AA1 - Chapter 3 Liquidation Calculations

CHAPTER 3
Partnership Liquidation
EXERCISES
Exercise 3 - 1
Capital balances before liquidation
Loan from partners
Total partners interest
Loss on realization (P46,000 P12,000)
Balances
Additional loss to partners
Balances
Distribution of cash to partners
Aguilar
P 11,000
2,000
P 13,000
(13,600)
P( 600)
600
--------
Benito
P 10,300
Casimiro
P 13,700
David
P 9,000
---------
P 10,300
( 10,200)
P
100
( 300)
P ( 200)
200
---------
P 13,700
( 6,800)
P 6,900
( 200)
P 6,700
(
133)
6,567
P 9,000
( 3,400)
P 5,600
( 100)
P 5,500
(
67)
5,433
Duque
P 50,000
15,000
( 15,000)
P 50,000
( 32,500)
P 17,500
( 11,250)
P 6,250
Espino
P 22,500
7,500
( 10,000)
P 20,000
( 16,250)
P 3,750
( 5,625)
P( 1,875)
Felipe
P 20,000
7,500
( 10,000)
P 17,500
( 16,250)
P 1,250
( 5,625)
P( 4,375)
Total
P 92,500
30,000
( 35,000)
P 87,500
( 65,000)
P 22,500
( 22,500)
------
Exercise 3 - 2
Original investments
Net income for 2007
Drawings in 2007
Total partners interest before dissolution
Net assets distributed to partners
Balances
Loss to partners distributed 2:1:1
Cash settlement among partners
Exercise 3 - 3
1.
2.
3.
Guarin, Capital
Receivable from Guarin
To offset receivable from Guarin against his capital.
1,500
1,500
Salary Payable to Henson

Henson, Capital
To include salary payable to Henson to his interest.
500
500
Henson, Capital (P24,500 x 40%)

Guarin, Capital (P24,500 x 60%)
Loss from Liquidation
To distribute loss from liquidation to partners.
Henson, Capital (P9,500 + P500 - P9,800)

Guarin, Capital (P18,000 - P1,500 - P14,700)
Cash
Exercise 3 - 4
1.
9,800
14,700
24,500
4.
200
1,800
2,000
Ibarra
Javier
Katindig
AA1 - Chapter 3 (2008 edition)
page 2
Original investment
Net loss for six months*
Loss on realization (P121,000 - P49,000 = P72,000)
Balances
Cash distribution to Ibarra
*
2.
P 60,000
(18,000)
(36,000)
P 6,000
( 1,200)
( 4,800)
Total capital, March 1 (P60,000 + P54,000 + P16,000)

Net assets, Aug. 31 (P5,000 + P121,000 - P32,000)
Net loss
P 54,000
(12,000)
(24,000)
P 18,000
( 800)
P130,000
94,000
P 36,000
Book value of other assets

Total loss on realization
Capital balance of Katindig after dist. of net loss
Excess of personal liabilities over personal assets
Maximum amount of loss that can be absorbed by Katindig
Fractional share of Katindig
Cash that must be realized on sale of other assets
Exercise 3 5
1.
Book value of other assets (P459,000 P3,000)
Cash realized:
Accounts receivable [P180,000 (P60,000 x 20%)]
Merchandise inventory
Prepaid advertising
Machinery and equipment (P120,000 x 60%)
Loss on realization
P 16,000
( 6,000)
(12,000)
P( 2,000)
2,000
P121,000
P 10,000
( 5,000)
P 5,000
1/6__
( 30,000)
P 91,000
P456,000
P168,000
75,000
2,400
72,000
317,400
P138,600
Lesaca Manalo Partnership

Statement of Liquidation
December 31, 2008
Cash
Balances before liquidation
Sale of assets and distribution
of loss
Balances
Payment of liabilities
Balances
Additional investment
Manalo
Balances
Balances
Additional loss to Lesaca
Payment to Lesaca
P 3,000
317,400
Other
Assets
Liabilities
AP
NP
Capital
Lesaca
Manalo
P456,000
( 456,000
)
P60,000
P258,000
P90,000
( 55,440)
P 51,000
( 83,160)
P60,000
( 59,400)
P258,000
( 258,000
)
P34,560
( 1,200)
(P32,160)
( 1,800)
P33,360
(P33,960)
12,000
P33,360
(P21,960)
P33,360
( 21,960)
P11,400
(P21,960)
21,960
P320,400
( 320,400
)
P600
by
12,000
P 12,000
(
600)
P 11,400
P
(
600
600)
P 11,400
Exercise 3 6
Restricted interest possible loss
Nocum
P180,000
Oliva
P300,000
Pascua
P240,000
Quinto
(P 33,000)
page 3
Non-cash assets
P600,000
Liquidation expenses
9,000
Unrecorded liabilities
15,000
Total
P624,000
Balances
Restricted interest possible loss to
Nocum, Oliva and Pascua for the
deficiency of Quinto
Balances
Restricted interest possible loss to
Oliva and Pascua for the deficiency of
Nocum
Safe payment
( 156,000)
P 24,000
( 156,000)
P144,000
( 156,000)
P 84,000
( 156,000)
(P189,000)
( 63,000)
(P 39,000)
( 63,000)
P 81,000
( 63,000)
P 21,000
189,000
-
( 19,500)
P 61,500
( 19,500)
P 1,500
39,000
-
Exercise 3 - 8
Rama, Sison and Toledo
Cash Priority Program
PAYMENTS
Capital balances
Rama
P30,000
Sison
P70,000
Toledo
P40,000
Rama
Sison
Toledo
page 4
Add Loan balances

Profit and loss ratio
Loss absorption balance
Allocation I Cash to Toledo
reducing LAB to an amount
reported for Sison
(P125,000 x 20%)
Balances
Allocation II - Cash to
Sison &
Toledo reducing LAB to an amount
reported for Rama
P100,000 x 40%
P100,000 x 20%
Balances
Allocation III - Further cash
distribution may be made in the
P & L ratio
Exercise 3-9
1.

January:
Sale of assets and dist. Of
loss
20,000
P90,000
40%
P225,000
30,000
P70,000
20%
P350,000
P125,000
P225,000
(125,000)
P225,000
P25,000
(100,000)
P125,000
P125,000
P40,000
(100,000)
P125,000
20,000
P45,000
P40,000
Julian, Lagman and Magno

January 1, 2008

Add Note payable to Magno
Loss absorption balances
Allocation I Cash to Lagman reducing
LAB to an amount reported for Julian
(P60,000 x 3/10)
Balances
Allocation II Cash to Julian & Lagman
reducing LAB to an amount reported
for Magno (P40,000 x 3/10)
Balances
Allocation III Further cash distributions
may be made in the P & L ratio
2.
20,000
P50,000
40%
P125,000
Julian
P 36,000
Lagman
P 54,000
P 36,000
3/10
P120,000
P 54,000
3/10
P180,000
Magno
P18,000
14,000
P 32,000
4/10
P80,000
P120,000
(60,000)
P120,000
P80,000
( 40,000)
P80,000
(40,000)
P80,000
P80,000
Julian
PAYMENTS
Lagman
Magno
P18,000
P12,000
P12,000
12,000
P20,000
Julian, Lagman and Magno

Statement of Liquidation
January to March, 2008
Cash
P12,000
Other
Assets
P146,000
30,000
( 38,000)
Liabilities
P36,000
NP to
Magno
P14,000
Julian
P36,000
( 2,400)
PAYMENTS
Lagman
Magno
P54,000
P18,000
( 2,400)
( 3,200)
Payment of liquidation
expenses
Distribution of cash to
partners (sch. 1)
Balances
February:
Sale of assets and
distribution of gain
Payment of liquidation
expenses
Distribution of cash to
partners (sch. 2)
Balances
March:
Sale of assets and
distribution of loss
Balances
Offset of loan against
deficiency
Final payment to partners
page 5
( 3,600)
( 36,000)
( 1,080)
(1,080
(1,440)
P32,520
(2,400)
P48,120
P13,360
2,700
2,700
3,600
(2,520)
(2,520)
(3,360)
P14,000
(10,000)
P22,700
(25,600)
P22,700
P13,600
P14,000
(11,100)
P11,600
(11,100)
P11,600
(14,800)
P(1,200)
(P11,600
)
(P11,600
)
(36,000)
( 2,400)
P108,000
44,000
P14,000
(35,000)
(8,400)
(35,600)
P73,000
36,000
P36,000
(73,000)
( 1,200)
(P12,800)
(P36,000)
1,200
Schedule 1
Installment Liquidation
January 31, 2008
Cash available
Allocation I Payable to Lagman
Amount
P2,400
P2,400
Julian
Lagman
Mango
P2,400
Schedule 2
Installment Liquidation
February 29, 2008
Cash available
Allocation I Balance
Payable to Lagman
Allocation II Payable to Julian and
Lagman
3. Journal entries
January
Cash
Julian, Capital
Lagman, Capital
Magno, Capital
Other Asset
Julian, Capital
Lagman, Capital
Magno, Capital
Cash
Amount
P2,400
Julian
P2,400
P20,000
Lagman
Mango
P2,400
P10,000
P10,000
10,000
P25,600
30,000
2,400
2,400
3,200
38,000
1,080
1,080
1,440
3,600
page 6
Liabilities
Cash
36,000
36,000
Lagman, Capital
Cash
February
March
2,400
2,400
Cash
Other assets
Julian, Capital
Lagman, Capital
Magno, Capital
44,000
35,000
2,700
2,700
3,600
Julian, Capital
Lagman, Capital
Magno, Capital
Cash
2,520
2,520
3,360
Julian. Capital
Lagman, Capital
Cash
10,000
25,600
Cash
Julian, Capital
Lagman, Capital
Magno, Capital
Other assets
36,000
11,100
11,100
14,800
8,400
35,600
73,000
Note Payable to Magno

Magno, Capital
1,200
Note Payable to Magno

Julian, Capital
Lagman, Capital
Cash
12,800
11,600
11,600
1,200
36,000
Exercise 3 - 10
U, V and W Co.
PAYMENTS
Capital balances
Allocation I - Cash to Villa reducing
LAB to an amount reported for
Waldo (P4,900 x 2/7)
Balances
Allocation II - Cash to Villa & Waldo
reducing LAB to an amount
reported for Urbe
Urbe
P 11,200
4/7
P 19,600
Villa
P13,000
2/7
P 45,500
Waldo
P 5,800
1/7
P 40,600
P 19,600
( 4,900)
P 40,600
P 40,600
Urbe
Villa
P 1,400
Waldo
P21,000 x 2/7
P21,000 x 1/7
Balances
Allocation III - Further cash distribution
may be made in the P & L ratio
2.
page 7
( 21,000)
P 19,600
P 19,600
Book value of assets

Loss on realization:
Capital balance of Urbe prior to realization
Cash to be received by Urbe
Share of Urbe in the loss on realization
Fractional share of Urbe
Cash to be realized of the sale of assets
6,000
(21,000)
P 19,600
P 7,400
P 30,000
P 11,200
10,000
P 1,200
4/7_
2,100
P 27,900
3.
Allocation III - P3,200 4/7 = P5,600 x 1/7

Allocation II
Total cash received by Waldo
4.
Book value of assets

Total cash available
Allocation I
Allocation II - P1,800 - P1,400 = P400 2/3
Loss on liquidation
P 30,000
Exercise 3 11
Partnership Books
1. Inventories
Capital Adjustment Account
2.
3.
4.
5.
6.
Accumulated Depreciation
Equipment
Goodwill
P980,000 P924,000 = P56,000
P 3,000
P 3,000
800
3,000
P 3,800
P 1,400
600
2,000
P 28,000
90,000
90,000
160,000
80,000
80,000
56,000
56,000

Belen, Capital (3/4)
Bgnes, Capital (1/4)
226,000
Colored Co. Stocks

Allowance for Uncollectible Accounts
Accounts Payable
Accounts Receivable
Inventories
Equipment
Goodwill
980,000
12,000
104,000
Belen, Capital
Bagnes, Capital
Cash
Colored Co. Stocks
563,500
458,500
169,500
56,500
124,000
296,000
520,000
156,000
42,000
980,000
page 8
New Corporations Books

1. Authorized to issue 50,000 shares of P50 par value Ordinary Share Capital.
2.
3.
Cash
Ordinary Share Capital
PIC in Excess of Par
700,000
Accounts Receivable
Inventories
Equipment
Goodwill
Allowance for Doubtful Accounts
Accounts Payable
124,000
296,000
520,000
156,000
500,000
200,000
12,000
104,000
700,000
280,000
Problem 3 2 (Case 3 cont.)

Calma, Daza and Esteban
Schedule of Cash Distribution to Partners
Capital balances before cash distribution
Add loan balance
Restricted interest - possible loss to Calma and Esteban
in the ratio of 2:1 if Daza fails to pay his deficiency
Free interests - amounts to be paid to partners
Payment to apply on:
Loan
Capital
Cash distribution
Calma
P 27,000
Daza
P ( 3,000)
P 27,000
P ( 3,000)
( 2,000)
P 25,000
P 25,000
P 25,000
Esteban
P 46,000
8,000
P 54,000
3,000
-
( 1,000)
P 53,000
P 8,000
45,000
P 53,000
AA1 - Chapter 3 Partnership Liquidation (2005)

Suggested Answers
page
Problem 3 2 (Case 4 cont.)

Calma, Daza and Esteban
Schedule of Cash Distribution to Partners
Capital balances before cash distribution
Add loan balance
Restricted interest - possible loss to Calm and Esteban in
the ratio of 2:1 if Daza fails to pay his deficiency
Balances
Restricted interest - possible loss to Esteban if Calma fails
to pay his deficiency
Free interests - amounts to be paid to partners
Loan
Capital
Cash distribution
Calma
P 9,000
Daza
P (21,000)
P 9,000
P (21,000)
Esteban
P 37,000
8,000
P 45,000
(14,000)
21,000
P( 5,000)
P 38,000
5,000
-
( 5,000)
-
P 8,000
25,000
P 33,000
( 7,000)
Chapter 3 Partnership Liquidation

Suggested Answers
page
Problem 3 - 3
1.
a.
b.
c.
d.
e.
f.
g.
h.
2.
a.
b.
Cash
Accumulated Depreciation
Fuentes, Capital (P72,000 x 5/15)
Goco, Capital (P72,000 x 5/15)
Herrera, Capital (P72,000 x 3/15)
Isla, Capital (P72,000 x 2/15)
Merchandise Inventory
Accounts Receivable
Store Fixtures
48,000
25,000
24,000
24,000
14,400
9,600
Accounts Payable
Cash (P28,000 + P48,000)
76,000
55,000
60,000
30,000
76,000
Fuentes, Capital
Herrera, Capital
Isla, Capital
Goco, Capital
4,500
2,700
1,800
Fuentes, Capital
Isla, Capital
Herrera, Capital
1,500
600
Fuentes, Loan
Isla, Loan
Fuentes, Capital
Isla, Capital
2,000
3,000
Cash
Fuentes, Capital
Herrera, Capital
6,000
Accounts Payable
Cash
4,000
Isla, Loan
Cash
2,000
Accounts Payable
Fuentes, Capital
4,000
Isla, Loan
Fuentes, Capital
Herrera, Capital
2,000
3,000
9,000
2,100
2,000
3,000
1,000
5,000
4,000
2,000
4,000
5,000
Problem 3 3 (cont.)
3.
a.
Accounts Payable
4,000

Suggested Answers
page
Herrera, Capital
b.
4,000
Isla, Capital
Fuentes, Capital
Herrera, Capital
2,000
1,000
1,000
Schedule to support the entries in Requirement 1

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

Suggested Answers
page
Problem 3 -5
JKLM Trading Co.
Schedule To Accompany Statement of Liquidation
Amounts to be Paid to Partners
February 28, 2008
Capital balances before dist. of cash
Add Loan balances
Restricted interest - possible loss if
nothing is realized on remaining assets
Balances
Restricted interest - additional possible
loss if Manabat is unable to pay his
deficiency (20:30:30)
Free interest - payments to partners
Payment to apply on
Loan
Capital
Total cash distribution
Jocson
P 19,128
15,000
P 34,128
Kaimo
P 88,992
Legarda
P 101,532
Manabat
P 22,878
P 88,992
P 101,532
P 22,878
( 25,494)
P 8,634
( 38,241)
P 50,751
( 38,241)
P 63,291
( 25,494)
P( 2,616)
( 654)
P 7,980
( 981)
P 49,770
(
981)
P 62,310
P 49,770
P 49,770
P 62,310
P 62,310
2,616
-
P 7,980
P 7,980
JKLM Trading Co.

Schedule To Accompany Statement of Liquidation
March 31, 2008
Add Loan balance
Restricted interest - possible loss if
nothing is realized on remaining assets
Free interest - payment to partners
Loan
Capital
Total cash distribution
Jocson
P 18,348
7,020
P 25,368
Kaimo
P 38,052
Legarda
P 38,052
Manabat
P 22,098
P 38,052
P 38,052
P 22,098
( 16,524)
P 8,844
( 24,786)
P 13,266
( 24,786)
P 13,266
(16,524)
P 5,574
P 7,020
1,824
P 8,844
P 13,266
P 13,266
P 13,266
P 13,266
P 5,574
P 5,574
AA1 -Chapter 3 Partnership Liquidation

Suggested Answers
page
Problem 3 6
QRS Partnership
Schedule to Accompany Statement of Liquidation
July 31, 2008
Quizon
Roman
Balances before cash distribution
P116,250
P159,750
Add Loan balance
150,000
P116,250
P309,750
Restricted interest possible loss of P480,000
on remaining unsold assets and cash
withheld of P30,000
( 255,000)
( 153,000)
Balances
( P138,750)
P156,750
to Roman and Silva
138,750
( 83,250)
Balances
P 73,500
Restricted interest possible loss to Roman
( 6,000)
Payment to Roman to apply on loan
P 67,500
QRS Partnership
Schedule to Accompany Statement of Liquidation
August 31, 2008
Quizon
Roman
Balances before cash distribution
P 93,000
P145,800
Add Loan balance
82,500
P 93,000
P228,300
on remaining unsold assets and cash
withheld of P30,000
( 202,500)
( 121,500)
Balances
( P109,500)
P106,800
to Roman and Silva
109,500
( 65,700)
Payment to Roman to apply on loan and to Silva
to apply on capital
P 41,100
Problem 3 - 7
Requirement 1
Tabora, Ureta and Veloso
Silva
P151,500
P151,500
( 102,000)
P 49,500
( 55,500)
(P 6,000)
6,000
Silva
P142,200
P142,200
( 81,000)
P 61,200
( 43,800)
P 17,400

Suggested Answers
page

January 1, 2008
Capital balances
Loan balances
Allocation I - Cash to Ureta to
reduce LAB to amount
reported for Tabora
Balances
Allocation II - Cash to Tabora
and Ureta to reduce LAB to
amount reported for Veloso
Balances
Allocation III - Further cash
distribution may be made
based on P & L ratio
Tabora
P120,000
45,000
P165,000
50%
P330,000
Ureta
P 90,000
30,000
P120,000
30%
P400,000
Veloso
P 40,000
13,000
P 53,000
20%
P265,000
P330,000
( 70,000)
P330,000
P265,000
( 65,000)
P265,000
( 65,000)
P265,000
PAYMENTS
Tabora
Ureta
Veloso
P21,000
P265,000
P32,500
P32,500
19,500
P40,500
Requirement 2
Amount
January:
Cash available
Allocation I - payable to Ureta
February:
Cash available
Allocation I - Bal. payable to Ureta
Allocation II - Payable to Tabora and
Ureta in the ratio of 50:30
P15,000
P40,000
6,000
P 6,000
P34,000
P90,000
18,000
P72,000
April:
Cash available
Allocation III - Based on P & L ratio
P30,000
30,000
b.
Neri, Capital
Ureta
P15,000
15,000
March:
Cash available
Allocation II - Balance
Allocation III - Based on P & L ratio
Problem 3 8 (cont.)
Requirement 1
January:
a.
Cash
Accounts Receivable
Tabora
Veloso
P21,250
P21,250
12,750
P18,750
P11,250
36,000
P47,250
P 6,750
21,600
P28,350
P14,400
P14,400
P15,000
P 9,000
P 6,000
112,000
112,000
2,200

Suggested Answers
page
Ordan, Capital
Pacia, Capital
Cash
c.
d.
February:
a.
b.
c.
d.
March:
a.
b.
c.
Accounts Payable
Cash
Pacia, Loan
Pacia, Capital
Cash
4,400
38,000
38,000
9,000
7,000
16,000
Cash
Accounts Receivable
Neri, Capital
Ordan, Capital
Pacia, Capital
Cash
Accounts Payable
Cash
Neri, Capital
Ordan, Capital
Pacia, Capital
Salary Payable to Neri
Neri, Capital
Ordan, Capital
Pacia, Capital
Cash
Cash
Neri, Capital
Ordan, Capital
Pacia, Capital
Accounts Receivable
Neri, Capital
Ordan, Capital
Pacia, Capital
Cash
Neri, Capital
Ordan, Capital
Pacia, Capital
Cash
Problem 3 - 9
Requirement 1
1,100
1,100
Wilson, Yuson and Zapata
36,000
36,000
1,400
700
700
2,800
39,000
38,000
500
250
250
6,000
1,400
3,700
8,700
19,800
35,000
4,000
2,000
2,000
43,000
2,000
1,000
1,000
4,000
39,500
19,750
19,750
79,000

Suggested Answers
page
Cash Distribution Schedule

June 30, 2008
Wilson
P 67,000
12,000
P 55,000
50%
P110,000
Capital balances
Receivable from partners
Allocation I - Cash to
Yuson to reduce LAB
to amt. reported for Zapata
Balances
P110,000
Allocation II - Cash to Zapata
and Yuson to reduce LAB
to amt. reported for Wilson
Balances
P110,000
Allocation III - Based on P & L
ratio (P6,000 + P100,000 P17,000 = P89,000 P14,000)
TOTALS
Yuson
P 45,000
P 45,000
30%
P150,000
Zapata
P 31,500
7,500
P 24,000
20%
P120,000
30,000
P120,000
P120,000
10,000
P110,000
10,000
P110,000
P AY M E N T S
Wilson
Yuson
Zapata
P 9,000
3,000
P 2,000
P37,500
22,500
15,000
P37,500
P 34,500
P17,000
Problem 3 9 Requirement No 2
Wilson, Yuson and Zapata
Cash Distribution Schedule
July 1 - September 30, 2008
July - Dist. of loss on sale of assets (1)
Liabilities
P 17,000
(17,000)
Wilson
P 55,000
(4,750)
(500)
Yuson
P 45,000
(2,850)
(300)
Zapata
P 24,000
(1,900)
(200)

Suggested Answers
page
Payment to partners (2)

Balances
Aug.- Liquidation expenses
Equipment taken by Zapata
Gain on transfer of eqt. to Zapata
Payment to Yuson (3)
Balances
Sept- Dist. of loss on sale of assets (4)
Final distribution to partners
(1)
(2)
(3)
(4)
(6,500)
P 35,350
(450)
P 49,750
(750)
(3,000)
(1,800)
(4,000)
P 32,700
(6,000)
(300)
P26,400
P 52,000
(10,000)
(500)
P41,500
P 21,900
(300)
(10,000)
(1,200)
P 12,800
(4,000)
(200)
P8,600
(P22,000 + P14,000) - (P16,500 + P10,000) = P9,500 loss on sale of assets

(P6,000 + P26,500 - P1,000 - P17,000) - P8,000 cash withheld = P6,500 cash dist. Req. 1
schedule of cash distribution below8,000 1,500 2,500 +4,000
(P99,000 - P4,000 BV of equipment taken by Zapata) - P75,000 = P20,000 loss on sale
Schedule of Cash Distribution
August 31, 20068
Wilson
Yuson
Zapata
Capital balances after dist.

of equipment to Zapata
Allocation I - Cash to
Yuson to reduce LAB to
amt. reported for Wilson
Balances
Allocation II - Cash to Wilson
& Yuson to reduce LAB to
amount reported for Zapata
Balances
Allocation III P & L ratio
P 52,000
50%
P104,000
P 36,700
30%
P122,333
P 12,800
20%
P 64,000
P104,000
18,333
P104,000
P 64,000
40,000
P 64,000
40,000
P 64,000
Wilson
Yuson
P 5,500
P 64,000
P20,000
P20,000
12,000
P 17,500
Problem 3 - 9 - Requirement 3
Cash available in September
Allocation I Balance
Allocation II
Balance - Allocation III
Amount
P76,500
1,500
32,000
P43,000
Wilson
Yuson
Zapata
P 20,000
21,500
P 41.500
P 1,500
12,000
12,900
P 26,400
P 8,600
P 8,600
Problem 3 -10
Arceo, Basco and Cervo
Statement of Changes in Partners Capital
For the Period January 1, 2006 to May 31, 2008
Arceo
Basco
Cervo
Total
Zapata

Suggested Answers
2006:
Original investment
Distribution of net income (sch. 1)
Drawings
Balance, December 31
2007:
Investment of Cervo (sch. 2)
Distribution of net loss
Drawings
Balances, December 31
2008:
Distribution of cash in Feb. (sch. 3)
Distribution of cash in April (sch. 4)
Balances
Sale of assets & distribution of loss
in May (sch. 5)
Final cash distribution
page
P50,000
15,200
(7,000)
P58,200
P30,000
12,800
(6,000)
P36,800
P 80,000
28,000
(13,000)
P 95,000
(9,100)
4,200
(4,900)
P40,000
(4,900)
3,000
(3,900)
P25,000
P54,000
4,800
(4,200)
P45,000
40,000
12,000
(13,000)
P110,000
(5,000)
(7,000)
P28,000
(5,000)
P20,000
(5,000)
(8,000)
P32,000
(10,000)
(20,000)
P 80,000
(17,500)
P 10,500
(12,500)
P 7,500
(20,000)
P 12,000
(50,000)
P 30,000
Schedule 1 - Distribution of 2006 net income

Salaries
Remainder 65%:35%
Total
Arceo
P10,000
5,200
P15,200
Schedule 2 - Admission of Cervo

Total capital before admission of Cervo
Investment of Cervo
Total capital
Interest acquired by Cervo
Capital credit of Cervo
Investment of Cervo
Bonus to Cervo from old partners (shared 65%:35%)
Schedule 3 - Cash distribution in February
Restricted interest - possible loss if nothing
is realized on remaining assets (P100,000)
Free interest - amount to be paid to partners
Basco
P10,000
2,800
P12,800
Total
P20,000
8,000
P28,000
P 95,000
40,000
P135,000
40%
P 54,000
40,000
P 14,000
Arceo
P40,000
Basco
P25,000
Cervo
P45,000
35,000
P 5,000
25,000
P ------
40,000
P 5,000
Arceo
P 35,000
Basco
P25,000
Cervo
P40,000
28,000
7,000
20,000
P 5,000
32,000
P 8,000
Schedule 4 - Cash distribution in April

Restricted interest - possible loss if nothing
is realized on remaining assets (P80,000)
Free interest - amount to be paid to partners

Suggested Answers
page
Schedule 5 - Loss on realization of assets in May

Capital balances equal to net assets
Cash realized on sale of assets
Loss on realization
Problem 3-11
Partnership Books
1.
Inventories
Prepaid Expenses
Goodwill
Accrued Expenses
Leony, Capital
Espie, Capital
2.
3.
60,000
3,000
243,000
6,000
200,000
100,000
Rover Corp. Stocks

Accounts Payable
Accrued Expenses
Cash
Accounts Receivable
Inventories
Prepaid Expenses
Furniture and Equipment
Goodwill
4,500,000
600,000
6,000
120,000
Leony, Capital
Espie, Capital
Rover Corp. Stocks
2,600,000
1,900,000
Corporations Books
1.
Cash
Accounts Receivable
Inventories
Prepaid Expense
Goodwill
Accounts Payable
Accrued Expenses
2.
P80,000
30,000
P50,000
Land
Cash
Pre-Operating Expenses
450,000
660,000
1,350,000
3,000
2,520,000
243,000
4,500,000
450,000
660,000
1,350,000
3,000
2,520,000
243,000
120,000
600,000
6,000
4,500,000
3,600,000
1,500,000
450,000
4,800,000
750,000

Suggested Answers
page
Rover Corporation
Statement of Financial Position
July 1, 2008
Assets
Cash
Accounts Receivable (net of Allow
of P120,000)
Inventories
Prepaid Expenses
Land
Goodwill
Total Assets
P 1,950,000
540,000
1,350,000
3,000
3,600,000
2,520,000
243,000
P10,206,000
Liabilities and Shareholders Equity

Accounts Payable
P 600,000
Accrued Expenses
6,000
Total Liabilities
P 606,000
Shareholders Equity
P9,300,000
750,000
Retained Earnings (deficit)
(450,000)
Total Shareholders Equity
P9,600,000
Total liabilities and SH equity
P10,206,000
MULTIPLE CHOICE
1.
2.
3.
4.
D
D
C
C
5.
6.
Share on loss on realization

(P39,000 + P4,800 P33,000)
Percentage ownership of Imperial
P10,800
20%
P54,000
Total capital
Cash available
Loss on realization
P70,000
28,000
P42,000
Capital bal. before liquidation

Loss on realization
Balances
Addl loss to Gueco & Tiangco
for the deficiency of Barcelon
Cash distribution to partners
7.
8.
Gueco
P 40,000
( 21,000)
P 19,000
Tiangco
P 25,000
(14,000)
P 11,000
Bacelon
P 5,000
( 7,000)
P( 2,000)
( 1,200)
P 17,800
( 800)
P 10,200
2,000
P ---0---
Total capital (P360,000 + P72,000)

Total liabilities
Total loss on liquidation
Capital balances
Drawing
Distribution of net income
Loss on liquidation
Balances
Alarcon
P 100,000
( 60,000)
24,000
(172,000)
P(108,000
P432,000
84,000
P516,000
Baretto
P 80,000
( 40,000)
24,000
(172,000)
P(108,000)
Coronel
P 300,000
(20,000)
24,000
(172,000)
P 132,000

Suggested Answers

Cash to be distributed
Coronel
9.
10
page
108,000
Total capital
Loans from partners
Cash available to partners (P37,500 P28,500)
12
13
Total assets = Total capital + Total liabilities

= P60,000 + P 3,000
Less Cash = P3,000 + P22,200 P23,200
Book value of noncash assets
Additional loss
Payment to Lazaro
14
15
16
17
Jurado
P 1,000
( 5,400)
P( 4,400)
4,400
P 5,400
Katindig
P25,000
( 7,200)
P(17,800)
3,920
Lazaro
P25,000
( 10,800)
P14,200
( 5,880)
P 8,320
Total credits equal debits (P130,000 + P44,000 +

P90,000)
Less Cash
Loss on realization [(P50,000 + P17,600 P55,200)/40%]
Cash received from sale of other assets
A
A
B
Capital balances
Loss on realization
Additional loss
Amt to be rec.from the part.
Esper
P 50,000
(112,000)
P(62,000)
(3,000)
Elma
P 15,500
3,500
P 19,000
( 15,400)
P 3,600
P 63,000
___2,000
P 61,000
P61,000 P23,200 = P37,800 x 3/21
Capital balances
Loss on realization
( 54,000)
P 78,000
P40,000
7,500
P47,500
9,000
P38,500
Doria
P 24,500
4,000
P 28,500
( 23,100)
P 5,400

Loan balances
Loss on realization
Balances cash to be paid to partners
11
( 54,000)
to
Ester
P50,000
( 56,000)
P(6,000)
6,000
Ethel
P50,000
( 56,000)
P(6,000)
( 1,500)
Marcelo
P 9,000
( 14,400)
P( 5,400)
5,400
P264,000
40,000
P224,000
31,000
P193,000
Elmer
P 75,000
( 56,000)
P19,000
(1,500)
P 17,500

Suggested Answers
page
200,00
0
P217,500
18
19
20
D
Initial investment
Purchases
Sales
Interest
Dividends
Cash held
Equal share
Cash received (paid)
Urbe
P 137,500,000
( 1,237,500,000)
1,339,250,000
(
2,200,000)
1,100,000
P 238,150,000
172,012,500
(P 66,137,500)

Loss on liquidation (P180,000)
Cash to be received by Delia
Delia
P480,000
( 72,000)
P408,000
Erma
P135,000
( 90,000)
Delia
P480,000
( 216,000)
P264,000
( 108,000)
Erma
P135,000
( 270,000)
(P135,000)
135,000
A
Addl loss to Delia & Flora
Cash to be received by Flora
21
D
Balances
Possible loss if remaining
inventories are not sold
Balances
Add loss to Delia & Flora
Distribution of cash to partners
22
23
24
25
D
B
A
Delia
P480,000
( 72,000)
P408,000
(192,000)
P216,000
( 156,000)
P 60,000
Viray
P 137,500,000
( 495,000,000)
462,000,000
(
1.375,000)
2,750,000
P 105,875,000
172,012,500
P 66,137,500
Flora
P165,000
( 18,000)
Flora
P165,000
( 54,000)
P111,000
( 27,000)
P 84,000
Erma
Flora
P135,000 P165,000
( 90,000) ( 18,000)
P 45,000 P147,000
( 240,000)
(P
195,000)
195,000
-
Estrada
P 40,000
Loss on sale of assets - P40,000
( 16,000)
Possible loss if nothing is realized
on remaining assets - P90,000
( 36,000)
Balances
P( 12,000)
Addl possible loss to Fortuna and
Gener for deficiency of Estrada
12,000
Balances - cash to be distributed
P --------Capital balance of Gener before distribution of cash
Share in the cash to be withheld for possible liquidation
( 48,000)
P 99,000
( 39,000)
P 60,000
Fortuna
P 65,000
(16,000)
Gener
P 48,000
( 8,000)
(36,000)
P 13,000
(18,000)
P 22,000
( 8,000)
P 5,000
( 4,000)
P 18,000
P 18,000

Suggested Answers
26
27
28
29
page
expenses - P3,000 x 20%/60% (shared by Fortuna

& Gener)
( 1,000)
Cash to be received by Gener
P 17,000
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
Total capital before drawing and net loss
P 135,000
Drawing
( 10,000)
Net loss for the year
( 20,000)
Total liabilities
5,000
Total assets
P 110,000
Cash on hand
(
700)
Amount of noncash assets before liquidation
P 109,300
Capital balance of Aguila before dist. of net loss
P 25,000
Share in net loss (P20,000 x 60%)
( 12,000)
Capital balance of Aguila before liquidation
P 13,000
Cash to be received by Aguila
19,000
Share of Aguila in the gain on sale of other assets
P
6,000
Percentage share of Aguila
60%
Total gain on sale of other assets
P 10,000
109,300
Cash to be realized from sale of other assets
P 119,300
PAYMENTS
D
Capital balances
Drawing
Net loss
Loss absorption bal.
Alloc. I - Cash to Corpuz
Balances
Alloc. II -Cash to Balweg
and Corpuz
Balances
Alloc. III - Based on
P & L ratio
Aguila
P 25,000
Balweg
P 50,000
( 12,000)
P 13,000
60%
P 21,667
( 5,000)
P 45,000
25%
P180,000
P 21,667
P180,000
Corpuz
P 60,000
(10,000)
( 3,000)
P 47,000
15%
P313,333
(133,333)
P180,000
P 21,667
(158,333)
P 21,667
(158,333)
P 21,667
Cash received by Corpuz

Cash received from Allocation I
Cash received from Allocation Ii
Fractional share (B 25% and C -15%)
Total cash distributed
Fractional share of Balingit
Cash received by Balingit
30
B
Nera
Ochoa
- P450,000 / 30% = P150,000

- P250,000 / 50% = P 50,000
Aguila
Balweg
Corpuz
P 20,000
P 39,583
P 39,583
P 33,000
( 20,000)
P 13,000
15/40
P 34,667
x 25/40
P 21,667
Vulnerability
Ranking
3
1
23,750
P43,750

Suggested Answers
Perez
31
- P250,000 / 20% = P125,000
D
1st P500,000
next P75,000
next P375,000
Remainder
32
page
Priority
Creditors
100%
Nera
Capital
Ochoa
Capital
100%
60%
30%
50%
Perez
Loan
Perez
Capital
26.67%
13.33%
20.00%
Nera
Ochoa
Perez
Total
P450,000
P250,000
P250,000
P950,000
( 150,000)
( 250,000)
( 100,000) ( 500,000)
P300,000
-----P150,000
P450,000
( 225,000)
(150,000) ( 375,000)
P 75,000
--------P 75,000
Reyes (20%)
Santos (40%)
Torres (40%)
Net capital balances
P100,000
P440,000
P310,000
Possible loss of P700,000
( 140,000)
(280,000)
( 280,000)
Balances
(P 40,000)
P160,000
P 30,000
Possible loss from Reyes debit balance
40,000
( 20,000)
( 20,000)`
Cash distribution
-----P140,000
P 10,000
Equities
Loss to absorb Ochoa
Balances
Loss to absorb Perez
Balance
33
34
35
D
C
Capital balances
Add Loan
Divided by P & L ratio
Loss absorption capacity
Allocation 1
Balances
Allocation II
Roger
P108,000
P108,000
30%
P360,000
P360,000
( 60,000)
P300,000
Sergio
P120,000
30,000
P150,000
50%
P300,000
P300,000
P300,000
Tito
P129,000
P129,000
20%
P645,000
( 285,000)
P360,000
( 60,000)
P300,000
Roger
Sergio
P57,000
P18,000
P18,000
Allocation III P & L ratio
36
37
38
Roger
Amount available
Allocation 1 to Tito
Allocation II 30%, 20%
P72,000
57,000
P15,000
Amount available
Allocation II Balance
Allocation III
P120,000
15,000
P105,000
D
Capital balances
Revaluation of assets
Sergio
Tito
P57,000
6,000
P63,000
P9,000
P9,000
Roger
Sergio
Tito
P 9,000
31,500
P40,500
P52,500
P52,500
P 6,000
21,000
P27,000
Jacinto
P400,000
200,000
Tito
Mapa
P600,000
200,000
Magno
P1,000,000
200,000
12,000
P69,000

Suggested Answers
Adjusted capital
Par of capital stock
Shares of stock to be recd by partners
page
P600,000
P100
6,000 sh.
P800,000
P100
8,000 sh
P1,200,000
P100
12,000 sh
39
Capital balances
Adjustment in assets (P20,000 P10,000 P3,000)
Adjusted capital
P260,000
7,000
P267,000
40
Total capital (P94,800 + P214,200)

Adjustments in assets (P6,600 P20,000 P22,000)
Adjusted capital
Ordinary Share Capital (720 x 2 x P10)
Preference Share Capital
P309,000
( 35,400)
P273,600
14,400
P259,200
Ordinary shares (P14,400 / P10)

Preference shares (P259,200 / P100)
1,440 sh..
2,592 sh.
41
C
Capital balances before incorporation
Adjustment in assets
Adjusted capital
Ordinary Share Capital (720 @P10)
Preference Share Capital
Roldan
P94,800
( 11,800)
P83,000
7,200
P75,800
Moises
P214,200
( 23,600)
P190,600
7,200
P183,400
Preference shares
Ordinary shares
758
720
1,834
720

AA1 - Chapter 3 Liquidation Calculations

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CHAPTER 3

Salary Payable to Henson

Henson, Capital (P24,500 x 40%)

Henson, Capital (P9,500 + P500 - P9,800)

AA1 - Chapter 3 (2008 edition)

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

Book value of other assets

Lesaca Manalo Partnership

AA1 - Chapter 3 (2008 edition)

AA1 - Chapter 3 (2008 edition)

Add Loan balances

Balances before liquidation

Julian, Lagman and Magno

Capital balances before liquidation

Julian, Lagman and Magno

AA1 - Chapter 3 (2008 edition)

AA1 - Chapter 3 (2008 edition)

Note Payable to Magno

Note Payable to Magno

AA1 - Chapter 3 (2008 edition)

Book value of assets

Allocation III - P3,200 4/7 = P5,600 x 1/7

Book value of assets

Capital Adjustment Account

Colored Co. Stocks

AA1 - Chapter 3 (2008 edition)

New Corporations Books

Problem 3 2 (Case 3 cont.)

AA1 - Chapter 3 Partnership Liquidation (2005)

Problem 3 2 (Case 4 cont.)

Chapter 3 Partnership Liquidation

Chapter 3 Partnership Liquidation

Schedule to support the entries in Requirement 1

Balances before liquidation

Chapter 3 Partnership Liquidation

JKLM Trading Co.

AA1 -Chapter 3 Partnership Liquidation

AA1 -Chapter 3 Partnership Liquidation

Cash Priority Program

AA1 -Chapter 3 Partnership Liquidation

Wilson, Yuson and Zapata

AA1 -Chapter 3 Partnership Liquidation

Cash Distribution Schedule

AA1 -Chapter 3 Partnership Liquidation

Payment to partners (2)

(P22,000 + P14,000) - (P16,500 + P10,000) = P9,500 loss on sale of assets

Capital balances after dist.

AA1 -Chapter 3 Partnership Liquidation

Schedule 1 - Distribution of 2006 net income

Schedule 2 - Admission of Cervo

Schedule 4 - Cash distribution in April

AA1 -Chapter 3 Partnership Liquidation

Schedule 5 - Loss on realization of assets in May

Rover Corp. Stocks

AA1 -Chapter 3 Partnership Liquidation

Liabilities and Shareholders Equity

Share on loss on realization

Capital bal. before liquidation

Total capital (P360,000 + P72,000)

AA1 -Chapter 3 Partnership Liquidation

Additional loss to partners

Total assets = Total capital + Total liabilities