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Name:
Section:
Date:
Score:
Partnership and Corporation (BAM201)
Partnership Liquidation
1.
The partnership of Jenson, Smith, and Hart share profits and losses in the ratio of 5:3:2, respectively. The partners voted to dissolve the
partnership when its assets, liabilities, and capital were as follows:
Assets
Cash
₱ 40,000
Other assets
210,000
₱250,000
Liabilities and Capital
Liabilities
₱ 60,000
Jenson, Capital
48,000
Smith, Capital
72,000
Hart, Capital
70,000
₱250,000
The partnership will be liquidated over a prolonged period of time. As cash becomes available, it will be distributed to the partners. Jenson is
insolvent. The first sale of noncash assets having a book value of ₱120,000 realized ₱90,000. How much cash should be distributed to each
partner after this sale?
a.
Jenson ₱0; Smith ₱28,800; Hart ₱41,200.
b.
Jenson ₱0; Smith ₱30,000; Hart ₱40,000.
c.
Jenson ₱35,000; Smith ₱21,000; Hart ₱14,000.
d.
Jenson ₱45,000; Smith ₱27,000; Hart ₱18,000.
2.
The statement of financial position of the partnership of A, B and C shows the following information:
Cash
Noncash assets
40,000
720,000
Total
760,000
Liabilities
B, Loan
C, Loan
A, Capital (50%)
B, Capital (30%)
C, Capital (20%)
Total Liab. & Equity
300,000
64,000
20,000
250,000
86,000
40,000
760,000
The non-cash assets are sold for ₱320,000. Partner C is the only solvent partner. In the settlement of the partners’ claims, how much did Partner
B receive?
a. 50,000
c. 22,500
b. 30,000
d. None
3.
On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership. The following information was made available:
Cash
80,000
Accounts payable
120,000
Accounts receivable
240,000
Payable to B
80,000
Inventory
480,000
A, Capital (20%)
400,000
Equipment
1,200,000
B, Capital (30%)
600,000
Total
2,000,000
C, Capital (50%)
800,000
Information on the conversion of non-cash assets is as follows:
●
₱200,000 was collected on accounts receivable; the balance is uncollectible.
●
₱280,000 was received for the entire inventory.
●
The equipment was sold for ₱1,000,000.
●
₱8,000 liquidation expenses were paid.
How much did C receive from the settlement of his interest in the partnership?
a. 310,400
c. 545,600
b. 587,400
d. 576,000
4.
The partners of the M & N Partnership started liquidating their business on July 1, 2004, at which time the partners were sharing profits
and losses 40% to M and 60% to N. The balance sheet of the partnership appeared as follows:
Cash
Receivable
Inventory
Equipment
Accumulated depreciation
8,800
22,400
39,400
65,200
(30,800)
Total Assets
105,000
Accounts payable
N, Loan
M, Capital
M, Drawing
N, Capital
N, Drawing
Total Liab. & Equity
32,400
14,000
31,000
(5,400)
33,200
(200)
105,000
During the month of July, the partners collected ₱600 of the receivables with no loss. The partners also sold during the month the entire
inventory on which they realized a total of ₱32,400.
How much of the cash was paid to N on July 31, 2004?
a.
0
b.
320
5.
c. 9,080
d. 9,400
The equity section of the statement of financial position of the partnership of A, B and C shows the following information:
A, capital (40%)
64,000
B, capital (40%)
104,000
C, capital (20%)
76,800
Total equity
244,800
Non-cash assets are sold in installment. Cash distributions are made to the partners as cash becomes available. In the second sale of non-cash
assets, the partners received the same amount of cash in the distribution. In the third sale of non-cash assets, the amount of cash available for
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distribution is ₱100,000. The carrying amount of the remaining non-cash assets is ₱260,000. Under the cash priority program, how much cash
is distributed to C in the third installment payment?
a. 40,000
c. 20,000
b. 38,400
d. 0
6.
On January 1, 20X2, the partners of Allen, Brown, and Cox, who share profits and losses in the ratio of 5:3:2, respectively, decided to
liquidate their partnership. The partnership trial balance at this date is as follows:
Debit
Cash
18,000
Accounts receivable
66,000
Inventory
52,000
Machinery and equipment, net
189,000
Allen, loan
30,000
Credit
Accounts payable
53,000
Brown, loan
20,000
Allen, capital
118,000
Brown, capital
90,000
Cox, capital
74,000
355,000
Totals
355,000
The partners plan a program of piecemeal conversion of assets in order to minimize liquidation losses. All available cash, less an amount
retained to provide for future expenses, is to be distributed to the partners at the end of each month. The following liquidation transactions
occurred in January 20X2.
●
₱51,000 was collected on accounts receivable; the balance is uncollectible.
●
₱38,000 was received for the entire inventory.
●
₱2,000 liquidation expenses were paid.
●
₱50,000 was paid to outside creditors, after offset of a P3,000 credit memorandum received on January 11, 20X2.
●
₱10,000 cash was retained in the business at the end of the month for potential unrecorded liabilities and anticipated expenses.
All partners are insolvent.
How much did Cox receive on the January 31, 20X2 cash distribution to the partners?
a. 26,600
c. 18,400
b. 24,600
d. 0
7.
On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership. The following information was made available:
Cash
80,000
Accounts payable
200,000
Accounts receivable
240,000
A, Capital (20%)
400,000
Inventory
480,000
B, Capital (30%)
600,000
Equipment
1,200,000
C, Capital (50%)
800,000
Total
2,000,000
Total
2,000,000
A third party offered to buy for ₱1,920,000 the partnership assets including liabilities but excluding cash and after certain assets are revalued
as follows:
Accounts receivable
180,000
Inventory
300,000
Equipment
1,280,000
How much did A receive from the settlement of his interest in the partnership?
a. 360,000
c. 482,600
b. 440,400
d. 440,000
8.
The accounts of AB Partnership after its noncash assets were realized are as follows:
Cash
Accounts payable
Loan payable to A
A, Capital
B, Capital
Debit
34,000
Credit
25,000
9,000
8,000
8,000
How much cash did B receive from the settlement of the partners’ interest in the partnership?
a.
0
c. 8,000
b.
1,000
d. 9,000
Use the following information for the next two questions:
Partners A, B and C decided to liquidate their partnership. A summary of the partnership’s statement of financial position is shown below:
Cash
50,000
Noncash assets
1,200,000
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Total
1,250,000
Accounts payable
Payable to A
A, Capital (50%)
B, Capital (30%)
C, Capital (20%)
Total
100,000
50,000
540,000
360,000
200,000
1,250,000
9.
If a cash priority program is prepared, which partner is paid first and how much is the total payment to that partner before all partners
will share on the available cash based on their profit and loss ratios?
a.
b.
10.
c. B, ₱90,000
B, ₱96,000
d. B, ₱60,000
Three-fourths (3/4) of the noncash assets were sold for ₱920,000. The partnership paid ₱5,000 transaction costs on the sale. How much
cash did A receive from the settlement of the partners’ interests under the cash priority program?
a.
b.
11.
A, ₱20,000
447,500
c. 386,500
493,500
d. 306,500
Partners Bee, Cee, Dee and Gee, who share profits in the ratio of 5:3:1:1, respectively, decided to liquidate their partnership. The capital
balances before the liquidation are as follows:
Bee
60,000
Cee
40,000
Dee
30,000
Gee
10,000
The partners agreed on the following:
●
Partnership’s computer equipment with a book value of ₱12,000 is to be taken over by partner Bee at a price of ₱15,000.
●
Partnership’s liabilities are to be paid off and the balance of cash on hand of ₱30,000 is to be divided in a manner that will avoid the need
for any possible recovery of cash from a partner.
How much of the ₱30,000 cash is distributed to Cee?
a. 10,000
c. 20,000
b. 0
12.
d. 15,000
A, B, and C are partners in ABC Partnership and share profits and losses in the ratio of 5:3:2, respectively. The partners have agreed to
liquidate the partnership. Prior to liquidation, the partnership balance sheet shows the following book values.
Cash
25,200
Non-cash
297,600
Notes payable to C
38,400
Other liabilities
184,800
A, capital
72,000
B, capital
(12,000)
C, capital
39,600
Liquidation expenses of ₱16,800 are paid. Non-cash assets with a book value of ₱240,000 are sold for ₱216,000. All the partners are personally
insolvent. How much cash should C receive?
a.
74,571
c. 39,600
b.
46,458
d. 37,600
13.
ABC Co. is undergoing liquidation. The following are the account balances after all the non-cash assets were sold:
Cash
50,000
Liabilities
A, Capital (30%)
B, Capital (30%)
C, Capital (40%)
120,000
90,000
(60,000)
(100,000)
The personal assets and liabilities of the partners are as follows:
A
B
C
Personal assets
80,000
100,000
192,000
Personal liabilities
90,000
61,000
80,000
C wants to make an additional contribution of only ₱70,000, which A is refuting. If the doctrine of marshaling of assets is followed, how much
of A’s ₱90,000 equity would appear to be recoverable?
a.
90,000
c. 81,000
b.
79,000
d. 0
14.
The following were the accounts of AB partnership on the day the partners decided to liquidate the business:
Cash
Receivables
Inventory
Other assets
Total Assets
18,000
75,000
90,000
84,000
267,000
Liabilities
Loan payable to A
A, Capital (60%)
B, Capital (40%)
Total Liabilities & Equity
42,000
24,000
102,000
99,000
267,000
In the first month of the liquidation process, one-third of the receivables was collected; ₱45,000 of inventory was sold at an average of 70% of
carrying amount; other assets were sold for ₱36,000. How much did A and B receive on the first cash distribution?
A
B
a.
8,100
27,400
b.
40,200
41,800
c.
59,100
54,400
d.
32,100
36,400
15.
ABC Co. is undergoing liquidation. Relevant information follows:
●
Account balances:
Receivable from A
Payable to B
A, Capital (50%)
7,200
14,400
59,400
A, Drawings (Dr.)
B, Capital (30%)
12,000
44,400
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C, Capital (20%)
C, Drawings (Cr.)
●
●
39,000
4,800
Total partnership assets are ₱211,200 (including ₱64,200 cash).
C received ₱33,000 in the final settlement of the partners’ claims.
How much is the total loss on the liquidation?
a.
64,200
b.
54,000
c. 31,200
d. 10,800
A and B formed a partnership on July 1, 20x1 to operate two stores to be managed by each of them. They invested ₱30,000 and ₱20,000
and agreed to share earnings 60% and 40%, respectively. All their transactions were of cash, and all their subsequent transactions were
handled through their respective bank accounts as summarized below:
A
B
Cash receipts……………………………₱79,100
₱65,245
Cash disbursements…………………… 62,275
70,695
16.
On December 31, 20x1, all remaining non-cash assets in the two stores were sold for cash of ₱60,000. The partnership was dissolved, and cash
settlement was effected. In the distribution of the ₱60,000 cash, A received
a. 24,000
c. 34,000
b. 26,000
d. 36,000
17.
A, B, C, and D are partners, sharing earnings in the ratio of 3/21, 4/21, 6/21 and 8/21, respectively. The balances of their capital accounts
on December 31, 20x1 are as follows:
A……………………………………………. ₱1,000
B…………………………………………..
25,000
C……………………………………………. 25,000
D……………………………………………
9,000
₱ 60,000
The partners decide to liquidate, and they accordingly convert the non-cash assets into ₱23,200 of cash. After paying the liabilities amounting
to ₱3,000, they have ₱22,000 to divide. Assume that a debit balance of any partner’s capital is uncollectible. The share of C in the cash
distribution to the partners was: (round-off answer)
a.
3,200
b.
8,200
c.
13,800
d.
17,800
18.
ABC Co. decided to liquidate. The capital balances before the start of the liquidation process were as follows:
A, Capital (30%)
₱350,000
B, Capital (20%)
₱250,000
C, Capital (50%)
₱350,000
In the first month of the liquidation process, all the partnership assets were sold and used to pay the liabilities, except one for ₱50,000 which
remains outstanding. A and B are solvent, but C is insolvent. On the remaining claim against the partnership, A is to absorb
a. 40,000.
b. 15,000.
c. 30,000.
d. 25,000.
19-20 . SHADE A
“It is the Lord who goes before you. He will be with you; he will not fail you or forsake you. Do not fear or be dismayed.” – (Deuteronomy 31:8)
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