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Answer Key Chapter 20

This document contains multiple choice and word problems involving calculations of capital accounts, losses, and distributions for various partnerships and partners. The key details are financial calculations for partnerships where capital accounts are established, losses from operations or asset sales are calculated and allocated to partners, and remaining balances or distributions are determined. The problems address topics like loss absorption, insolvency, revaluations, depreciation, and determining safe payments to partners.

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229 views4 pages

Answer Key Chapter 20

This document contains multiple choice and word problems involving calculations of capital accounts, losses, and distributions for various partnerships and partners. The key details are financial calculations for partnerships where capital accounts are established, losses from operations or asset sales are calculated and allocated to partners, and remaining balances or distributions are determined. The problems address topics like loss absorption, insolvency, revaluations, depreciation, and determining safe payments to partners.

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NCT
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Multiple Choice Problems

1. b - (P40,000 + P10,000 – P2,000 – P4,000 = P44,000)


2. d – P80,000 – (P150,000 – P50,00) x 50% = P30,000
3. c
4. a - Phil (P35,000 + P10,000); Harry P28,000; Bill (P27,000 - P5,000)
5. c - Rick P46,000; Mary (P39,000 - P15,000); Fran (P29,000 + P10,000)
6. d - P50,000 - (P15,000 - P9,500)(.25)
7. b - P45,000 - (P15,000 - P9,500)(.30)
8. a - P108,000 + [P10,000 - (P25,000 - P18,000)](.55)
9. c - P62,000 + [P10,000 - (P25,000 - P18,000)](.20)
10. b
11. c
12. d

13. c
Vulnerability ranks:
Lang equity (P70,000 - P40,000)/.25 = P120,000 = 1
Maas equity (P80,000 + P50,0000/.25 = P520,000 = 3
Neal equity (P150,000/.5) = P300,000 = 2

Assumed loss absorption:


25% 25% 50%
Lang Maas Neal Total
Equities P 30,000 P 130,000 P 150,000 P 310,000
Loss to eliminate
Lang ( 30,000 ) ( 30,000 ) ( 60,000 ) ( 120,000 )
0 P 100,000 P 90,000 P 190,000
Loss to eliminate
Neal ( 45,000 ) ( 90,000 ) ( 135,000 )
P 55,000 P 0 P 55,000

14. c JJ CC TT Total

Profit ratio 40% 50% 10% 100%

Prior capital (160,000) (45,000) (55,000) (260,000)


Loss on sale
of inventory 24,000 30,000 6,000 60,000
(136,000) (15,000) (49,000) (200,000)

15. a Prior capital (160,000) (45,000) (55,000) (260,000)


Loss on sale
of inventory 72,000 90,000 18,000 180,000
(88,000) 45,000 (37,000) (80,000)
Allocate Charles'
capital deficit: (45,000)
JJ = .40/.50 36,000
TT = .10/.50 9,000
(52,000) -0- (28,000) (80,000)

16. c – (P234,000 – P434,000) x 20% = P40,000

17. b
T D H
Capital before realization 40,000 10,000 15,000
Loss on sale (85,000 – 33,000) (26,000) (15,600) (10,400)
14,000 ( 5,600) 4,600
Additional loss (5:2) (4,000) 5,600 ( 1,600)
10,000 3,000

18. a
T D H
Capital before realization 40,000 10,000 15,000
Loss on sale (85,000 – 21,100) (31,950) (19,170) (12,780)
8,050 ( 9,170) 2,220
Additional loss (5:2) (6,550) 9,170 (2,620)
1,500 ( 400)
Additional loss ( 400) 400
1,100

19. b
K L M
Capital before realization 60,000 40,000 80,000
Liquidation expenses (2,000) ( 4,000) ( 4,000)
Loss on sale (300 - 180) (24,000) (48,000) ( 48,000)
34,000 (12,000) 28,000
Additional loss (2:4) ( 4,000) 12,000 ( 8,000)
30,000 20,000
20. d
H I J Total
Capital before realization 80,000 110,000 140,000 330,000
Loss on sale (2:4:4) (61,000) (122,000) (122,000) (305,000)
19,000 (12,000) 18,000 25,000
Additional loss (2:4) ( 4,000) 12,000 ( 8,000)
15,000 10,000
21. d – [(P240,000 – P96,000) /30% = P480,000]

22. a
Capital before realization – C 130,000
Liquidation expenses (12,000 x 50%) (6,000)
Share on loss on realization (132,000)
Capital balance after realization ( 8,000)

Total loss on realization: P132,000/50% (264,000)


Non-cash assets 434,000
Proceeds 170,000
23. b
Ding Laurel Ezzard Tillman Total
Capital before realization 60,000 67,000 17,000 96,000 240,000
Loss on sale (4:2:2:2) (52,800) ( 26,400) (26,400) (26,400) (132,000)
7,200 40,600 ( 9,400) 69,600 108,000
Possible insolvency loss (4:2:2) ( 4,700) ( 2,350) ( 9,400) ( 2,350) -0-
Safe payments 2,500 38,250 0 67,250 108,000

24. e – refer to No. 23


25. b
Gonda Herron Morse Total
Capital before realization 60,000 70,000 40,000 170,000
Loss on sale (30:45:25); [200 – 150] (15,000) ( 22,500) (12,500) (50,000)
45,000 47,500 27,500 120,000
26. c
S D F Total
Capital 40,000 15,000 5,000 60,000
Loan ________ _______ 5,000 5,000
Total interests 40,000 15,000 10,000 65,000
Loss on sale (5:3:2) - [90,000 – 26,000] (32,000) ( 19,200) (12,800) (64,000)
8,000 ( 4,200) ( 2,800) 1,000
Possible insolvency (5:3) (1,750) ( 1,050) 2,800 0
6,250 ( 5,250) 1,000
Additional investment _______ 5,250 5,250
6,250 6,250
27. b
28. a –
Since the partnership currently has total capital of P350,000, the P150,000 that is available
would indicate maximum potential losses of P200,000 that is hypothetically split among the
partners.
White Sands Luke Total
Capital before realization 50,000 100,000 200,000 350,000
Loss on sale (30:20:50); [350 – 150] (60,000) ( 40,000) (100,000) (200,000)
(10,000) 60,000 100,000 150,000
Possible insolvency (2:5) 10,000 (2,857) (7,143) 0
Safe payments 57,143 92,857 150,000

29. b - (P13,000 – P1,000 share of gain = P12,000, refer to entries below)


Revaluation entry:
Accumulated depreciation 3,000
Gym, capital 1,000
Hob, capital 1,000
Ing, capital 1,000

Withdrawal of equipment:
Accumulated depreciation (8,000 – 3,000) 5,000
Hob, capital 13,000
Equipment 18,000

30. b –
Accumulated depreciation 70,000
K, capital (P150,000 + P10,000 + P10,000 – P70,000) 100,000
Machinery, at cost 150,000
Rice [P110,000 – (P150,000 – P70,000)] x 1/3 10,000
Long [P110,000 – (P150,000 – P70,000)] x 1/3 10,000

31. c
X Y Z Total
Capital before realization 90,000 60,000 30,000 180,000
Loss on sale (35%:35%:30%) (42,000) (42,000) (36,000) *(120,000)
48,000 18,000) ( 6,000) 60,000
*balancing figure – total reduction in capital

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