Name:_________________________________ Score:____________________________

Section:_______________________________

Problem A = James, Wade, Allen and Bosh are partners sharing profits and losses equally. The partnership is
insolvent and is to be liquidated. The status of the partnership and each partner is presented below:

James Wade Allen Bosh

Partnership capital balance 150,000 100,000 (200,000) (300,000)
Personal assets (exclusive of
partnership interest) 1,000,000 300,000 800,000 10,000
Personal liabilities (exclusive of
partnership interest) 400,000 600,000 50,000 280,000

1. Which of the following statement is true with regards to partnership creditors?

a. Must first seek recovery against Allen because he is personally solvent and he has a negative capital
balance.
b. Will not be paid in full regardless of how they agreed legally because the partnership assets are less than
partnership liabilities.
c. Will have to share Wade’s interest in the partnership on a pro-rata basis with Wade’ personal creditors.
d. Have first claims to partnership assets before any partner’s personal creditors have rights to the
partnership assets

2. The partnership creditors may obtain recovery of their claims

a. In the amount of P62,500 from each partner
b. From the personal assets of either James or Wade
c. From the personal assets of either Allen or Bosh
d. From the personal assets of either James or Allen for some or all of their claims.

3. How much will be the partnership creditors’ total recovery in liquidating the partnership?
a. P250,000 b. P150,000 c. P100,000 d. P0

4. What are the personal net worth of James and Allen after liquidation?
James Allen
a. P600,000 P750,000
b. P650,000 P750,000
c. P600,000 P450,000
d. P650,000 P450,000

Problem B = Miami Heat Partnership had the following condensed financial position prior to liquidation:

Assets Liabilities and Capital

Cash 588,000 Liabilities 328,000
Noncash assets 2,880,000 Loan payable to James 180,000
James, Capital (25%) 776,000
Wade, Capital (40%) 1,320,000
Bosh, Capital (35%) 864,000
Total 3,468,000 Total 3,468,000
Assuming non-cash assets with a book value of P1,360,000 were sold for P1,660,000 and that all available cash
was distributed.

5. Which of the following statements is FALSE for Partner James to receive a total of P704,000 cash after
liquidation?
a. The proceeds from the sale of the remaining non-cash assets amount to P212,000.

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 b. The loss on realization on the sale of the remaining non-cash assets amount to P1,308,000.
c. Partner Wade will receive the amount of P84,800 on the final distribution of cash.
d. Partner Bosh will receive a total of P532,000 cash after liquidation.

6. As of the first installment, how much cash received by James as recovery from his capital?
a. P651,000 b. P471,000 c. P576,000 d. P396,000

7. How much is the total cash received by partner Wade as recovery of his interest from the partnership?
a. P916,800 b. P 1,440,000 c. P852,800 d. P1,320,000

8. How much cash received by James in the second and final installment?
a. P128,000 b. P308,000 c. P53,000 d. P233,000

Problem C = James, Wade and Bosh are partners who share profits and losses as follows: James 45%, Wade
15%, and Bosh 40%. The Statement of Financial Position of Miami Heat Partnership as of December 31, 2014
is given below:

Assets Liabilities and Capital

Cash 268,000 Liabilities 532,000
Noncash assets 1,940,000 Loan payable to James 44,000
James, Capital 694,000
Wade, Capital 354,000
Bosh, Capital 584,000
Total 2,208,000 Total Liabilities and Capital 2,208,000

On January 1, 2015, the partners decided to liquidate. For the month of January, some assets were sold at a
gain of P56,000. Payment to partner Wade from the initial sale of assets was P180,000. Cash withheld for
possible liquidation and unrecognized liabilities amounted to P146,800.

9. Which of the following statement is true?

a. The book/carrying value of the noncash assets sold in January amounted to P982,800.
b. Payment to partner James from the initial sale of assets was P172,000.
c. The total amount of cash paid and distributed for the month of January is P1,048,000.
d. The share of Bosh in the maximum possible loss is P427,680.

10. How much is the total cash paid to James on the first installment?
a. P172,000 b. P 185,000 c. P108,000 d. P216,000

11. How much is the total maximum possible loss in the month of January?
a. P1,069,200 b. P1,216,000 c. P957,200 d. P1,104,000

12. How much was the cash realized from the first sale of non-cash assets?
a. P780,000 b. P870,800 c. P926,800 d. P1,194,800

13. Assuming the remaining noncash assets were sold at 60% of the carrying value, the actual liquidating
expenses on the second sale was P34,000 and unrecorded liabilities was P75,000, how much is the total
cash paid to all partners as final settlement?
a. P754,320 b. P641,520 c. P679,320 d. P566,520

14. Using assumption no. 13, how much is the final payment received by James?
a. P547,200 b. P498,150 c. P335,694 d. P305,694

Problem D = James, Wade and Bosh of the Miami Heat Partnership has the following account balances before
liquidation:

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 Cash 420,000 Liabilities 1,445,000
Noncash assets 4,793,000 Loan from Bosh 100,000
Loan to Wade 192,000 James, Capital (25%) 1,120,000
Receivable from James 44,000 Wade, Capital (15%) 1,632,000
Expenses, (including salaries Bosh, Capital (60%) 2,240,000
of partners P240,000 each) 2,556,000 Revenues 1,468,000

Before liquidation, it was discovered that the salaries given to the partners were credited to Salaries payable and
are still part of total liabilities. No drawings were made as of the period.

During June, some noncash assets were sold that resulted to a gain of P72,000. Liquidation expenses of
P124,000 were paid and additional expenses amounting to P96,000 were expected to be incurred through the
following months of liquidating the partnership. Liabilities to outsiders amounting to P516,000 were paid.

15. For Wade to receive P1,272,000 on the first distribution of cash, which of the following statement is true?
a. The total maximum possible loss for the month of June amounted to P1,789,000.
b. The total amount of cash paid to partners in June was amounted to P3,736,000
c. The proceeds from the sale of the non-cash assets sold in June was amounted to P3,801,000.
d. The amount of cash withheld considered in the computation of maximum possible loss is amounted to
P96,000.

16. What amount is the total payment made to partners on the month of June?
a. P3,736,000 b. P3,161,000 c. P3,065,000 d. P2,856,000

17. How much is the cash realized from the first sale of assets?
a. P3,801,000 b. P3,381,000 c. P3,285,000 d. P3,161,000

18. How much is the carrying value of noncash sold on the first sale?
a. P3,729,000 b. P3,309,000 c. P3,213,000 d. P3,089,000

19. What is the cash balance after all payments made on the month of June?
a. P305,000 b. P209,000 c. P96,000 d. P0

Problem E = The partnership of JAMES, WADE and ALLEN decided to liquidate their partnership on May 31,
2014. Before liquidating and sharing of net income, their capital balances are as follows: JAMES (30%)
P875,000, WADE (30%) P630,000, and ALLEN (40%) P770,000. Net income from January 1 to May 31 is
P420,000. Liabilities of the partnership is amounted to P950,000 and its total assets include cash amounting to
P250,000. Unsettled liabilities are P285,000. JAMES invested additional cash enough to settle their
partnership’s indebtedness. WADE is personally solvent, while ALLEN is personally insolvent, and JAMES
becomes insolvent after investing the cash needed by the partnership.

Payments made to liquidate the partnership:

 Legal and accounting fees P50,000
 Cost incurred to dispose assets P25,000
 General and administrative expenses P40,000
 Representation expenses P10,000

20. How much were the partnership’s non-cash sold for?

a. P3,110,000 b. P700,000 c. P415,000 d. P105,000

21. How much cash will WADE invest in the partnership?

a. P202,500 b. P327,500 c. P175,500 d. P290,000

22. How much will JAMES receive as a result of their liquidation?

a. P202,500 b. P327,500 c. P175,500 d. P290,000

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Problem F = A balance sheet for the partnership of JAMES, WADE and BOSH, who share profits in the ratio of
2:1:1, shows the following balances just before liquidation:

Cash 120,000 Liabilities 200,000

Other assets 595,000 JAMES, Capital 220,000
WADE, Capital 155,000
BOSH, Capital 140,000

On the first month of the liquidation, assets with a book value of P380,000 are sold for P345,000. Liquidation
expenses of P10,000 are paid, and additional liquidation expenses are anticipated. Liabilities are paid amounting
P74,000, and sufficient cash is retained to insure the payment to creditors before making payments to partners.
On the first payment to partners, WADE receives P82,500.
23. The total cash distributed to the partners in the first installment is:
a.) P200,000 b.) P125,000 c.) P225,000 d.) P100,000
24. The amount of cash withheld for anticipation liquidation expenses and unpaid liabilities is:
a.) P146,000 b.) P156,000 c.) P166,000 d.) P176,000
25. Continue Problem F = If the remaining book value of other assets was sold for P175,000 and payment for
unpaid liabilities and liquidation expenses were made. How much liquidation expenses was paid, if JAMES
received P80,000 in the final settlement?
a.) P45,000 b.) P30,000 c.) P15,000 d.) P10,000

Problem G = The partnership of JAMES, WADE and BOSH is preparing to liquidate. Profit and loss sharing
ratios are shown is the summarized balance sheet at December 31, 2013 as follows:

Cash 400,000 Other liabilities 200,000

Inventories 400,000 JAMES, Loan 200,000
Loan to WADE 40,000 JAMES, Capital (40%) 400,000
Other Assets 1,020,000 WADE, Capital (20%) 640,000
ALLEN, Capital (20%) 200,000
BOSH, Capital (20%) 220,000
Total Assets 1,860,000 Total Liabilities & Capitals 1,860,000

During January 2014, the inventories are sold for P170,000, the other liabilities are paid, and P100,000 is set-
aside for contingencies.

26. Compute the total cash payment to partners and the cash that should be received by JAMES and WADE:
Payments to Partners JAMES WADE
a. P390,000 P46,667 P323,334
b. P410,000 P60,000 P330,000
c. P290,000 P0 P290,000
d. P270,000 P0 P270,000

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