Partnership Liquidation

Problem 1

On December 31, 2019, the accounting record of MM, NN, OO Partnership (a general
partnership) included the following ledger account balances:

(Dr.) Cr.
MM, drawing (15,000.00)
OO, drawing (5,625.00)
NN, loan 18,750.00
MM, capital 76,875.00
NN, capital 62,812.50
OO, capital 67,500.00

Total assets of the partnership amounted to P299,062.50 including P32,812.50 cash and
partnership liabilities totaled, P93,750. The partnership was liquidated on December 31,
2019 and OO received P52,031.25 cash pursuant to the liquidation. MM, NN and OO
shared net income and losses in a 5:3:2 ratio, respectively.

1. The loss on realization

a. 9,843.75 c. 49,218.75
b. 15,468.75 d. 77,343.50
2. The amount realized from sale of non-cash assets?
a. 160,781.25 c. 217,031.25
b. 188,906.25 d. 266,250.00
3. The cash balance after payment of liabilities?
a. 156,093.75 c. 221,718.75
b. 193,593.75 c. 249,843.75
Problem 2

Fleming, Durano and Mart are partners in a wholesale business. On January 1, 2019 the
total capital was P30,00 and drawings presented as follows:

Capitals Drawings
Fleming 6,250.00 3,750.00
Durano 5,000.00 2,500.00
Mart 18,750.00 1,250.00

Partners agree that profit and loss ratio are shared equally. Because of the failure of
some debtors to pay their outstanding accounts, the partnership loses heavily and is
compelled to liquidate. After exhausting the partnership assets, including those arising
from an operating profit of P4,500 in 2019, they still owe P5,250 to creditors on
December 31, 2019. Fleming has no personal but the others are well off.

1. The partnership liquidation loss:

a. None c. 27,750
b. 10,000 d. 32,250
2. The amount to be received by Mart as a result of the liquidation:
a. 818.75 c. 7,125
b. 4,875 d. 9,750
 Problem 3

Following is the balance sheet of DD, EE and FF partnership (a general partnership) on

June 4, 2019 immediately prior to its liquidation:

Assets Liabilities and Capital

Cash 6,000.00 Liabilities 20,000.00
Other Asset 94,000.00 EE, loan 4,000.00
DD, capital 27,000.00
EE, capital 39,000.00
FF, capital 10,000.00
100,000.00 Total 100,000.00

The partners shared net income and losses as follows: DD, 40%; EE, 40% and FF, 20%.
On June 4, 2019, the other cash were realized at P30,700 and P20,500 had to be paid to
liquidate the liabilities because of an unrecorded trade accounts payable of P500. DD
and EE were solvent, but FF’s personal liabilities exceeded personal assets by P5,000.
How much would each partner receive?

a. DD, 1,680; EE, 17,680; FF, 0

b. DD, 1,480; EE, 17,480; FF, 0
c. DD, 100; EE, 12,100; FF, 0
d. DD, 100; EE, 16,100; FF, 0
 Problem 4

When Ray and Conniff, general partners of the Ray Conniff partnership who shared net
income and losses in a 4:6 ratio were incapacitated in an accident, a liquidator was
appointed to raise up the partnership. The partnership’s balance sheet showed the
following:

Assets Liabilities and Capital

Cash 17,500.00 Liabilities 10,000.00
Other Asset 50,000.00 Ray, capital 35,500.00
Goodwill 5,000.00 Conniff, capital 27,000.00
72,500.00 Total 72,500.00

Liquidation expenses paid P2,500 for advertising, rent, travel, etc. and in the process of
liquidating the partnership an overlooked bill for landscaping of P1,000 is discovered and
in addition, partners agree to keep a P1,500 contingent fun. Determine the amount of
cash that should be paid to each partner:

a. Ray, 11,500; Conniff, 0 c. Ray, 7500; Conniff, 0

b. Ray, 2,500; Conniff, 0 d. Ray, 5,000; Conniff, 0
 Problem 5

The partnership of JJ, KK, LL and MM is preparing to liquidate. Profit and loss sharing
ratios are shown is the summarized balance sheet at December 31, 2019 as follows:

Assets Liabilities and Capital

Cash 100,000.00 Other Liabilities 50,000.00
Inventories 100,000.00 JJ, loan 50,000.00
Loan to KK 10,000.00 JJ, capital (40%) 100,000.00
Other Assets 255,000.00 KK, capital (20%) 160,000.00
LL, capital (20%) 50,000.00
MM, capital (20%) 55,000.00
Total 465,000.00 Total 465,000.00

During January 2020, the inventories are sold for P42,500, the others liabilities are paid
and P25,000 is set-aside for contingencies

Compute the total cash payment to partners:

Payment to
Partners
a. 97,500.00
b. 102,500.00
c. 72,500.00
d. 67,500.00
Problem 6

Partners Edong, Sally and Zarah decided to liquidate their partnership on November 30,
2017. Their capital balances and profit and loss are as follows:
Capitals P&L ratio
Edong P 600,000 40%
Sally 784,000 40%
Zarah 240,000 20%
The net income from January 1, 2017 to November 30, 2017 is P656,000. On November
30, 2017, the cash balance is P520,000, and that of liabilities is P1,160,000.
Edong is to receive P706,560 in the settlement of his interest.

1. Calculate: (1) The loss on realization, and (2) the amount to be realized from the sale
of non-cash assets?

A. (1) P 389,600 (2) P2,530,400

B. (1) P 248,000 (2) P5,100,000
C. (1) P 620,000 (2) P3,860,000
D. (1) P 522,000 (2) P3,860,000
Problem 7

The partnership of Mikee and Rosa is in the process of liquidation. On January 1, 2017,
the ledger shows account balances as follows:
Cash P 8,000 Accounts Payable P 12,000
Accounts Receivable 20,000 Mikee, Capital 32,000
Lumber Inventory 32,000 Rosa, Capital 16,000
On January 10, 2017, the lumber inventory is sold for P20,000, and during January,
accounts receivable of P16,800 is collected. No further collections on the receivables are
expected and the partners have incurred P3,200 of liquidation expenses. Profits are
shared 60% for Mikee and 40% for Rosa.
How much cash will partner Mikee and Rosa receive upon liquidation?

A. P22,800; P9,920 C. P20,960; P8,640

B. P37,600; P18,400 D. P20,500; P20,500
Problem 8

The partnership ABC is currently liquidating and on February 15, 2017, their balances in
capital and their profit and loss ratios are shown below:
Apple, Capital (P&L 40%) P 22,000
Bryan, Capital (P&L 20%) 14,000
Cecile, Capital (P&L 40%) -12,000
Assume non-cash assets have been all disposed and Cecile has promised to pay his
deficiency in a week’s time.
Calculate the amount to be received by one of the partners if cash is paid immediately
on February 15, 2017.

A. Apple, P22,000 C. Bryan, P10,000

B. Bryan, P12,000 D. Apple, P12,000
Problem 9

The balance sheet for Chester, Joana and John partnership, who share profits and losses
in the ratio of 50%, 25% and 25%, respectively, shows the following balances just
before liquidation.

Cash P 24,000
Other Assets 119,000
Liabilities 40,000
Chester, Capital 44,000
Joana, Capital 31,000
John, Capital 28,000

On the first month of liquidation, certain assets are sold for P64,000. Liquidation
expense of P2,000 are paid, and additional liquidation expenses are anticipated.
Liabilities are paid amounting to P10,800 and sufficient cash is retained to insure the
payment to creditors before making payments to partners. On the first payment to the
partners, Chester receives P12,500

Determine the amount of cash withheld for anticipated liquidation expenses.

A. P35,200 C. P33,200
B. P29,200 D. P6,000
Problem 10

A condensed balance sheet with profit sharing percentages for the E, F and G
partnership on January 1, 2017, shows the following:
Cash P 100,000 Liabilities P 80,000
Other Assets 500,000 E, Capital (40%) 100,000
F, Capital (40%) 250,000
G, Capital (20%) 170,000
Total P 600,000 Total P 600,000

On January 2, 2017, the partners decided to liquidate the business, and during January
they sell assets with a book value of P300,000 for P170,000.

How much cash will the partners receive if all available cash, except for a P10,000
contingency fund, is distributed immediately after the sale

A. All partners will receive P60,000

B. Partners F and G will both receive P90,000
C. Partner F will receive P96,667 and Partner G will receive P93,333
D. Partner F will receive P190,000
Problem 11

A, B, and C are partners sharing profits in the ratio of 5:3:2, respectively. A balance
sheet prepared just prior to partnership liquidation shows the following:
A B C
Capital Balances P 122,000 P 72,000 P47,000
Loan Balances P 43,000 P 48,000 P 6,000
Assets are sold and cash is distributed to partners in monthly instalments during the
course of liquidation as follows:
January P 20,000
February 50,000
March 80,000
April (final distribution) 20,000

Required:
a. Prepare a program to show how cash is to be distributed during the entire course
of liquidation.
b. Using the program developed above, prepare a schedule summarizing the
payments to be made to partners at the end of each month.
Problem 12

Elizabeth, Diana, Anthony, and Scarlett were partners who decided to liquidate the
affairs of the partnership. Prior to dissolution, the condensed balance sheet together
with the profit and loss sharing ratio was derived as follows:
P P
Cash 100,000 Liabilities 750,000
Other Assets 1,800,000 Diana, Loan 60,000
Scarlett, Loan 50,000
Elizabeth,Capital (30%) 420,000
Diana, Capital (30%) 315,000
Anthony, Capital (20%) 205,000
Scarlett, Capital (20%) 100,000
P
1,900,000 P 1,900,000

The other assets were sold for P 1,200,000. Payments were made to creditors and final
distributions of cash were made to partners.

a. The partner who got paid the most was:

b. The cash received by Scarlett will be applied:
Problem 13

D, E, and F are partners sharing profits in the ratio of 40:35:25, respectively. On

December 31, 2018, they agree to liquidate. A balance sheet prepared on this date
follows:

DEF Partnership
Balance Sheet
As of December 31, 2018
Cash P 2,000 Liabilities P 6,000
Other Assets 46,000 E, Loan 5,000
F, Loan 2,500
D, Capital 14,450
E, Capital 12,550
F, Capital 7,500
P 48,000 P 48,000

The results of liquidation are summarized below:

Expenses Cash Withheld

Realization Book Cash at end of month Liability
of
s Value Realized for estimated Paid
Realization
future expenses
Problem 14
The balance sheet of J, K, and L Partnership shows the following information as of
December 31, 2018:

Cash P 2,000 Liabilities P 5,000

Other
Assets 28,000 J, Loan 2,500
J, Capital 12,500
K, Capital 7,000
L, Capital 3,000
P 30,000 P 30,000

Profit and loss ratio is 3:2:1, respectively, for J, K, and L. Other assets were
realized as follows:

Date Cash Received Book Value

January, 2018 P 8,000 P 9,000
February, 2018 3,500 7,700
March, 2018 12,500 11,300

Cash is distributed as assets are realized.

a. How much is the total loss to J?

b. How much is the total cash received by K?
c. How much cash does L receive in January?
Problem 15

Balance sheet data for the firm of W, X, and Y as of January 1, 2018, follow:

P
Assets 1,225,000 Liabilities P 675,000
W, Capital 200,000
X, Capital 200,000
Y, Capital 200,000
P P
1,225,000 1,225,000

Partners share profits equally after allowance of a salary to Y, the managing partner, of
P7,500 monthly. As a result of operation losses sustained at the beginning of 2018, W
advanced P 150,000 to the firm on April 1; it was agreed that he would be allowed
interest at 6%. With continued losses, the members decided to liquidate. Y agreed to
take over partnership equipment in part of settlement of his interest, the transfer being
made at an agreed value of P 40,000. On November1, P 200,000 cash was available for
distribution to partners after the sale of remaining assets and payment of partnership
obligations to outsiders. Y had withdrawn his salary for January and February but had
not received his salary for the period of March 1 to November 1; no other cash
payments had been made to partners. Available cash was distributed on November 1
and the firm was declared dissolved.

How much cash should W received in the distribution of P 200,000 cash available?