chapter 6 partnership liquidation lump-sum

CHAPTER 6

Partnership Liquidation – Lump-sum

Exercise 6-1

E2 Partnership

Statement of Liquidation

June 1 - 30, 2009

Non-cash CAPITAL

Cash Assets Liabilities Encabo Elorde

Profit and loss ratio 225/500 275/500

Balances before liquidation P 25,000 P600,000 P125,000 P225,000 P275,000

Sale of non-cash assets and distribution of loss 350,000 ( 600,000) ( 112,500) (137,500)

Balances P375,000 P125,000 P 112,500 P137,500

Payment of liabilities ( 125,000) ( 125,000)

Balances P250,000 P 112,500 P137,500

Payment to partners ( 250,000) ( 112,500) (137,500)

Exercise 6-2

1.

Elias, Enrico and Ever


January 1 – 31, 2009

Non-cash C A P I T A L

Cash Assets Liabilities Elias Enrico Ever

Profit and loss ratio 3/8 3/8 2/8

Balances before liquidation P 80,000 P810,000 P270,000 P60,000 P290,000 P270,000

Sale of non-cash assets and distribution of loss 634,000 (810,000) (66,000) ( 66,000) ( 44,000)

Payment of liquidation expenses ( 24,000) ( 9,000) ( 9,000) ( 6,000)

Balances P690,000 P270,000 (P15,000) P215,000 P220,000

Payment of liabilities (270,000) (270,000)

Balances P420,000 (P15,000) P215,000 P220,000

Additional investment of Elias 15,000 15,000

Balances P435,000 P215,000 P220,000

Payment to partners ( 435,000) ( 215,000) ( 220,000)

Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers

2.

Elias , Enrico and Ever Statement of Liquidation

January 1 – 31, 2009

Non-cash Note Payable C A P I T A L

Cash Assets to Elias Liabilities Elias Enrico Ever Profit and loss ratio 3/8 3/8 2/8

Balances before liquidation P 80,000 P810,000 P70,000 P200,000 P60,000 P290,000 P270,000

Sale of non-cash assets and distribution of loss 634,000 (810,000) (66,000) ( 66,000) ( 44,000)

Payment of liquidation expenses (24,000) ( 9,000) ( 9,000) ( 6,000)

Balances P690,000 P70,000 P200,000 (P15,000) P215,000 P220,000


Balances P490,000 P70,000 (P15,000) P215,000 P220,000

Offset of loan against debit balance in the

capital balance of Elias

( 15,000)

15,000

Balances P490,000 P55,000 P215,000 P220,000

Payment to partners (490,000) ( 55,000) ( 215,000) ( 220,000)

3. Elias , Enrico and Ever Statement of Liquidation

January 1 – 31, 2009

NR from Non-cash NP C A P I T A L

Cash Enrico Assets to Elias Liabilities Elias Enrico Ever Profit and loss ratio 3/8 3/8 2/8

Balances before liquidation P 80,000 P110,000 P700,000 P70,000 P200,000 P60,000 P290,000 P270,000 Sale of non-cash assets and distribution of loss 634,000 (700,000) (24,750) ( 24,750) ( 16,500)

Payment of liquidation expenses (24,000) ( 9,000) ( 9,000) ( 6,000)

Balances P690,000 P110,000 P70,000 P200,000 P26,250 P256,250 P247,500


Balances P490,000 P110,000 P70,000 P26,250 P256,250 P247,500

Offset of receivable against credit balance in

the capital of Enrico

(110,000)

( 110,000)

Balances P490,000 P70,000 P26,250 P146,250 P247,500

Payment to partners (490,000) ( 70,000) ( 26,250) ( 146,250) ( 247,500)


Exercise 6-3

Case 1

Enteng and Estrel


January 1 – 31, 2009

Other Loans_______ Capital______

Cash Assets Liabilities Enteng Estrel Enteng (90%) Estrel (10%)

Balances before liquidation P 40,000 P 400,000 P 264,000 P 36,000 P 40,000 P 80,000 P 20,000 Sale of other assets & dist. of loss 268,000 (400,000) (118,800) ( 13,200)

Balances P 308,000 P 264,000 P 36,000 P 40,000 (P 38,800) P 6,800


Balances P 44,000 P 36,000 P 40,000 (P 38,800) P 6,800 Offset of loan against debit balance in

the capital of Enteng

( 36,000)

36,000

Balances P 44,000 P 40,000 (P 2,800) P 6,800

Additional loss to Estrel for the

deficiency of Enteng

2,800 ( 2,800)

Balances P 44,000 P 40,000 P 4,000


1. Cash 268,000 4. Estrel, Capital 2,800

Enteng, Capital 118,800 Enteng, Capital 2,800

Estrel, Capital 13,200

Other Assets 400,000

2. Liabilities 264,000 5. Estrel, Loan 40,000

Cash 264,000 Estrel, Capital 4,000

Cash 44,000

3. Enteng, Loan 36,000

Enteng, Capital 36,000


Case 2

Enteng and Estrel


January 1 – 31, 2009


Cash Assets Liabilities Enteng Estrel Enteng Estrel

Balances before liquidation P 40,000 P 400,000 P 264,000 P 36,000 P 40,000 P 80,000 P 20,000

Sale of other assets and distribution of loss 268,000 (400,000) ( 92,400) ( 39,600)

Balances P 308,000 P 264,000 P 36,000 P 40,000 (P 12,400) (P 19,600)

Payment of liabilities (264,000) ( 264,000)

Balances P 44,000 P 36,000 P 40,000 (P 12,400) (P 19,600)

Offset of loan against debit

balance in capital account

(12,400)

( 19,600)

12,400

19,600

Balances P 44,000 P 23,600 P 20,400


1. Cash 268,000 3. Enteng, Loan 12,400

Enteng, Capital 92,400 Estrel, Loan 19,600

Estrel, Capital 39,600 Enteng, Capital 12,400

Other Assets 400,000 Estrel, Capital 19,600

2. Liabilities 264,000 4. Enteng, Loan 23,600

Cash 264,000 Estrel, Loan 20,400

Cash 44,000


Case 3

Enteng and Estrel


January 1- 31, 2009


Cash Assets Liabilities Enteng Estrel Enteng Estrel

Balances before liquidation P 40,000 P 400,000 P 264,000 P 36,000 P 40,000 P 80,000 P 20,000

Sale of other assets & distribution of loss 268,000 (400,000) ( 66,000) ( 66,000)

Balances P 308,000 P 264,000 P 36,000 P 40,000 P 14,000 (P 46,000)


Balances P 44,000 P 36,000 P 40,000 P 14,000 (P 46,000)

Offset of loan against debit balance

in the capital of Estrel

(40,000)

40,000

Balances P 44,000 P 36,000 P 14,000 P ( 6,000) Additional loss to Enteng for the deficiency of Estrel ( 6,000) 6,000

Balances P 44,000 P 36,000 P 8,000


1. Cash 268,000 4, Enteng, Capital 6,000

Enteng, Capital 66,000 Estrel, Capital 6,000



2. Liabilities 264,000 5. Enteng, Loan 36,000

Cash 264,000 Enteng, Capital 8,000

Cash 44,000

3. Estrel, Loan 40,000


Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers page

Exercise 6-4

Esguerra Esteban Estrada Eugenio

Capital balances before liquidation P 11,000 P 10,300 P 13,700 P 9,000

Loan from partners 2,000

Total partners’ interest P 13,000 P 10,300 P 13,700 P 9,000

Loss on realization (P46,000 – P12,000) ( 13,600) ( 10,200) ( 6,800) ( 3,400)

Balances (P 600) P 100 P 6,900 P 5,600

Additional loss to partners 600 ( 300) ( 200) ( 100)

Balances -------- (P 200) P 6,700 P 5,500

Additional loss to partners 200 ( 133) ( 67)

Distribution of cash to partners --------- --------- P 6,567 P 5,433


Problem 6-1

Ester, Edna, Emma, and Eva


October 1-31,2009

Other Rec'l from Eva, C A P I T A L

Cash Assets Ester Liabilities Loan Ester (4) Edna (2) Emma (1) Eva (1)

Balances before liquidation P 50,000 P950,000 P62,500 P 450,000 P37,500 P381,250 P 93,750 P50,000 P50,000 Sale of asset and distribution of loss 500,000 ( 950,000) ( 225,000) ( 112,500) ( 56,250) ( 56,250)

Balances P 550,000 P62,500 P 450,000 P37,500 P156,250 (P 18,750) (P 6,250) (P 6,250)


Balances P 100,000 P62,500 P37,500 P156,250 (P 18,750) (P 6,250) (P 6,250)

Offset of receivable against

credit balance in the

capital account of Ester

(62,500)

( 62,500)

Balances P 100,000 P37,500 P 93,750 (P 18,750) (P 6,250) (P 6,250)

Additional loss to the partners

for the deficiency of Edna

shared 4:1:1

( 12,500)

18,750

( 3,125)

( 3,125)

Balances P 100,000 P37,500 P 81,250 (P 9,375) (P 9,375)


balance in the capital

account of Eva

( 9,375)

9,375

Balances P 100,000 P28,125 P 81,250 (P 9,375)

Payment to partners ( 100,000) (26,250) ( 73,750)

Balances P 1,875 P 7,500 (P 9,375) Additional investment by Emma 9,375 9,375

Balances P 9,375 P 1,875 P 7,500



Journal entries to record the liquidation of the partnership

1. Cash 500,000

Ester, Capital 225,000

Edna, Capital 112,500

Emma, Capital 56,250

Eva, Capital 56,250


2. Liabilities 450,000

Cash 450,000

3. Esters, Capital 62,500

Receivable from Ester 62,500

4. Ester, Capital 12,500

Emma, Capital 3,125

Eva, Capital 3,125

Edna, Capital 18,750

5. Eva, Loan 9,375

Eva, Capital 9,375

6. Eva, Loan 26,250


Cash 100,000

7. Cash 9,375

Emma, Capital 9,375

8. Eva, Loan 1,875


Cash 9,375


Problem 6-2

1. Esteban, Capital P 144,000 3. a. Cash 463,000

Esteban, Drawing ( 12,000) Eugenio, Capital 52,500

Total interest of Esteban P 132,000 Evaristo, Capital 31,500

Cash received by Esteban 111,000 Esteban, Capital 21,000

Share of Esteban in the loss on liquidation P 21,000 Other Assets 568,000

Fractional share of Esteban 2/10

Total loss on liquidation P 105,000 b. Liabilities 200,000

Cash 200,000

c. Evaristo, Loan 40,000

Eugenio, Capital 79,500

Evaristo, Capital 102,500

Esteban, Capital 111,000

Cash 333,000

2.

Eugenio , Evaristo and Esteban


January 1 – 31, 2009

C A P I T A L

Cash

Other

Assets

Liabilities

Evaristo,

Loan

Eugenio

(5/10)

Evaristo

(3/10)

Esteban

(2/10)

Balances before liquidation P 70,000 P 568,000 P 200,000 P 40,000 P 132,000 P 134,000 P132,000

Sale of other assets & distribution of loss 463,000 ( 568,000) ( 52,500) ( 31,500) ( 21,000)

Balances P 533,000 P 200,000 P 40,000 P 79,500 P 102,500 P 111,000


Balances P 333,000 P 40,000 P 79,500 P 102,500 P 111,000

Payment to partners ( 333,000) ( 40,000) ( 79,500) (102,500) ( 111,000)

Problem 6-3


Case 1

Estrella, Espino and Espiritu


January 1- 31, 2009

Other L O A N C A P I T A L

Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (1)

Balances before liquidation P 20,000 P 340,000 P 112,000 P 5,000 P 8,000 P 95,000 P 60,000 P 80,000 Sale of assets & distribution of loss 250,000 ( 340,000) (36,000) (36,000) (18,000)

Balances P 270,000 P 112,000 P 5,000 P 8,000 P 59,000 P 24,000 P 62,000

Payment of liabilities ( 112,000) (112,000)

Balances P 158,000 P 5,000 P 8,000 P 59,000 P 24,000 P 62,000

Payment to partners ( 158,000) (5,000) (8,000) (59,000) ( 24,000) (62,000)

Case 2



January 1 - 31, 2009



Balances before liquidation P 20,000 P 340,000 P 112,000 P 5,000 P 8,000 P 95,000 P 60,000 P 80,000

Sale of assets & distribution of loss 185,000 (340,000) (62,000) ( 62,000) (31,000)

Balances P 205,000 P 112,000 P 5,000 P 8,000 P 33,000 (P 2,000) P 49,000


Balances P 93,000 P 5,000 P 8,000 P 33,000 (P 2,000) P 49,000

Offset of loan against debit balance in

the capital of Espino

( 2,000)

2,000

Balances P 93,000 P 3,000 P 8,000 P 33,000 P 49,000

Payment to partners ( 93,000) (3,000) (8,000) (33,000) (49,000)

Case 3




January 1 -31, 2009



Balances before liquidation P 20,000 P 340,000 P 112,000 P 5,000 P 8,000 P 95,000 P 60,000 P 80,000 Sale of assets & distribution of loss 170,000 (340,000) (68,000) ( 68,000) (34,000)

Balances P 190,000 P 112,000 P 5,000 P 8,000 P 27,000 (P 8,000) P 46,000


Balances P 78,000 P 5,000 P 8,000 P 27,000 (P 8,000) P 46,000


balance in the capital of

Espino

( 5,000)

5,000

Balances P 78,000 P 8,000 P 27,000 (P 3,000) P 46,000

Payment to partners ( 78,000) ( 8,000) ( 25,000) ( 45,000)

Balances P 2,000 (P 3,000) P 1,000

Additional investment by

Espino

3,000

3,000

Balances P 3,000 P 2,000 P 1,000

Payment to partners ( 3,000) (8,000) ( 2,000) ( 1,000)


Schedule to Accompany Statement of Liquidation


Amounts to be Paid to Partners

Estrella (2) Espino (2) Espiritu (1)

Capital balances before cash distribution P 27,000 (P 3,000) P 46,000

Add loan balance 8,000

Total partners’ interest P 27,000 (P 3,000) P 54,000

Restricted interest - possible loss to Estrella and Espiritu in the

ratio of 2:1 if Espino fails to pay his deficiency

( 2,000)

3,000

( 1,000)

Free interests - amounts to be paid to partners P 25,000 P 53,000

Payment to apply on:

Loan P 8,000

Capital P 25,000 45,000

Cash distribution P 25,000 P 53,000

Case 4




January 1 – 31, 2009

Other L O A N CAPTIAL


Balances before liquidation P 20,000 P 340,000 P 112,000 P 5,000 P 8,000 P 95,000 P 60,000 P 80,000 Sale of assets & distribution of loss 125,000 ( 340,000) (86,000) (86,000) (43,000)

Balances P 145,000 P 112,000 P 5,000 P 8,000 P 9,000 (P26,000) P 37,000


Balances P 33,000 P 5,000 P 8,000 P 9,000 (P26,000) P 37,000


balance in the capital of Espino

( 5,000)

5,000

Balances P 33,000 P 8,000 P 9,000 (P21,000) P 37,000


Balances P 9,000 (P21,000) P 12,000

Additional investment by Espino 21,000 21,000

Balances P 21,000 P 9,000 P 12,000




Schedule to Accompany Statement of Liquidation

Amount to be Paid to Partners

Estrella (2) Espino (2) Espiritu (1)

Capital balances before cash distribution P 9,000 (P 21,000) P 37,000

Add loan balance 8,000

Total partners’ interest P 9,000 (P 21,000) P 45,000

Restricted interest - possible loss to Estrella and Espiritu

in the ratio of 2:1 if Espino fails to pay his

deficiency

(14,000)

21,000

( 7,000)

Balances (P 5,000) P 38,000

Restricted interest - possible loss to Espiritu if Estrella

fails to pay his deficiency

5,000

( 5,000)

Free interests - amounts to be paid to partners P 33,000

Payment to apply on:

Loan P 8,000

Capital 25,000

Cash distribution P 33,000


Case 5



January 1 - 31, 2009

Other Other L O A N C A P I T A L


Balances before liquidation P 20,000 P 340,000 P 112,000 P 5,000 P 8,000 P 95,000 P 60,000 P 80,000

Sale of assets & distribution of loss 90,000 (340,000) (100,000) (100,000) (50,000)

Balances P 110,000 P 112,000 P 5,000 P 8,000 (P 5,000) (P 40,000) P 30,000


Balances P 2,000 P 5,000 P 8,000 (P 5,000) (P 40,000) P 30,000

Offset of loan against debit balance

in the capital of Espino

( 5,000)

5,000

Balances P 2,000 P 8,000 (P 5,000) (P 35,000) P 30,000

Additional investment by Estrella

and Espino

40,000 5,000 35,000

Balances P 40,000 P 2,000 P 8,000 P 30,000

Payment of liabilities and payment

to partners

( 40,000) ( 2,000) (8,000) ( 30,000)


Problem 6 – 4

1.

Asset Book Value Cash

Realized

(Gain) Loss

Accounts Receivable P 60,000 P64,000 (P 4,000)

Merchandise Inventory 50,000 25,000 25,000

Prepaid Advertising 2,000 800 1,200

Machinery and Equipment 40,000 24,000 16,000

P152,000 P113,800 P 38,200

2.

Evasco-Ellor Partnership


January 1 – 31, 2009

Cash Other

Assets

Accounts

Payable

Notes

Payable

CAPITAL

Evasco (4) Ellor (6)

Balances before

liquidation

P 1,000

P152,000

P20,000

P 86,000

P 30,000

P 17,000

Sale of assets and

distribution of loss

113,800

(152,000)

(15,280)

(22,920)

Balances P114,800 P20,000 P 86,000 P 14,720 (P 5,920)

Unrecorded liabilities 2,000 1,000 ( 1,200) ( 1,800)

Balances P114,800 P22,000 P 87,000 P 13,520 (P 7,720)

Payment of liabilities (109,000) (22,000) (87,000)

Balances P 5,800 P 13,520 (P 7,720)

Additional investment of

Ellor

4,000

4,000

Balances P 9,800 P 13,520 (P 3,720)

Additional loss to

Evasco for the

deficiency of Ellor

( 3,720)

3,720

Balances P 9,800 P 9,800

Payment to Evasco ( 9,800) ( 9,800)

3.

a. Cash 113,800

Evasco, Capital 15,280

Ellor, Capital 22,920

Allowance for Uncollectible Accounts 20,000

Accumulated Depreciation 60,000

Accounts Receivable 80,000

Merchandise Inventory 50,000

Prepaid Advertising 2,000

Machinery and Equipment 100,000

b. Evasco, Capital 1,200



Accounts Payable 2,000

Notes Payable 1,000

c. Accounts Payable 22,000

Notes Payable 87,000

Cash 109,000

d. Cash 4,000


e. Evasco, Capital 3,720


f. Evasco, Capital 9,800

Cash 9,800

MULTIPLE CHOICE

1. C Total assets = Total capital + Total liabilities

= P60,000 + P 3,000 P 63,000

Less Cash = P3,000 + P22,200 - P23,200 ___2,000

Book value of noncash assets P 61,000

2. A P61,000 - P23,200 = P37,800 x 3/21 P 5,400

3. B Espina Espinosa Esteban Estrellita

Capital bal. before liquidation P1,000 P25,000 P25,000 P 9,000

Loss on realization ( 5,400) ( 7,200) ( 10,800) ( 14,400)

Balances (P4,400) P17,800 P14,200 (P5,400)

Add’l loss to Espinosa and Esteban 4,400 ( 3,920) ( 5,880) 5,400

Cash payments to partners P 8,320

4. C Total capital P70,000

Less Cash left for distribution 28,000

Loss on realization P 42,000

5. A E1 E2 E3

Capital bal. before liquidation P 40,000 P 25,000 P 5,000

Loss on realization ( 21,000) (14,000) ( 7,000)

Balances P 19,000 P 11,000 P( 2,000)

Addl loss to E1 & E2 for the deficiency of E3 ( 1,200) ( 800) 2,000

Cash payment to E1 P 17,800

6. D Total capital (P360,000 + P72,000) P432,000

Total liabilities 84,000

Total loss on liquidation P516,000

7. A Espera Elor Este


Capital balances P 100,000 P 80,000 P 300,000

Drawing ( 60,000) ( 40,000) (20,000)

Distribution of net income 24,000 24,000 24,000

Loss on liquidation (172,000) (172,000) (172,000)

Balances (P108,000) P(108,000) P 132,000

Additional loss to Elor and Este 108,000 ( 54,000) ( 54,000)

Cash to be distributed to Este P 78,000

8. B Escano Ender Evelo

Balances before liquidation P10,000 P35,000 P41,000

Loss from sale of non-cash assets ( 16,000) ( 12,000) ( 12,000)

Balances (P 6,000) P23,000 P29,000

Additional loss for deficiency of Escano 6,000 ( 3,000) ( 3,000)

Balances P20,000 P26,000

Add Loan balance 14,000

Cash to be received by Ender P34,000

9. B Escano Ender Evelo

Balances before liquidation P10,000 P35,000 P41,000

Loss on liquidation - P45,000 ( 18,000) ( 13,500) ( 13,500)

Balances (P 8,000) P21,500 P27,500

Additional loss for deficiency

of Escano (P8,000 - P5,000 = P3,000) 3,000 ( 1,500) ( 1,500)

Payment to Evelo 26,000

10. D Cash to be received by Escano P12,000

Escano capital before liquidation 10,000

Escano’s share in the gain on realization P 2,000

Escano 's profit share 40%

Total gain on realization P 5,000

Book value of non-cash assets 70,000

Cash realized from sale of non-cash assets P75,000

11. C Capital of Echo before liquidation P50,000

Share in loss from liquidation (P60,000 x 6/10) (36,000)

Amount to be received by Echo P14,000

12. A Echo Egay Elma

Capital balances P50,000 P50,000 P10,000

Loss on realization (12,000) (12,000) (36,000)

P38,000 P38,000 (P26,000)

Addl loss for the deficiency of Elma (13,000) (13,000) 26,000

Amt to be received by Egay P25,000

13. A Esmer Estrel Ellea Elmer

14. A Capital and loan balances P 50,000 P 50,000 P50,000 P 75,000


15. B Loss on realization ( 112,000) ( 56,000) ( 56,000) ( 56,000)

Balances (P 62,000) (P 6,000) (P 6,000) P 19,000

Add’l loss for the def of Estrel ( 3,000) 6,000 ( 1,500) ( 1,500)

Amount to be received from the partnership P 17,500

Personal assets 200,000

Amount available to personal creditors of Elmer P217,500

TEST MATERIALS

Test Material No. 21 Test Material No. 22

1. F 11. T 1. Loan payable 11. Marshaling of assets

2. F 12. T 2. Lump-sum liquidation 12. Capital deficiency

3. T 13. F 3. Right of offset 13. Gain on realization

4. T 14. T 4. Liquidation 14. Liquidation expenses

5. T 15. T 5. Realization 15. Loss to the other partner

6. F 16. F 6. Loan rec’l from partner 16. Capital balance

7. T 17. T 7. Installment liquidation 17. Personal creditors

8. T 18. F 8. Deficient partner 18. Additional investment

9. F 19. T 9. Statement of liquidation 19. Addition to capital

10. T 20. T 10. Insolvent partner 20. Profit and loss ratio

Test Material No. 23

1. A

2. D

3. D

4. C

5. D

6. C

7. B

8. A

9. C

10. D

11. D

12. A P100,000/4 = P25,000

13. C P120,000 x 1/3 = P40,000; P120,000 x 2/3 = P80,000

14. A P75,000 x 2/5 = P30,000; P75,000 x 3/5 = P45,000

15. C P60,000 + P90,000 - P30,000 = P120,000

16. A Emy Ely Evy

Capital balances before liquidation P280,000 P160,000 P20,000

Distribution of loss on realization ( 70,000) ( 42,000) ( 28,000)

Balances P210,000 P118,000 (P 8,000)

Additional loss for

the deficiency of Evy ( 5,000) ( 3,000) 8,000

Balances P205,000 P115,000

Cash payments to partners ( 205,000) ( 115,000)

17. C P320,000 - (P120,000 x 4/10) = P272,000

18. A Eden Elisa Elma


Capital balances before liquidation P320,000 P 90,000 P110,000

Distribution of loss on realization ( 144,000) ( 180,000) ( 36,000)

Balances P176,000 (P 90,000) P 74,000

Additional loss for the deficiency of

Elisa

( 72,000) 90,000 ( 18,000)

Payment to Elma P 56,000

19. C Estacio Estioco

Capital balances (P21,000) P21,000

Loan 45,000

Cash payment to partners P24,000 P21,000

20. D


Test Material 24

Problem A

EEE Partnership


January 1 – 31, 2009

Cash Non-cash

Assets

Accounts

Payable

Loan Payable to

Empoy

CAPITAL

Estoy Empoy Eloy

Balances before liquidation P 25,000 P 475,000 P 240,000 P 30,000 P120,000 P 50,000 P 60,000

Sale of assets and dist. of loss 260,000 (475,000) (43,000) (86,000) (86,000)

Balances P 285,000 P 240,000 P 30,000 P 77,000 (P36,000) (P 26,000)


Balances P 45,000 P 30,000 P 77,000 (P36,000) (P 26,000)

Offset of loan against deficiency of

Empoy

( 30,000)

30,000

Balances P 45,000 P 77,000 (P 6,000) (P26,000)

Additional loss to Estoy and Empoy

for the deficiency of Eloy

( 333)

( 667)

1,000

Balances P 45,000 P 76,667 (P 6,667) (P25,000)

Additional investment by Empoy and

Eloy

31,667

6,667

25,000

Balances P 76,667 P 76,667

Payment to Estoy ( 76,667) (76,667)


2.

a, Cash 260,000

Estoy, Capital 43,000

Empoy, Capital 86,000

Eloy, Capital 86,000

Accounts Receivable 75,000

Inventories 100 000

Property, Plant and Equipment 300,000

b. Accounts Payable 240,000

Cash 240,000

c. Loan Payable to Empoy 30,000


d. Estoy, Capital 333

Empoy Capital 667

Eloy, Capital 1,000

e. Cash 31,667


Eloy, Capital 25,000

f. Estoy, Capital 76,667

Cash 76,667

3.

Estoy Empoy Eloy

Personal assets P250,000 P300,000 P350,000

Applied to

Personal liabilities ( 230,000) ( 240,000) ( 325,000)

Partnership liabilities ( 6,667) ( 25,000)

Balances P 20,000 P 53,333 ---


Problem B

1. a. Escobar Elloso Echaves

Capital balances before liquidation P90,000 P 90,000 P 30,000

(Receivables) Payables ( 75,000) 40,000 60,000

Total partners’ interest P15,000 P130,000 P 90,000

Loss on realization ( 32,200) ( 32,200) ( 16,100)

Balances (P17,200) P 97,800 P 73,900

Additional investment of Escobar 17,200

Payment to partners ( 97,800) ( 73,900)

b. Escobar Elloso Echaves





Balances (P29,200) P 85,800 P 67,900

Additional loss to Elloso and Echaves 25,200 ( 16,800) ( 8,400)

Balances (P 4,000) P 69,000 P 59,500

Additional investment of Escobar 4,000


c. Escobar Elloso Echaves





Liquidation expenses ( 9,950) ( 9,950) ( 4,975)

Balances (P39,150) P 75,850 P 62,925

Additional loss to Elloso and Echaves 39,150 ( 26,100) ( 13,050)


2. Partnership assets of P455,500 (excluding cash) less partnership liabilities of P308,500 is

partnership net assets of P147,000. Price offered is P140,000; the loss on sale of the

business is P7,000. Therefore, it is wiser to accept the offer for the purchase of the

business for P140,000. The loss shall be P7,000 compared with liquidating the business

and selling the other assets for P300,000 incurring loss on realization of P155,500.

chapter 6 partnership liquidation lump-sum

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