PROBLEM 4

5.A
Solution:
LIST A LIST B
A= 50,000 x 0.1 = 5,000 80,000+70,000+130,000 =210,000 x 0.1 =25,000
B= 70,000 x 0.1 = 7,000
12,000
6.A
Net asset after admission 75,000
Multiply: New partner’s interest 20%
Capital Credit 15,000
Investment 18,000
Bonus to old partner (3,000)

7.B

CAPITAL
A 139,200
B 208,800
C 96,000
444,000

Payment of D 132,000
Capital credit given 444kx1/5 88,800
Combined gain of A & B 43,200

8.C
Solution:
30,000
(50,000) –(120,000 +30,000 x 1/3) – Andre’s Capital Balance
(20,000)
MING (60%) PIW (40%)
(12,000) (8,000)
80,000 40,000
68,000 32,000

9.B. 54,000
Solution:
Total capital after admission 150,000
Multiply by: Interest of Lind 1/3
Capital credit to Lind 50,000
Contribution of Lind (40,000)
Bonus to Lind 10,000
Multiply by: Old P/L ratio of Blau 60%
Deduction to Blau's capital 6,000
Interest of Blau before admission of Lind 60,000
Deduction to Blau's capital (6,000)
Adjusted capital of Blau after admission 54,000

10.A
Sol.
320,000
(360,000)
40,000
x 3/5
24,000

11.A
Sol.
40,000
x 2/5
16,000

128,000
(16,000)
112,000

LIQUIDATION

1. A
Solution:
The total loss on the sale is computed as follows:
Sale of other assets 120,000
Carrying amount of all other assets (250,000)
Total loss on sale (130,000)

The partial settlement to partners is computed as follows:

Cobb Davis Eddy Totals

Capital balances 80,000 90,000 70,000 240,000
Allocation of loss
(65,000) (39,000) (26,000) (130,000)
[130K x (50%; 30% & 20%)]
Amounts received 15,000 51,000 44,000 110,000
2. B

Since it is apparent that the partners will have no gains or

losses from the sale of its non-cash assets due to the
settlement at it carrying amount. The partners shall receive
equal amounts of their claims.

3. A.
 4. D

Solution:
A = L + E
Given information 120,000 not equal to - + 490,000
Loss (squeeze) (370,000)
Adjusted balances 120,000 = - + 120,000

Jack Beans Totals

(30%) (70%)
Capital balances – unadjusted 300,000 190,000 490,000
Allocation of loss (111,000) (259,000) (370,00
0)
Total 189,000 (69,000) 120,000

5. A
Solution:
Beans
(70%)
Capital balances – 190,000
unadjusted
Allocation of loss (91,000) (squeez
e)
Total 99,000 (start)

Total loss = (91,000) ÷ 70% = (130,000)

Jack (30%)
Capital balances –
unadjusted 300,000
Allocation of loss (-130K x (39,00
30%) 0)
Total
261,000

6. A
Solution:
Jack
(30%)
Capital balances – unadjusted 300,000
Allocation of loss (39,000) (squeez
e)
Total 261,000 (start)

Total loss = (39,000) ÷ 30% = (130,000)

 Beans
(70%)
Capital balances –
unadjusted 190,000
Allocation of loss (-130K x (91,00
70%) 0)
Total 99,00
0

Amount received by Jack 261,000

Amount received by Beans 99,000
Settlement of liabilities 200,000
Net proceeds from sale 560,000

7. D
20% 30% 50%
CASH NCA LIABILITIES A B C
Beginning balances 20,000 480,000 30,000 100,000 170,000 200,000
Actual loss on realization 62,000 (160,000) - (19,600) (29,400) (49,000)
Total 82,000 320,000 30,000 80,400 140,600 151,000
Settlement of liabilities (30,000) (30,000) -
Total 52,000 320,000 - 80,400 140,600 151,000
Maximum loss possible (320,000) (64,000) (96,000) (160,000)
Total 52,000 - - 16,400 44,600 (9,000)
Loss absorpotion (3,600) (5,400) 9,000
Total 52,000 - - 12,800 39,200 -
Payment of claims (52,000) - - (12,800) (39,200) -
Total - - - - - -

Allocation of loss on realization

Carrying amount of assets realized 160,000
Cash proceeds (70,000)
Liquidation expenses 8,000
Actual loss on realization 98,000

Maximum loss possible

Carrying amount of unsold non-cash assets (320,000)
Maximum loss possible (320,000)

8. B
Solution:

The loss is determined as follows:

A = L + E
Given information 0 = 30,0 +
00 570,000
Loss (squeeze) (600,0
00)
 Adjusted balances 0 = +
30,000 (30,000
)

A B C
(30%) (20%) (50%) Total
s
Cap. bal. - 210,000 150,000 210,000 570,00
unadjusted 0
Allocation of loss:
(180,00 (120,000 (300,000 (600,00
-600K x 30%; x
0) ) ) 0)
20%; x 50%
Total 30,000 30,000 (90,000) (30,00
0)
Allocation of (54,000
deficiency ) (36,000) 90,000 -
(-90K x 3/5); (-90K x (24,000 (6,000) - (30,00
2/5) ) 0)
Total
Additional 24,000 6,000 - 30,00
contributions 0
Total - - - -

Allocation of loss (180,000)

Allocation of deficiency (54,000)

Decrease in A's capital balance (234,000)

9. A

10. B

50% 30% 20%

A B C
Capital balances 250,000 150,000 100,000
Interest adjustments in the partnership
Receivable from A (10,000)
Payable to B 20,000
Total interest 240,000 170,000 100,000
Divded by: P/L ratio 50% 30% 20%
Maximum loss absorption capacity (MLAC) 480,000 566,667 500,000
First priority - (66,667) -
Adjusted 480,000 500,000 500,000
Second priority - (20,000) (20,000)

Adjusted 480,000 480,000 480,000

CASH A B C
Priority claims - 26,000 4,000
First available cash for distribution: 12,000
First payment according to priority (12,000) - (12,000) -

Adjusted priority claims - 14,000 4,000

Second available cash for distribution: 30,000
Second payment according to priority (18,000) (14,000) (4,000)

Adjusted priority claims 12,000 - - -

Distribution for remaining cash after priority(12,000)
claims (6,000) (3,600) (2,400)

B received in the second payment of cash distribution (17,600)