RC – AL KHWARIZMI INTERNATIONAL COLLEGE FOUNDATION, INC. DEPARTMENT OF ACCOUNTANCY
PARTNERSHIP LIQUIDATION PART 2 Multiple Choice Partners S, V and I share profits and losses in t he ratio of 4:5:1. The statement of financial position for the partnership is as follows: Cash
50,000
Inve ntory
360,000
Total Asse ts
410,000
Accounts payabl e
150,000
S, capi tal
160,000
V, capi tal
45, 000
I, capi tal
55, 000
Total Li abi l i ti e s and Capi tal
410,000
1.
If the inventory is sold for 300,000, how h ow much should S receive upon liquidation of the partnership? a. 48,000 c. 136,000 b. 100,000 d. 160,000
2.
If the inventory is sold for 180,000, how h ow much should I receive upon liquidation of the partnership? a. 28,000 c. 37,000 b. 32,000 d. 55,000
3.
The partnership will be liquidated in instalments. As cash becomes available, it will be distributed to the partners. If inventory costing 200,000 is sold for 140,000, how much cash should be distributed to each partner at this time? a. 56,000; 70,000; 14,000 c. 32,000; 0; 8,000 b. 16,000; 20,000; 4,000 d. 20,000; 0; 20,000
4.
In accounting for the liquidation of a partnership, cash payments to partners after all non -partner creditors’ claims have been satisfied, but before the final cash distribution, should be according to a. The partners’ relative profit and loss sharing ratios b. The final balances in partner capital accounts c. The partners’ relative share of the gain or loss on li quidations d. Safe payments computations
5.
In a partnership liquidation, the final cash distribution to the partners should be made in accordance with the a. The partners’ profit and loss sharing ratios b. The final balances in partner s’ s’ loan capital loan capital accounts c. Ratio of the capital contributions by the partners d. Ratio of capital contributions less withdrawal by partners
6.
After all non-cash assets have been converted into cash in the liquidation of the P and R partnership, the ledger contains the following account balances De bi t Cash
47,000
Accounts payabl e
32,000
Loan payable to P
15,000
P, capi tal R, capi tal
7.
Cre di t
7,000 7,000
Available cash should be distributed with 32,000 going t o accounts payable and a. 15,000 to the loan payable to P c. 8,000 to P and 7,000 to R b. 7,500 each to P and R d. 7,000 to P and 8,000 to R On Jan 1, 2011, the partners of L, R and E, who share P/L in the ratio of 5:3:2, respectively, decided to liquidate their partnership. On this date, the partnership condensed statement of financial position was as follows:
RC – AL KHWARIZMI INTERNATIONAL COLLEGE FOUNDATION, INC. DEPARTMENT OF ACCOUNTANCY
PARTNERSHIP LIQUIDATION PART 2 Cash
Othe r assets
50,000 250,000
Total Asse ts
300,000
Li Li abi l i ti e s
60, 000
L capi tal
80, 000
R, capi tal
90, 000
E, capi tal
70, 000
Total Li abi l i ti e s and Capi tal
300,000
On Jan 15, 2011, the first cash sale of other assets with a carrying amount of 150,000 realized 120,000. Safe instalment payments to the partners were made same date. How much cash should be distributed to each partner? a. 15,000; 51,000; 44,000 c. 55,000; 33,000; 22,000 b. 40,000; 45,000; 35,000 d. 60,000; 36,000; 24,000 8.
The condensed statement of financial position is presented for B, C and D, who share profits and losses in the ratio of 4:3:3, respectively: Cash
100,000
Li abi l i ti e s
150,000
Othe r assets
300,000
B, capi tal
40, 000
C, capi tal
180,000
D, capi tal
30, 000
Total Asse ts
400,000
Total Li abi l i ti e s and Capi tal
400,000
The partners agreed to dissolve the partnership after selling the other assets for 200,000. Upon dissolution of the partnership, B should have received a. 0 c. 60,000 b. 40,000 d. 70,000 9.
The process of terminating the t he business, selling the assets, paying the liabilities and disbursing remaining cash to the partners is called a. Dissolution c. Withdrawal b. Formation of a new partnership d. Liquidation
10. A and M have shared P and L equally. Immediately prior to the final cash disbursement in the liquidation of their partnership, the books showed: Cash 100,000
a. 40,000 b. 60,000
=
Li abi l i ti es 0
+
A, Capi tal 60,000
+
M, Capi tal 40,000
c. 50,000 d. 100,000
11. Partners A and V have capital balances of 15,000 and 12,000, respectively. They share profits and losses in a 2:1 ratio. They sold all the partnership assets for 60,000, which resulted to a 6,000 gain on realization. The amount that V should receive as her share of cash upon liquidation of the partnership is a. 12,000 c. 23,000 b. 20,000 d. 14,000 12. N, C and S are partners sharing P/L equally. The partnership is being liquidated and after all assets are converted to cash and all liabilities paid, there remained 52,000 cash available for distribution to the partners. N and C have capital balances of 40,000 and 30,000, respectively. S has a debit balance of 18,000 in her capital account. If S is personally insolvent, how much cash will be distributed to N? a. 26,000 c. 40,000 b. 31,000 d. 34,000 13. The T, M and O company decided to liquidate its operations on Jan 1 . The capital accounts and P/L percentages on that date for the three partners are as follows:
RC – AL KHWARIZMI INTERNATIONAL COLLEGE FOUNDATION, INC. DEPARTMENT OF ACCOUNTANCY
PARTNERSHIP LIQUIDATION PART 2
Partner
Balance in Capital Accounts
T M O
10,000 12,000 -4, 000
P/L % 20% 30% 50%
O is unable to contribute any assets to the partnership to cover her deficit. How much would be distributed to T from liquidation? a. 10,000 c. 6,000 b. 9,200 d. 8,400 14. The condensed statement of financial position is presented for Al and Am company, immediately prior to its liquidation: Cash
Othe r asse ts Total Asse ts
100,000
Li Li abi l i ti e s
10,000
50,000
Al , capi tal
50,000
Am, capi tal
90,000
150,000
Total Li abi l i ti e s and Capi tal
150,000
If non-cash assets are sold for 90,000 and Al and Am share P/L equally, what will be the final cash distribution to Al? a. 65,000 c. 70,000 b. 95,000 d. 50,000 15. Prior to partnership liquidation, a schedule of possible losses is frequently prepared to determine the amount of cash that may be safely distributed to the partners. The schedule of possible losses a. Consist of each partner’s capital account plus loan balance, divided by that partner’s profit and loss loss sharing ratio b. Shows the successive losses necessary to eliminate the capital accounts of partners (assuming no contribution of personal assets by the partners) c. Indicates the distribution of successive amounts of available cash to each partner d. Assumes contribution of personal assets by partners unless there is a substantial presumption of personal insolvency by the partners The following are based on the Dec 31, 2010 statement of financial position of the M, C and I partnership: Cash
20,000
Inventory
120,000
Prope rty and Equipment, ne t
300,000
Accounts payabl e
170,000
M, capi tal ( 50%)
100,000
C, capi tal ( 30%)
90,000
I, capi tal ( 20%)
80,000
On Jan 1, 2011, the partners decided to liquidate the partnership. They agreed that all cash should be distributed as soon as it becomes available. A cash distribution plan is necessary to facilitate the distribution of cash. 16. The distribution plan should be based on relative vulnerability to losses. For the M, C and I partnership, the relative vulnerability should show that a. M is the most vulnerable c. C is the most vulnerable b. M is the least vulnerable d. C is the least vulnerable 17. If cash of 180,000, including 20,000 cash on hand, becomes available, it should be distributed in accordance with a cash priority plan. How much cash should be distributed to the creditors and partners, respectively? a. 170,000 to creditors; 10,000 to C b. 170,000 to creditors; 10,000 to M c. 170,000 to creditors; 10,000 to I d. 170,000 to creditors; 5,000 to M; 3,000 to C; 2,000 to I
RC – AL KHWARIZMI INTERNATIONAL COLLEGE FOUNDATION, INC. DEPARTMENT OF ACCOUNTANCY
PARTNERSHIP LIQUIDATION PART 2 18. If cash of 220,000, including 20,000 cash on hand, becomes available, it should be distributed first to settle the accounts payable and then to a. 25,000 to M; 15,000 to C and 10,000 to I c. 10,000 to M; 32,000 to C and 8,000 to I b. 0 to M; 26,000 to C and 24,000 to I d. 0 to M; 18,000 to C and 32,000 to I As of Dec 31, 2011, the books of V, G and C partnership showed capital balances balances of V, 40,000; G, 25,000 and C, 5,000. The partners’ P/L ratio was 3:2:1, respectively. The partners decided to dissolve to dissolve and liquidate. They sold all the non-cash assets for 37,000 cash. After settlement of all liabilities amounting to 12,000, they still have 28,000 cash left for distribution. 19. The loss on realization of the non-cash non -cash assets was a. 42,000 b. 40,000
c. 45,000 d. 21,000
20. Assuming that any debit balance of partners’ capital is uncollectible, the share of V on 28,000 cash for distribution was: a. 19,000 c. 18,000 b. 16,000 d. 17,800 The following statement of financial position is presented for the partnership of V, P and Y who share profits and losses in the ratio of 5:3:2, respectively. Cash Othe r Assets
120,000
Li abi l i ti e s
280,000
1, 080,000
V, capi tal
560,000
P, capi tal
320,000
Y, capi tal
40,000
1, 200,000
1,200,000
21. Assume that the partners decided to liquidate the partnership. If the ot her assets were sold for 800,000, how should the available cash be distributed? a. 280,000 to V; 320,000 to P; 40,000 to Y c. 412,000 to V; 228,000 to P; 0 to Y b. 324,000 to V; 236,000 to P; 16,000 to Y d. 410,000 to V; 230,000 to P; 0 to Y
From the records of the DTA partnership, answer question #4 to 6: DTA Partnership Statement of Financial Position Dec 31, 2011 Assets Cash
2,000
Othe r Asse ts Total
28,000 30,000
Liabilities and Capital Capital De Me sa, Loan De Me sa, Capi tal
2,500 12,500
Tudtud, Capi tal
7,000
Apostol , Capi tal
3,000
Total
25,000
Profit and loss ratio is 3:2:1 for De Mesa, Tudtud and Apsotol, respectively. Cash is distributed as assets are realized. Other assets were realized as follows:
RC – AL KHWARIZMI INTERNATIONAL COLLEGE FOUNDATION, INC. DEPARTMENT OF ACCOUNTANCY
PARTNERSHIP LIQUIDATION PART 2 Date
Cash Recei eceive ved d Book Valu Value e
Jan 2011
6,000
9,000
Fe b 2011
3,500
7,700
Mar 2011
12,500
11,300
22. The total loss to De Mesa is: a. 3,000 b. 2,000
c. 1,000 d. 0
23. Total cash received by Tudtud is: a. 2,000 b. 1,500
c. 5,000 d. 0
24. Cash received by Apostol in January is: a. 200 b. 1,000
c. 0 d. 500
25. R, C and P have capital balances of 40,000, 50,000 and 18,000, respectively and a profit sharing ratio of 4:2:1, respectively. If R received 8,000 upon liquidation, the total amount received by all t he partners was: a. 108,000 c. 24,000 b. 56,000 d. 52,000 26. Assume the same facts in #7 above except that R received 26,000 as a r esult of the liquidation, P received as part of the liquidation: a. 26,000 c. 14,500 b. 18,000 d. 14,000 27. The condensed statement of financial position of R, T and D partnership as of Mar 31, 2011 follows: Assets Cash
28,000
Othe r Asse ts Total
265,000 293,000
Liabilities and Capital Li abi l i ti e s
48,000
R, Capi tal
95,000
T, Capi tal
80,000
D, Capi tal
70,000
Total
293,000
P/L ratio is 50:25:25, respectively. The partners voted to dissolve the partnership and liquidate by selling assets in instalments. 70,000 was realized on the first cash sale of other non -cash assets which has a book value of 150,000. After settlement with creditors, all cash available was distributed to partners. How much cash did D receive? a. 10,500 c. 32,500 b. 20,000 d. 21,250 C, S and B are partners sharing P/L in the ratio of 4:3:3, respectively. The condensed stat ement of financial position of CSB partnership as of Dec 31, 2011 is:
RC – AL KHWARIZMI INTERNATIONAL COLLEGE FOUNDATION, INC. DEPARTMENT OF ACCOUNTANCY
PARTNERSHIP LIQUIDATION PART 2 Asse ts Cash Othe r Asse ts
Total
Li abi l i ti e s and Capi tal 50, 000
Li abi l i ti e s
40,000
130, 000
C, Capi tal
60,000
S, Capi tal
40,000
B, Capi tal
40,000
180, 000
Total
180,000
28. The CSB partnership was dissolved and liquidated by instalments. The first realization of 40,000 cash was on the sale of other assets with book value of 80,000. After the payment of the t he liabilities, the cash available is distributed to C, S and B, respectively as follows: a. 36,000; 27,000; 27,000 c. 44,000; 28,000; 28,000 b. 16,000; 12,000; 12,000 d. 24,000; 13,000; 13,000 29. The condensed statement of financial position of B, A and I who share in the P/L in the ratio of 5:3:2, respectively, is as follows: Asse ts Cash Othe r Asse ts
Total
Li abi l i ti e s and Capi tal 30,000
Li abi l i ti e s
50, 000
320,000
B, Capi tal
80, 000
A, Capi tal
115, 000
I, Capi tal
105, 000
350,000
Total
350, 000
The partners agreed to liquidate the partnership by instalment. Immediately there was a realization of 100,000 cash in selling other assets with book value of 150,000. On the cash availability, priority is the payment of the liabilities and the balance is not to be distributed to the partners. How should the remaining cash be distributed? a. 50,000; 30,000 and 20,000 respectively c. 0; 48,000 and 32,000 respectively b. 40,000; 24,000 and 16,000 respectively d. 0, 31,000 and 49,000 respectively 30. Ri, Co and Re are partners sharing P/L in the ratio of 5:3:2, 5:3:2 , respectively. The condensed statement of financial position of RCR partnership as of Dec 31, 2011 is: Asse ts Cash Othe r Asse ts
Total
Li abi l i ti e s and Capi tal 40, 000
Li abi l i ti e s
60,000
210, 000
Ri , Capi tal
48,000
Co, Capi tal
72,000
Re , Capi tal
70,000
Total
250,000
250, 000
The RCR partnership was dissolved and liquidated by instalments. The first realization of 90,000 cash was on the sale of other assets with book value of 120,000. How much should be distributed to each partner after this sale? a. Ri 0; Co 28,800; Re 41,200 c. Ri 35,000; Co 21,000; Re 14,000 b. Ri 0; Co 30,000; Re 40,000 d. Ri 45,000; Co 27,000; Re 18,000
