Bal. 0
BB (3)
75, 000
(58, 500)
16, 500
(14, 100)
2, 400
CC (2)
50, 000
(39, 000)
11, 000
(9, 400)
1, 600
AA (5)
BB (3)
88, 000
110, 000
÷ .05
÷ .03
1, 760, 000 3, 666, 666. 67
1ST
2ND
CC (2)
74, 000
÷ .02
3, 700, 000
3RD
First Priority: Liability
Second Priority:
CC (3, 700, 000 – 3, 666, 667) X .20 =
Third Priority:
CC (3, 666, 667 – 1, 760, 000) X .20 =
BB (3, 666, 667 – 1, 760, 000) X .30 =
53, 000
6, 667
TOTAL
381, 333
572, 000
1, 013, 000
III – CASH DISTRIBUTION OR PAYMENT PRIORITY PROGRAM
The partnership PP, EE, and TT has asked you to assist in winding up its business. You complete the
following information.
1.) The trial balance of the partnership on June 30, 20x4 is:
Accounts
Cash
Accounts Receivable (net)
Inventory
Plant and Equipment (net)
Accounts Payable
PP, Capital
EE, Capital
TT, Capital
Debit
Credit
P 6, 000
22, 000
14, 000
99, 000
Total
P 141, 000
P 17, 000
55, 000
45, 000
24, 000
P 141, 000
2.) The partners share profits and losses as follows: PP, 50%; EE, 30%; and TT, 20%.
3.) The partners are considering an offer of P 100, 000 for the accounts receivable, inventory, and
plant and equipment as of June 30. The P 100, 000 will be paid to creditors and the partners in
installments, the number and amounts of which are to be negotiated.
Required: prepare a cash distribution or cash payment priority program plan as of June 30, 20x4
showing how much cash each partner will receive if the offer to sell the assets is accepted.
PP, EE, AND TT PARTNERSHIP
CASH DISTRIBUTION PLAN
AS OF JUNE 30, 20X4
Loss Absorption Power
PP
EE
TT
Loss on sharing
percentage
Preliquidation capital
balance
Loss Absorption
Potential
(Capital Balance/Loss
Ratio)
Decrease highest LAP to
next highest LAP:
Decrease EE by 30, 000
Capital Balance
PP
EE
TT
50%
30%
20%
55, 000
110, 000
150, 000
45, 000
24, 000
120, 000
(30, 000)
(9, 000)
(Cash distribution: 30, 000* 30%)
Balance
Decrease highest LAP to
next highest level:
Decrease EE by 10, 000
110, 000
120, 000
120, 000
55, 000
(10, 000)
36, 000
24, 000
(3, 000)
(Cash distribution: 10, 000* 30%)
Decrease TT by 10, 000
(10, 000)
(2, 000)
(Cash distribution: 10, 000* 20%)
Balance
110, 000
110, 000
110, 000
55, 000
33, 000
22, 000
IV – STATEMENT OF LIQUIDATION – INSTALLMENT; SCHEDULE OF SAFE PAYMENTS
Assuming the same information in PROBLEM III and the partners have decided to liquidate their
partnership by installments instead of accepting the offer of P 100, 000. Cash is distributed to the partners
at the end of each month; a summary of the liquidation transactions follows:
July
1.
2.
3.
4.
5.
P 16, 500 collected on accounts receivable; balance is uncollectible.
P 10, 000received for the entire inventory.
P 1, 000 liquidation expense is paid.
P 17, 000 paid to creditors.
P 8, 000 cash retained in the business at the end of the month.
August
1. P 1, 500 in liquidation expenses paid.
2. As part of payment of his capital, TT accepted an item of equipment that he develop, which had
a book value of P 4, 000. The partners agreed that value of P 10, 000 should be placed on this item
for liquidation purposes.
3. P 2, 500 cash retained in the business at the end of the month.
September
1. P 75, 000 received on sale of remaining plant and equipment.
2. P 10, 000 liquidation expenses paid. No cash retained in the business.
Required: Prepare a statement of partnership realization and liquidation with supporting schedules of
cash payments to partners.
Cash
Accounts
receivable
Inventory
Plant and
Equipment
Accounts
payable
22, 000
(22, 000)
0
14, 000
99, 000
17, 000
99, 000
17, 000
0
14, 000
(14, 000)
0
99, 000
17, 000
0
0
99, 000
0
0
99, 000
17, 000
(17, 000)
0
0
0
99, 000
0
49, 750
0
0
99, 000
0
0
0
99, 000
0
49, 750
(750)
49, 000
0
0
99, 000
0
0
0
0
0
0
99, 000
(99, 000)
0
0
0
0
0
0
0
0
0
July
6, 000
16, 500
Bal. 22,500
10, 000
Bal. 32,500
(1, 000)
Bal. 31,500
(17, 000)
Bal. 14,500
(6, 500)
Bal. 8, 000
August
8, 000
(1, 500)
Bal. 6, 500
(4, 000)
Bal. 2, 500
September
2, 500
75, 000
Bal. 77, 500
(1, 000)
Bal. 76, 500
(76, 000)
Bal.
0
Schedule of Safe Payment
1ST SCHEDULE
PP (50%)
49, 750
(53, 500)
Bal. (3, 750)
3, 750
Bal. 0
Bal. 0
EE (30%)
41, 850
(32, 100)
9, 750
(2, 250)
7, 500
(1, 000)
6, 500
TT (20%)
21, 900
(21, 400)
500
(1, 500)
(1, 000)
1, 000
0
0
PP,
Capital
(50%)
EE,
Capital
(30%)
TT,
Capital
(20%)
55, 000
(2, 750)
52, 250
(2, 000)
50, 250
(500)
49, 750
45, 000
(1, 650)
43, 350
(1, 200)
42, 150
(300)
41, 850
24, 000
(1, 100)
22, 900
(800)
22, 100
(200)
21, 900
49, 750
41, 850
(6, 500)
35, 350
21, 900
49, 000
35, 350
(450)
34, 900
(3, 400)
31, 500
21, 900
(300)
21, 600
(600)
21, 000
49, 000
(12, 000)
37, 000
(500)
36, 500
(36, 500)
0
31, 500
(7, 200)
24, 300
(300)
24, 000
(24, 000)
0
21, 000
(4, 800)
16, 200
(200)
16, 000
(16, 000)
0
21, 900
2nd Schedule
PP (50%)
49, 000
(50, 750)
Bal. (1, 750)
1, 750
Bal. 0
EE (30%)
34, 900
(30, 450)
4, 450
(1, 050)
3, 400
PP (50%)
EE (30%)
55, 000
45, 000
÷ .05
÷ .03
1, 100, 000 1, 500, 000
1ST
3rd
TT (20%)
21, 600
(20, 300)
1, 300
(700)
600
TT (20%)
24, 000
÷ .02
1, 200, 000
2nd
First Priority: Liability
Second Priority:
EE (1, 500, 000 – 1, 200, 000) x .30
Third Priority:
EE (1, 200, 000 – 1, 100, 000) x .30
TT (1, 200, 000 – 1, 100, 000) x .20
17, 000
90, 000
TOTAL
30, 000
20, 000
157, 000
V – STATEMENT OF LIQUIDATION – INSTALLMENT; SCHEDULE OF SAFE PAYMENTS
The DSV Partnership decided to liquidate the partnership as of June 30, 20x4. The balance sheet of the
partnership as of this date is presented as follows:
DSV Partnership
Balance Sheet
As of June 30, 20x4
ASSETS:
Cash
Accounts Receivable (net)
Inventories
Property, Plant, and Equipment (net)
TOTAL ASSETS:
LIABILITIES
Accounts Payable
PARTNER’S CAPITAL
DD, Capital
SS, Capital
VV, Capital
TOTAL LIABILITES AND CAPITAL
P 50, 000
95, 000
75, 000
500, 000
P 720, 000
P 405, 000
100, 000
140, 000
75, 000
P 720, 000
The personal assets (excluding partnership loan and capital interest) and personal liabilities of each
partner as of June 30, 20x4, follow:
Personal Assets
Personal Liabilities
Personal Net Worth
DD
P 250, 000
(270, 000)
(20, 000)
SS
VV
P 450, 000
(420, 000)
30, 000
P 300, 000
(240, 000)
60, 000
The DSV Partnership was liquidated during the months of July, August, and September. The assets sold
and the amounts realized follow:
MONTH
ASSETS SOLD
July
Inventories
Accounts Receivable (net)
Property Plant and Equipment
August
Inventories
Accounts Receivable (net)
September
Accounts Receivable (net)
Property, Plant, and Equipment
CARRYING
AMOUNT
P 50, 000
60, 000
400, 000
AMOUNT
REALIZED
P 45, 000
40, 000
305, 000
25, 000
10, 000
18, 000
4, 000
25, 000
100, 000
10, 000
45, 000
Required: Prepare a statement of partnership realization and liquidation for the DSV Partnership for the
three-month period ended September 30, 20x4. DD, SS, and VV share profits and losses in the ratio
50:30:20. The partners wish to distribute available cash at the end of each month after reserving P 10,
000 of cash at the end of July and August to meet unexpected liquidation expenses. Actual liquidation
expenses incurred and paid each month amounted to P 2, 500. Support each cash distribution to the
partners with a schedule of safe installment payments.
Cash
July
50, 000
390, 000
Bal. 440,000
(2, 500)
Bal. 437, 500
(405, 000)
Bal.
32, 500
(22, 500)
Bal. 10, 000
August
10, 000
22, 000
Bal. 32, 000
(2, 500)
Bal. 29, 500
(19, 500)
Bal. 10, 000
September
10, 000
55, 000
Bal. 65, 000
65, 000
(2, 500)
Bal. 62, 500
(62, 500)
Bal. 0
Bal.
Accounts
Receivab
le (net)
Inventories
Property,
Plant, and
Equipment
(net)
Accounts
Payable
95, 000
(60, 000)
35, 000
75, 000
(50, 000)
25, 000
500, 000
(400, 000)
100, 000
405, 000
35, 000
25, 000
100, 000
35, 000
25, 000
100, 000
405, 000
(405, 000)
0
35, 000
25, 000
100, 000
0
38, 750
35, 000
(10, 000)
25, 000
25, 000
(25, 000)
0
100, 000
0
100, 000
0
25, 000
0
100, 000
0
38, 750
(6, 500)
32, 250
(1, 250)
31, 000
25, 000
0
100, 000
0
31, 000
25, 000
(25, 000)
0
0
0
0
100, 000
(100, 000)
0
0
0
0
0
31, 000
(35, 000)
(4, 000)
4, 000
0
0
0
0
0
0
0
0
0
0
0
405, 000
0
DD,
Capital
(50%)
SS,
Capital
(30%)
VV,
Capital
(20%)
100, 000
(60, 000)
40, 000
(1, 250)
38, 750
140, 000
(36, 000)
104, 000
(750)
103, 250
75, 000
(24, 000)
51, 000
(500)
50, 500
38, 750
103, 250
(22, 500)
80, 750
50, 500
80, 750
(3, 900)
76, 850
(750)
76, 100
(13, 700)
62, 400
50, 500
(2, 600)
47, 900
(500)
47, 400
(5, 800)
41, 600
62, 400
(21, 000)
41, 400
(2, 400)
39, 000
(1, 500)
37, 500
(37, 500)
0
41, 600
(14, 000)
27, 600
(1, 600)
26, 000
(1, 000)
25, 000
(25, 000)
0
50, 500
Schedule of Safe Payment
1ST SCHEDULE
DD (50%)
38, 750
(85, 000)
Bal. (46, 250)
46, 250
SS (30%)
103, 250
(51, 000)
52, 250
(27, 750)
VV (20%)
50, 500
(34, 000)
16, 500
(18, 500)
Bal. 0
24, 500
(2, 000)
22, 500
(2, 000)
2, 000
0
SS (30%)
76, 100
(40, 500)
35, 600
(21, 900)
13, 700
VV (20%)
47, 400
(27, 000)
20, 400
(14, 600)
5, 800
Bal. 0
2ND SCHEDULE
DD (50%)
31, 000
(67, 500)
Bal. (36, 500)
Bal. 0
DD (50%)
SS (30%)
100, 000
140, 000
÷ .05
÷ .03
2, 000, 000 4, 666, 667
1ST
3RD
VV (20%)
75, 000
÷ .02
3, 750, 000
2ND
First Priority: Liability
Second Priority:
SS (4, 666, 667 – 3, 750, 000) x .30
Third Priority:
SS (3, 750, 000 –2, 000, 000) x .30
VV (3, 750, 000 –2, 000, 000) x .20
405, 000
275, 000
525, 000
350, 000
TOTAL
1, 555, 000
DSV PARTNERSHIP
SCHEDULE OF SAFE PAYMENTS TO PARTNERS
DD
SS
50%
30%
Schedule 1, July 31, 20x4
July, 20x4: Sale of Assets and distribution of
loss
VV
20%