Professional Documents
Culture Documents
LO1
1.
LO1
2.
LO1
3.
LO1
4.
LO1
5.
LO1
6.
LO2
7.
LO2
8.
4,000
6,000
14,000
12,000
6,000
42,000
Accounts payable
Loan from Xin
Warle, capital(20%)
Xin, capital(30%)
Yates, capital(50%)
Total liab./equity
7,000
5,000
14,000
10,000
6,000
42,000
The percentages shown are the residual profit and loss sharing
ratios. The partners dissolved the partnership on July 1, 2006,. and
began the liquidation process. During July the following events
occurred:
* Receivables of $3,000 were collected.
* The inventory was sold for $4,000.
* All available cash was distributed on
July 31, except for $2,000 that was
set aside for contingent expenses.
2009 Pearson Education, Inc. publishing as Prentice Hall
16-3
LO2
9.
LO2
10.
LO2
11.
$ 2,000.
$ 4,000.
$ 7,000.
$11,000.
How much cash would Xin receive from the cash that is available
for distribution on July 31?
a.
b.
c.
d.
LO2
12.
$60,000.
$29,000.
$30,000.
$42,000.
$
0.
$ 600.
$1,000.
$2,000.
Cash
Other assets
400,000
200,000
Accounts payable
Hara, capital (40%)
Ives, capital (30%)
Jack, capital (30%)
200,000
135,000
216,000
49,000
Total assets
600,000
Total liab./equity
600,000
$146,000.
$147,000.
$153,000.
$156,000
2009 Pearson Education, Inc. publishing as Prentice Hall
16-4
LO2
13.
Cash
Inventory
Plant assets
198,000
80,000
230,000
Accounts payable
Jade, capital (40%)
Kahl, capital (40%)
Lane, capital (20%)
149,000
79,000
140,000
140,000
Total assets
508,000
Total liab./equity
508,000
$23,000.
$29,000
$30,000.
$34,000.
LO3
15.
LO4
16.
LO5
17.
The year-end balance sheet and residual profit and loss sharing
percentages for the Lang, Maas, and Neal partnership on
December 31, 2005, are as follows:
Cash
Loan to Lang
Other assets
30,000
40,000
480,000
Total assets
550,000
Accounts payable
Loan from Maas
Lang, capital (25%)
Maas, capital (25%)
Neal, capital (50%)
Total liab./equity
200,000
50,000
70,000
80,000
150,000
550,000
Lang
Maas
Maas
Neal
in
in
in
in
the
the
the
the
amount
amount
amount
amount
of
of
of
of
$20,000.
$45,000.
$55,000.
$90,000.
LO5
18.
LO5
19.
LO6
20.
third.
third.
third.
third.
also
also
also
who
LO2
Exercise 1
The balance sheet of the Alba, Blick, and Calvo partnership on
January 1, 2006 (the date of partnership dissolution) was as follows:
Cash
Other assets
Loan to Calvo
2,000
13,000
1,000
Total assets
16,000
Liabilities
Loan from Alba
Alba, capital (20%)
Blick, capital(40%)
Calvo, capital(40%)
Total liab./equity
4,010
500
990
4,500
6,000
16,000
In January, other assets with a book value of $8,000 were sold for
$5,000 in cash.
Required:
Determine how
distributed.
the
available
cash
on
January
31,
2006
will
be
LO2
Exercise 2
The partnership of Dale, Edgar, and Fred was dissolved, and by July
1, 2006, all assets had been converted into cash and all partnership
liabilities were paid. The partnership balance sheet on July 1, 2006
(with partner residual profit and loss sharing percentages) was as
follows:
Cash
10,000
Fred, capital(30%)
Dale, capital(40%)
Edgar, capital(30%)
40,000
(20,000)
(10,000)
Total assets
10,000
Total equity
10,000
Personal assets
Personal liabilities
Dale
45,000 $
30,000
Edgar
30,000 $
20,000
Fred
25,000
10,000
Required:
Prepare the final statement of partnership liquidation.
2009 Pearson Education, Inc. publishing as Prentice Hall
16-8
LO2
Exercise 3
The balance sheet of the Omar, Paolo, and Quek partnership on
November 1, 2006 (before commencement of partnership liquidation) was
as follows:
Cash
Inventory
Loan to Omar
Loan to Quek
Plant assets-net
58,000
60,000
8,000
14,000
70,000
Total assets
210,000
Accounts payable
Notes payable
Omar, capital(40%)
Paolo, capital(25%)
Quek, capital (35%)
34,000
62,000
24,000
26,000
64,000
Total liab./equity
210,000
the
available
cash
on
November
31,
2006
should
be
LO2
Exercise 4
A cash distribution plan for the Folger, Glover, and Hale partnership
was as follows:
First $250,000
Next $100,000
Next $150,000
Remainder
Priority
Creditors
100%
Folger
Glover
70%
30%
11/15
20%
35%
Hale
4/15
45%
Required:
If $850,000 of cash was distributed by the partnership, how much was
received respectively by the priority creditors, Folger, Glover, and
Hale?
LO2
Exercise 5
The balance sheet of the Jody, Kane, and Lark partnership on May 1,
2006 (before commencement of partnership liquidation) was as follows:
Cash
Inventory
Loan to Jody
Loan to Lark
Plant assets-net
54,000
60,000
10,000
16,000
110,000
Accounts payable
Notes payable
Jody, capital (30%)
Kane, capital (45%)
Lark, capital (25%)
28,000
60,000
32,000
90,000
40,000
Total assets
250,000
Total liab./equity
250,000
3,000
33,000
4,000
Total assets
40,000
Liabilities
Loan from Nebe
Nebe, capital (20%)
Oak, capital (30%)
Pang, capital (50%)
Total liab./equity
9,000
1,000
3,000
6,000
21,000
40,000
In October, other assets with a book value of $15,000 were sold for
$17,000 in cash.
Required:
Determine how
distributed.
the
available
cash
on
October
31,
2006
will
be
LO2
Exercise 7
The partnership of Hanly, Ide, and Jen was dissolved. By August 1,
2006, all assets had been converted into cash and all partnership
liabilities were paid. The partnership balance sheet on August 1,
2006 (with partner residual profit and loss sharing percentages) was
as follows:
Cash
50,000
Hanly, capital(30%)
Ide, capital(20%)
Jen, capital(50%)
4,000
(60,000)
106,000
Total assets
50,000
Total equity
50,000
Personal assets
Personal liabilities
Hanly
74,000 $
72,000
Ide
120,000 $
80,000
Required:
Prepare the final statement of partnership liquidation.
Jen
56,000
60,000
LO5
Exercise 8
Luis, Mac, Nel, and Oma are partners who share profits and losses
40%, 25%, 25%, and 10%, respectively. The partnership will be
liquidated gradually over several months beginning January 1, 2006.
The partnership trial balance at December 31, 2005 is as follows:
Cash
Accounts receivable
Inventory
Loan to Nel
Furniture
Equipment
Goodwill
Accounts payable
Note payable
Loan from Luis
Luis, capital (40%)
Mac, capital (25%)
Nel, capital (25%)
Oma, capital (10%)
Totals
Debits
3,000
19,000
25,000
5,000
15,000
10,000
12,000
Credits
89,000 $
14,000
30,000
5,000
15,000
9,000
12,000
4,000
89,000
Required:
Prepare a cash distribution plan for January 1, 2006, showing how
cash installments will be distributed among the partners as it
becomes available.
LO5
Exercise 9
Quan, Ray, Sen, and Tad are partners who share profits and losses 30%, 20%,
35%, and 15%, respectively. The partnership will be liquidated gradually
over several months beginning January 1, 2006. The partnership trial
balance at December 31, 2005 is as follows:
Cash
Accounts receivable
Inventory
Loan to Ray
Furniture
Equipment
Goodwill
Accounts payable
Note payable
Loan from Sen
Quan, capital (30%)
Ray, capital (20%)
Sen, capital (35%)
Tad, capital (15%)
Totals
Debits
3,000
10,000
25,000
4,000
15,000
18,000
10,000
Credits
12,000
30,000
6,000
12,000
9,000
12,000
4,000
85,000
85,000 $
Required:
Prepare a cash distribution plan for January 1, 2006, showing how
cash installments will be distributed among the partners as it
becomes available.
LO5
Exercise 10
A cash distribution plan
partnership was as follows:
First $100,000
Next $180,000
Next $270,000
Remainder
Priority
Creditors
100%
for
the
Upton,
Valenta,
and
Walker
Upton
Valenta
Walker
44%
2/9
11%
10%
1/9
44%
46%
2/3
45%
Required:
If $700,000 of cash was distributed by the partnership, how much was
received respectively by the priority creditors, Upton, Valenta, and
Walker?
2009 Pearson Education, Inc. publishing as Prentice Hall
16-13
SOLUTIONS
Multiple Choice Questions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
Equities,Jun 30
Inventory loss
Contingency fund
Subtotals
Possible losses on
remaining assets
Subtotals
Xin
15,000
3,000 )
600 )
11,400
$
(
(
Yates
6,000
$
5,000 ) (
1,000 ) (
0
Total
29,000
10,000 )
2,000 )
17,000
15,000 )
2,000
3,000 ) (
2,600
$
4,500 ) (
6,900
$(
7,500 ) (
7,500 ) $
(
(
3,000 ) (
400 )
4,500 )
2,400
7,500
0
Eliminate Yatess
Deficit
Subtotals
Eliminate Warles
Deficit
Cash distribution
(
(
Warle
8,000
$
2,000 ) (
400 ) (
5,600
400
0
(
$
400 )
2,000
2,000
2,000
12.
b
Losses
Equities
Possible loss on
remaining assets
Contingencies
Subtotals
40%
Hara
135,000
$
200,000
10,000
(
(
$
80,000 ) (
4,000 ) (
51,000
$
60,000 ) (
3,000 ) (
153,000
$(
Eliminate Jacks
debit balance
8,000 ) (
6,000 )
Safe payments
13.
30%
Ives
216,000
43,000
147,000
30%
Jack
49,000
60,000 )
3,000 )
14,000 )
14,000
Equities
Distribute inventory to
Lane and:
recognize $20,000 loss
Possible losses on plant
Subtotal
Eliminate Jades debit
balance to Kahl & Lane
Balance
14.
15.
16.
$
(
(
$(
$
40%
Jade
79,000
$
(
20%
Lane
140,000
60,000 )
8,000 ) (
92,000 ) (
21,000 ) $
8,000 ) (
92,000 ) (
40,000
$
4,000 )
46,000 )
30,000
21,000
0
14,000 ) (
26,000
$
7,000 )
23,000
(
$
40%
Kahl
140,000
17.
Vulnerability ranks:
Lang equity ($70,000 - $40,000)/.25 = $120,000
Maas equity ($80,000 + $50,0000/.25 = $520,000
Neal equity ($150,000/.5)
= $300,000
Assumed loss absorption:
Equities
Loss to eliminate
Lang
Subtotals
Loss to eliminate
Neal
Subtotals
18.
19.
20.
$
(
25%
Lang
30,000
25%
Maas
130,000
= 1
= 3
= 2
50%
Neal
150,000
Total
310,000
30,000 ) (
0
$
30,000 ) (
100,000
$
60,000 ) (
90,000
$
120,000 )
190,000
(
$
45,000 ) (
55,000
$
90,000 ) (
0
$
135,000 )
55,000
Exercise 1
Alba, Blick, and Calvo Partnership
Partnership Liquidation Schedule
NonFirst
20%
40%
40%
Cash
Rank
Alba
Blick
Calvo
Assets
Debt
Equity
Equity
Equity
2,000 $ 13,000 $ 4,010 $
1,490 $
4,500 $ 5,000
5,000 ( 8,000)
(
600) ( 1,200) ( 1,200)
7,000 $ 5,000 $ 4,010 $
890 $ 3,300 $ 3,800
Cash
Jan 1 Balance
Sale of assets
Subtotal
$
$
$
(
(
$
Alba
Blick
Calvo
Equity
Equity
Equity
890 $
3,300 $
3,800
1,000)(
2,000)(
2,000)
110)
1,300
1,800
110 (
55)(
55)
0 $
1,245 $ 1,745
Exercise 2
Dale, Edgar, and Fred Partnership
Final Statement of Partnership Liquidation
Dale
Edgar
Fred
Cash
Capital
Capital
Capital
Total
10,000 $(
20,000) $(
10,000) $
40,000 $ 10,000
Balance, July 1 $
Dales
personal
contribution
15,000
25,000
25,000
Write-off Dale
Edgars personal
contribution
Write-off Edgar
Distribute cash
(
$
15,000
5,000) (
5,000 (
0 (
10,000
35,000
35,000
10,000)
2,500) (
12,500)
40,000
2,500)
37,500
10,000
2,500)
2,500 (
0
37,500
2,500)
35,000
35,000)
0
(
$
15,000
25,000
25,000
10,000
35,000
35,000
35,000) ( 35,000)
0 $
0
Exercise 3
Omar, Paolo, and Quek
Schedule of Partnership Liquidation
November 30, 2006
Assets
$
210,000 $
10,000
(
26,000)
Debts
96,000
194,000
22,000)
96,000) (
76,000
96,000
Balance, Nov. 1
Inventory sold
Sale of plant
Balances before
distribution
Offset loans
(
Pay creditors
(
Partner equity
$
Possible loss:
Plant assets
(
Distribution
$
10,000)
66,000
96,000)
40%
Omar
24,000 $
4,000
10,400) (
17,600
8,000)
9,600
(
$
4,000 )
5,600
25%
35%
Paolo
Quek
26,000 $ 64,000
2,500
3,500
6,500) ( 9,100)
22,000
58,400
( 14,000)
22,000
$ 44,400
(
$
2,500 )
19,500
(
3,500)
$ 40,900
Exercise 4
First $250,000
Next $100,000
Next $150,000
Last $350,000
Total $850,000
Priority
Creditors
250,000
Folger
$
250,000 $
Glover
70,000 $
110,000
70,000
250,000 $
Hale
30,000
$
122,500
152,500 $
40,000
157,500
197,500
Exercise 5
Jody, Kane, and Lark
Schedule of Partnership Liquidation
May 30, 2006
Assets
$
250,000 $
10,000
(
6,000)
Balance, May 1
Plant sold
Inventory sold
Balances before
distribution
Offset loans
(
Pay creditors
(
Partner equity $
Possible loss:
Plant assets
(
Distribution
$
254,000
26,000)
88,000)(
140,000
60,000)
80,000
30%
Jody
32,000 $
3,000
1,800) (
45%
25%
Kane
Lark
90,000 $ 40,000
4,500
2,500
2,700) ( 1,500)
33,200
10,000)
91,800
41,000
( 16,000)
91,800
$ 25,000
Debts
88,000 $
88,000
88,000)
$
(
$
23,200
18,000) (
5,200 $
27,000) ( 15,000)
64,800 $ 10,000
Exercise 6
Nebe, Oak, and Pang Partnership
Partnership Liquidation Schedule
NonFirst
30%
20%
50%
Cash
Rank
Oak
Nebe
Pang
Assets
Debt
Equity
Equity
Equity
Jan 1 Balance $ 3,000 $ 33,000 $ 9,000 $ 2,000 $ 4,000 $ 21,000
Sale of assets
17,000 ( 15,000)
600
400
1,000
Subtotal
20,000
18,000
9,000
2,600
4,400
22,000
Cash
$
(
(
$
Oak
Nebe
Equity
Equity
2,600 $
4,400
5,400)(
3,600)(
2,800)
800
2,800 (
800)(
0 $
0 $
Pang
Equity
22,000
9,000)
13,000
2,000)
11,000
goes
to
priority
creditors,
and
then
Pang
receives
Exercise 7
Hanly, Ide, and Jen Partnership
Final Statement of Partnership Liquidation
Ide
Hanly
Jen
Cash
Capital
Capital
Capital
Total
50,000 $(
60,000) $
4,000 $ 106,000 $ 50,000
Balance, Aug. 1 $
Ides
personal
contribution
40,000
90,000
Write-off Ide
90,000
Hanlys personal
contribution
40,000
( 20,000)
20,000 (
$
0 $(
2,000
(
$
92,000
92,000
92,000)
0
106,000
12,500)
93,500
2,000
Write-off Hanly
Distribute cash
4,000
7,500)(
3,500)
40,000
90,000
90,000
2,000
1,500)
1,500 (
0
(
$
93,500
1,500)
92,000
92,000
92,000
92,000) ( 92,000)
0 $
0
Exercise 8
Loss absorption potential:
Luis
Mac
Nel
Oma
Partners
Equity
$
20,000
9,000
7,000
4,000
Profit
and Loss
Ratio
40%
25%
25%
10%
$
$
$
$
Loss
Absorption
Potential
50,000
36,000
28,000
40,000
Vulnerability
Ranking
4
2
1
3
20,000
25%
Mac
$
9,000
25%
Nel
$
( 11,200 ) (
8,800
7,000 ) (
2,000
3,200 ) (
5,600
2,000 )
0
(
$
1,600 )
4,000
7,000
10%
Oma
$
7,000 ) (
0
4,000
Total
$ 40,000
2,800 ) ( 28,000 )
1,200
12,000
800 ) (
400
6,000 )
6,000
(
$
400 ) (
0
$
2,000 )
4,000
Exercise 9
Loss absorption potential:
Quan
Ray
Sen
Tad
Partners
Equity
12,000
5,000
18,000
4,000
Profit
and Loss
Ratio
30%
20%
35%
15%
$
$
$
$
Loss
Absorption
Potential
40,000
25,000
51,429
26,667
Vulnerability
Ranking
3
1
4
2
15%
Tad
12,000
20%
Ray
4,000
7,500 ) (
4,500
3,750 ) (
250
$
500 ) (
4,000
$
250 )
0
(
$
4,000 )
0
35%
Sen
5,000
$ 18,000
5,000 ) (
0
Total
$ 39,000
8,750 ) ( 25,000 )
9,250
14,000
583 ) (
8,667
1,333 )
12,667
(
$
4,667 ) (
4,000
$
8,667 )
4,000
First
Next
Next
Last
Total
$100,000
$180,000
$270,000
$150,000
$700,000
Priority
Creditors
100,000
Upton
$
100,000 $
79,200 $
60,000
16,500
155,700 $
Valenta
18,000 $
30,000
66,000
114,000 $
Walker
82,800
180,000
67,500
330,300