FINAL SUMMATIVE ASSESSMENT - AE112 (1ST SEM 2020-2021) - QUIZ 2

SUGGESTED KEY ANSWER

MC - THEORY MC - THEORY PROBLEM SOLVING

1 F 1 A 1 81,870.00
2 F 2 D 2 750,000.00
3 T 3 D 3 230,000.00
4 F 4 C 4 120,000.00
5 T 5 C 5 2,000.00
6 F 6 C 6 13,500.00
7 F 7 C 7 138,800.00
8 T 8 C
9 T 9 C
10 T 10 A

MULTIPLE CHOICE - COMPUTATIONAL

1 A. 0; P5,000; P18,000 Tan Lim Wan
Capital balances before liquidation 40,000.00 65,000.00 48,000.00
Loss on realization, P40,000 (16,000.00) (16,000.00) (8,000.00)
Capital balances before cash distribution 24,000.00 49,000.00 40,000.00
Possible loss, P90,000 (36,000.00) (36,000.00) (18,000.00)
Balances (12,000.00) 13,000.00 22,000.00
Additional loss to Lim and Wan, 4:2 12,000.00 (8,000.00) (4,000.00)
Cash distribution 0.00 5,000.00 18,000.00

2 D. P5,600; P5,600; P2,800

Tan(14,000 x 40%) 5,600.00
Lim (14,000 x 40%) 5,600.00
Wan (14,000 x 20%) 2,800.00

3 D. P40,400 Jacob Santos Hervas

Capital balances before liquidation 40,000.00 72,000.00 70,000.00
Loss on realization (P120,000 - P90,000) (15,000.00) (9,000.00) (6,000.00)
Liquidation expenses, P20,000 (1,000.00) (600.00) (400.00)
Capital balances before cash distribution 24,000.00 62,400.00 63,600.00
Loan balances 8,000.00 0.00 0.00
Total interest 32,000.00 62,400.00 63,600.00
Possible loss (P210,000 - 120,000) (45,000.00) (27,000.00) (18,000.00)
Balances (13,000.00) 35,400.00 45,600.00
Additional loss to Santos and Hervas 13,000.00 (7,800.00) (5,200.00)
Cash distribution 0.00 27,600.00 40,400.00

4 C. P20,000 Dy Sy Lee
Total interest 22,000.00 15,500.00 14,000.00
Profit and loss ratio 0.50 0.25 0.25
Loan absoprtion balances 44,000.00 62,000.00 56,000.00
Priority I - to Sy (6,000.00)
Balances 44,000.00 56,000.00 56,000.00
Priority II - to Sy and Lee (12,000.00) (12,000.00)
Total 44,000.00 44,000.00 44,000.00

Priority I - to Sy (P6,000 x 1/4) 1,500.00

Priority II - to Sy (P12,000 x 1/4) 3,000.00
Priority II - to Lee (P12,000 x 1/4) 3,000.00
Total 0.00 4,500.00 3,000.00

Cash distribution to Dy 6,250.00

Divide by Dy's profit and loss ratio 0.50
Amount in excess of P7,560 12,500.00
Total payment under Priority I and II 7,500.00
Total cash distribution to partner 20,000.00

5 C. EM up to P16,200
Loss absorption balances
EM (P27,000 / 30%) 90,000.00
DM (P18,000 / 50%) 36,000.00
Excess of EM 54,000.00
Multiply by EM's profit and loss ratio 0.30
Priority I to EM 16,200.00

6 C. P7,350 JJ KK LL MM
Total interest 78,000.00 94,500.00 54,000.00 30,000.00
Divide by profit and loss ratio 0.40 0.35 0.15 0.10
Absorption balances 195,000.00 270,000.00 360,000.00 300,000.00
Priority I to LL (60,000.00)
Balances 195,000.00 270,000.00 300,000.00 300,000.00
Priority II to LL, MM, 15:10 (30,000.00) (30,000.00)
Balances 195,000.00 270,000.00 270,000.00 270,000.00
Priority III to KK, LL, MM, 35:15:10 (75,000.00) (75,000.00) (75,000.00)
Total 195,000.00 195,000.00 195,000.00 195,000.00

Cash payments
JJ KK LL MM
Priority I to LL (P60,000 x 15%) 9,000.00
Priority II to LL (P60,000 x 15%) 4,500.00
Priority II to M (P60,000 x 10%) 3,000.00
Priority III to KK (P75,000 x 35%) 26,250.00
Priority III to LL (P75,000 x 15%) 11,250.00
Priority III to MM (P75,000 x 10%) 7,500.00
Further cash distribution, profit and loss ratio 0.00 26,250.00 24,750.00 10,500.00
 Cash distribution to Partners (P38,100 - P9,000), P29,100 JJ KK LL MM
Priority I to LL 9,000.00
Priority II to LL, MM, 15:10 4,500.00 3,000.00
Priority II to KK, LL, MM, 35:15:10 (P29,100 - P16,500) 7,350.00 3,150.00 2,100.00
Cash distribution 0.00 7,350.00 16,650.00 5,100.00

7 C. P61,000
Cash left for distribution 22,200.00
Add (deduct):
Cash realized from sale (23,200.00)
Payment of liabilities 3,000.00 (20,200.00)
Cash balance prior to sale and payment 2,000.00

Total capital of the partnersip prior to liquidation 60,000.00

Add: Total liabilities prior to liquidation 3,000.00
Total assets of the partnership prior to liquidation 63,000.00
Less: Cash balance prior to sale and payment 2,000.00
Book value of non-cash assets 61,000.00
Less: Sale of non-cash assets 23,200.00
Loss on realization of non-cash assets 37,800.00

8 C. P79,000; P41,000 Owen Adar Total

Capital balances 85,000.00 45,000.00 130,000.00
Loss on realization (6,000.00) (4,000.00) (10,000.00)
Balances after loss 79,000.00 41,000.00 120,000.00
Payment to partners (79,000.00) (41,000.00) (120,000.00)
Balances after payment - - -

9 C. P175,000; P125,000 April May

Capital balances 750,000.00 500,000.00
Loan payable to May - 200,000.00
Total interests 750,000.00 700,000.00
Divide by: P&L Ratio 50% 50%
Loss absorption potential 1,500,000.00 1,400,000.00
Priority 1 - April (100,000.00) -
Balances 1,400,000.00 1,400,000.00

Payment to partners: April May Total

Priority 1 - April 50,000.00 - 50,000.00
Balance (based on P&L Ratio) 125,000.00 125,000.00 250,000.00
Total payments 175,000.00 125,000.00 300,000.00

10 A. P14,000
Cash left for distribution 56,000.00
Add (deduct):
Cash realized from sale (37,000.00)
Payment of liabilities 12,000.00 (25,000.00)
Cash balance prior to sale and payment 31,000.00

Total capital of the partnersip prior to liquidation 70,000.00

Add: Total liabilities prior to liquidation 12,000.00
Total assets of the partnership prior to liquidation 82,000.00
Less: Cash balance prior to sale and payment 31,000.00
Book value of non-cash assets 51,000.00
Less: Sale of non-cash assets 37,000.00
Loss on realization of non-cash assets 14,000.00

PROBLEM SOLVING Cash NCA Liabilities Emmy, Loan Cassie, Cap. Daisy, Cap. Emmy, Cap.
1 Balances 12,400.00 1,682,500.00 198,000.00 13,200.00 741,850.00 445,110.00 296,740.00
Sale of non-cash assets 525,000.00 (1,682,500.00) (463,000.00) (347,250.00) (347,250.00)
Balances 537,400.00 0.00 198,000.00 13,200.00 278,850.00 97,860.00 (50,510.00)
Right of offset (13,200.00) 13,200.00
Balances 537,400.00 0.00 198,000.00 0.00 278,850.00 97,860.00 (37,310.00)
Absorption of loss (21,320.00) (15,990.00) 37,310.00
Balances 537,400.00 0.00 198,000.00 0.00 257,530.00 81,870.00 0.00
Payment of liabilities (198,000.00) (198,000.00)
Balances 339,400.00 0.00 0.00 0.00 257,530.00 81,870.00 0.00
Payment to partners (339,400.00) (257,530.00) (81,870.00)
Balances 0.00 0.00 0.00 0.00 0.00 0.00 0.00

2 Capital balance before liquidation 741,850.00

Cash settlement (368,850.00)
Share in loss in realization 373,000.00
Divide by: P/L ratio 40%
Total loss on realization 932,500.00
Book value of non-cash assets
Accounts Receivable 23,700.00
Allowance for Bad Debts (14,200.00)
Land 1,400,000.00
Equipment 320,000.00
Accumulated Depreciation (47,000.00) 1,682,500.00
Total selling price 750,000.00
 Proof: Cash NCA Liabilities Emmy, Loan Cassie, Cap. Daisy, Cap. Emmy, Cap.
Balances 12,400.00 1,682,500.00 198,000.00 13,200.00 741,850.00 445,110.00 296,740.00
Sale of non-cash assets 750,000.00 (1,682,500.00) (373,000.00) (279,750.00) (279,750.00)
Balances 762,400.00 0.00 198,000.00 13,200.00 368,850.00 165,360.00 16,990.00
Payment of liabilities (198,000.00) (198,000.00)
Balances 564,400.00 0.00 0.00 13,200.00 368,850.00 165,360.00 16,990.00
Payment of loan (13,200.00) (13,200.00)
Balances 551,200.00 0.00 0.00 0.00 368,850.00 165,360.00 16,990.00
Payment to partners (551,200.00) (368,850.00) (165,360.00) (16,990.00)
Balances 0.00 0.00 0.00 0.00 0.00 0.00 0.00

3 Cash left for distribution 70,000.00

Add (deduct):
Cash realized from sale (110,000.00)
Payment of liabilities 60,000.00 (50,000.00)
Cash balance prior to sale and payment 20,000.00

Total capital of the partnersip prior to liquidation 190,000.00

Add: Total liabilities prior to liquidation 60,000.00
Total assets of the partnership prior to liquidation 250,000.00
Less: Cash balance prior to sale and payment 20,000.00
Book value of non-cash assets 230,000.00
Less: Sale of non-cash assets 110,000.00
4 Loss on realization of non-cash assets 120,000.00

5 Balances Cash Payment

Monzon Nieva Monzon Nieva
Total interest 22,500.00 17,500.00
Profit and loss ratio 0.60 0.40
Loss absorption balances 37,500.00 43,750.00
Priority I - to Nieva (6,250.00) 2,500.00
Total 37,500.00 37,500.00 0.00 2,500.00

Further cash distribution - P & L ratio

All the P2,000 should be paid to Nieva, since she is entitled to P2,500 under Priority I

6 Cash before liquidation 5,000.00

June: cash realized 18,000.00
Payment to creditor (20,000.00)
Payment to Partners (2,000.00)
Cash balances, June 30 1,000.00
July: cash realized 12,000.00
Payment of liquidation expenses (500.00)
Payment to Partners (12,500.00)
Cash balances, July 31 0.00
August: cash realized 22,500.00
Cash distribution for August, P & L ratio 22,500.00

Distribution to Partners - August

Monzon (P22,500 x 60%) 13,500.00
Nieva (P22,500 x 40%) 9,000.00

7 Pedro Quito Romeo Sixto

Capital balances 10,000.00 250,000.00 250,000.00 90,000.00
Liquidation loss (54,000.00) (72,000.00) (108,000.00) (144,000.00)
Deficiency of Pedro and Sixto 44,000.00 (39,200.00) (58,800.00) 54,000.00
Cash distribution 0.00 138,800.00 83,200.00 0.00

Alternative computation: Pedro Quito Romeo Sixto

Total interest 10,000.00 250,000.00 250,000.00 90,000.00
Divide by: P/L Ratios 1/7 4/21 2/7 8/21
Loss absorption potential 70,000.00 1,312,500.00 875,000.00 236,250.00
Priority 1 - Quito (437,500.00)
Balances 70,000.00 875,000.00 875,000.00 236,250.00
Priority 2 - Quito, Romeo (638,750.00) (638,750.00)
Balances 70,000.00 236,250.00 236,250.00 236,250.00
Priority 3 - Quito, Romeo, Sixto (166,250.00) (166,250.00) (166,250.00)
Balances 70,000.00 70,000.00 70,000.00 70,000.00

Payments
Pedro Quito Romeo Sixto Total
Priority 1 - Quito - 83,333.33 - - 83,333.33
Priority 2 - Quito, Romeo - 121,666.67 182,500.00 - 304,166.67
Priority 3 - Quito, Romeo, Sixto - 31,666.67 47,500.00 63,333.33 142,500.00
Total - 236,666.67 230,000.00 63,333.33 530,000.00

Payments
Pedro Quito Romeo Sixto Total
Priority 1 - Quito - 83,333.33 - - 83,333.33
Priority 2 - Quito, Romeo - 55,466.67 83,200.00 - 138,666.67
Total - 138,800.00 83,200.00 - 222,000.00