CHAPTER 6 Partnership Liquidation – Lump-sum Lump-sum Exercise 6-1
E2 Partnership Statement of Liquidation June 1 - 30, 2009 Non-cash Cash Assets Profit and loss ratio Balances before liquidation Sale of non-cash assets and distribution distribution of loss Balances Payment of liabilities Balances Payment to partners
P 25,000 350,000 P375,000 ( 125,000) P250,000 ( 250,000)
P600,000 ( 600,000)
Liabilities P125,000 P125,000 ( 125,000)
CAPITAL Encabo Elorde 225/500 275/500 P225,000 P275,000 ( 112,500) (137,500) P 112,500 P137,500 P 112,500 ( 112,500)
P137,500 (137,500)
Exercise 6-2
1. Elias, Enrico and Ever Statement of Liquidation January 1 – 31, 31, 2009 Non-cash Cash Assets Liabilities Profit and loss ratio Balances before liquidation Sale of non-cash assets and distribution distribution of loss Payment of liquidation liquidation expenses Balances Payment of liabilities Balances Additional investment of Elias Balances Payment to partners
P 80,000 634,000 ( 24,000) P690,000 (270,000) P420,000 15,000 P435,000 ( 435,000)
P810,000 (810,000)
P270,000
P270,000 (270,000)
Elias 3/8 P60,000 (66,000) ( 9,000) (P15,000) (P15,000) 15,000
C A P I T A L Enrico Ever 3/8 2/8 P290,000 P270,000 ( 66,000) ( 44,000) ( 9,000) ( 6,000) P215,000 P220,000 P215,000
P220,000
P215,000 ( 215,000)
P220,000 ( 220,000)
Chapter 6 - Partnership Liquidation - Lump-Sum Lump-Sum Suggested Answers
2.
Elias , Enrico and Ever Statement of Liquidation January 1 – 31, 31, 2009 Cash Profit and loss ratio Balances before liquidation Sale of non-cash assets and distribution distribution of loss Payment of liquidation expenses Balances Payment of liabilities Balances Offset of loan against debit balance in the capital balance of Elias Balances Payment to partners
P 80,000 634,000 (24,000) P690,000 (200,000) P490,000
Non-cash Assets P810,000 (810,000)
P490,000 (490,000)
Note Payable to Elias
C A P I T A L Liabilities
Elias
Enrico
Ever
3/8 P60,000 (66,000) ( 9,000) (P15,000)
3/8 P290,000 ( 66,000) ( 9,000) P215,000
2/8 P270,000 ( 44,000) ( 6,000) P220,000
P70,000
(P15,000)
P215,000
P220,000
( 15,000) P55,000 ( 55,000)
15,000 P215,000 ( 215,000)
P220,000 ( 220,000)
P70,000
P200,000
P70,000
P200,000 (200,000)
Elias , Enrico and Ever
3.
Statement of Liquidation January 1 – 31, 31, 2009 NR from Cash Profit and loss ratio Balances before liquidation
P 80,000
Enrico P110,000
Non-cash Assets P700,000
NP to Elias P70,000
C A P I T A L Liabilities
Elias
P200,000
3/8 P60,000
Enrico 3/8 P290,000
Ever 2/8 P270,000
Chapter 6 - Partnership Liquidation - Lump-Sum Lump-Sum Suggested Answers
2.
Elias , Enrico and Ever Statement of Liquidation January 1 – 31, 31, 2009 Non-cash Assets
Cash Profit and loss ratio Balances before liquidation Sale of non-cash assets and distribution distribution of loss Payment of liquidation expenses Balances Payment of liabilities Balances Offset of loan against debit balance in the capital balance of Elias Balances Payment to partners
P 80,000 634,000 (24,000) P690,000 (200,000) P490,000
P810,000 (810,000)
P490,000 (490,000)
Note Payable to Elias
C A P I T A L Liabilities
Elias
Enrico
Ever
3/8 P60,000 (66,000) ( 9,000) (P15,000)
3/8 P290,000 ( 66,000) ( 9,000) P215,000
2/8 P270,000 ( 44,000) ( 6,000) P220,000
P70,000
(P15,000)
P215,000
P220,000
( 15,000) P55,000 ( 55,000)
15,000 P215,000 ( 215,000)
P220,000 ( 220,000)
P70,000
P200,000
P70,000
P200,000 (200,000)
Elias , Enrico and Ever
3.
Statement of Liquidation January 1 – 31, 31, 2009 NR from Cash Profit and loss ratio Balances before liquidation Sale of non-cash assets and distribution of loss
Payment of liquidation liquidation expenses Balances Payment of liabilities Balances Offset of receivable against credit balance in the capital of Enrico Balances Payment to partners Exercise 6-3
Enrico
P 80,000 634,000 (24,000) P690,000 (200,000) P490,000
P110,000
Non-cash Assets
NP to Elias
P700,000 (700,000)
C A P I T A L Liabilities
P70,000
P200,000
P110,000
P70,000
P200,000 (200,000)
P110,000
P70,000
Elias
Enrico 3/8 P290,000 ( 24,750) ( 9,000) P256,250
2/8 P270,000 ( 16,500) ( 6,000) P247,500
P26,250
P256,250
P247,500
P26,250 ( 26,250)
( 110,000) P146,250 ( 146,250)
P247,500 ( 247,500)
(110,000) P490,000 (490,000)
P70,000 ( 70,000)
Ever
3/8 P60,000 (24,750) ( 9,000) P26,250
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Case 1 Enteng and Estrel Statement of Liquidation
Balances before liquidation Sale of other assets & dist. of loss
Balances Payment of liabilities Balances
P 36,000
P 40,000
Capital______ Enteng (90%) Estrel (10%) P 80,000 P 20,000 (118,800) ( 13,200) (P 38,800) P 6,800
P 36,000
P 40,000
(P 38,800)
P 6,800
P 44,000
P 40,000
(P
36,000 2,800) 2,800
P 6,800 ( 2,800)
P 44,000 ( 44,000)
P 40,000 ( 40,000)
Cash P 40,000 268,000 P 308,000 (264,000) P 44,000
Other Assets P 400,000 (400,000)
Liabilities P 264,000 P 264,000 (264,000)
Offset of loan against debit balance in the capital of Enteng
Balances Additional loss to Estrel for the deficiency of Enteng Balances Payment to partners
Loans_______ Enteng Estrel P 36,000 P 40,000
( 36,000)
P 4,000 ( 4,000)
January 1 – 31, 2009 1.
Cash Enteng, Capital Estrel, Capital Other Assets
268,000 118,800 13,200
4.
400,000
Estrel, Capital Enteng, Capital
2,800 2,800
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Case 1 Enteng and Estrel Statement of Liquidation
Balances before liquidation Sale of other assets & dist. of loss
Balances Payment of liabilities Balances
P 36,000
P 40,000
Capital______ Enteng (90%) Estrel (10%) P 80,000 P 20,000 (118,800) ( 13,200) (P 38,800) P 6,800
P 36,000
P 40,000
(P 38,800)
P 6,800
P 44,000
P 40,000
(P
36,000 2,800) 2,800
P 6,800 ( 2,800)
P 44,000 ( 44,000)
P 40,000 ( 40,000)
Cash P 40,000 268,000 P 308,000 (264,000) P 44,000
Other Assets P 400,000 (400,000)
P 264,000 (264,000)
Offset of loan against debit balance in the capital of Enteng
Balances Additional loss to Estrel for the deficiency of Enteng Balances Payment to partners
Loans_______ Enteng Estrel P 36,000 P 40,000
Liabilities P 264,000
( 36,000)
P 4,000 ( 4,000)
January 1 – 31, 2009 1.
2.
3.
Cash Enteng, Capital Estrel, Capital Other Assets
268,000 118,800 13,200
Liabilities Cash
264,000
Enteng, Loan Enteng, Capital
4.
Estrel, Capital Enteng, Capital
2,800 2,800
400,000 5. 264,000
Estrel, Loan Estrel, Capital Cash
40,000 4,000 44,000
36,000 36,000
Case 2
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Enteng and Estrel Statement of Liquidation January 1 – 31, 2009
Balances before liquidation Sale of other assets and distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in capital account Balances Payment to partners
1.
2.
Cash P 40,000 268,000 P 308,000 (264,000) P 44,000
Other Assets P 400,000 (400,000)
Liabilities P 264,000 P 264,000 ( 264,000)
P 44,000 ( 44,000)
Cash Enteng, Capital Estrel, Capital Other Assets
268,000 92,400 39,600
Liabilities Cash
264,000
3.
400,000 4. 264,000
Loans_______ Enteng Estrel P 36,000 P 40,000 P 36,000
P 40,000
Capital______ Enteng Estrel P 80,000 P 20,000 ( 92,400) ( 39,600) (P 12,400) (P 19,600)
P 36,000
P 40,000
(P 12,400)
(12,400) P 23,600 ( 23,600)
( 19,600) P 20,400 ( 20,400)
12,400
Enteng, Loan Estrel, Loan Enteng, Capital Estrel, Capital
12,400 19,600
Enteng, Loan Estrel, Loan Cash
23,600 20,400
(P 19,600) 19,600
12,400 19,600
44,000
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Enteng and Estrel Statement of Liquidation January 1 – 31, 2009
Balances before liquidation Sale of other assets and distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in capital account Balances Payment to partners
1.
2.
Cash P 40,000 268,000 P 308,000 (264,000) P 44,000
Other Assets P 400,000 (400,000)
Loans_______ Enteng Estrel P 36,000 P 40,000
Liabilities P 264,000 P 264,000 ( 264,000)
P 44,000 ( 44,000)
Cash Enteng, Capital Estrel, Capital Other Assets
268,000 92,400 39,600
Liabilities Cash
264,000
3.
400,000 4. 264,000
P 36,000
P 40,000
Capital______ Enteng Estrel P 80,000 P 20,000 ( 92,400) ( 39,600) (P 12,400) (P 19,600)
P 36,000
P 40,000
(P 12,400)
(12,400) P 23,600 ( 23,600)
( 19,600) P 20,400 ( 20,400)
12,400
Enteng, Loan Estrel, Loan Enteng, Capital Estrel, Capital
12,400 19,600
Enteng, Loan Estrel, Loan Cash
23,600 20,400
(P 19,600) 19,600
12,400 19,600
44,000
Case 3 Enteng and Estrel
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Balances before liquidation Sale of other assets & distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in the capital of Estrel Balances
Cash P 40,000 268,000 P 308,000 (264,000) P 44,000
Statement of Liquidation January 1- 31, 2009 Other Assets Liabilities P 400,000 P 264,000 (400,000) P 264,000 ( 264,000)
Loans_______ Enteng Estrel P 36,000 P 40,000 P 36,000
P 40,000
Capital______ Enteng Estrel P 80,000 P 20,000 ( 66,000) ( 66,000) P 14,000 (P 46,000)
P 36,000
P 40,000
P 14,000
(40,000) P 44,000
P 36,000
P 44,000 ( 44,000)
P 36,000 ( 36,000)
Additional loss to Enteng for the deficiency of Estrel
Balances Payment to partners
1.
2.
3.
Cash Enteng, Capital Estrel, Capital Other Assets
268,000 66,000 66,000
Liabilities Cash
264,000
Estrel, Loan
4,
Enteng, Capital Estrel, Capital
P 14,000 ( 6,000) P 8,000 ( 8,000)
(P 46,000) 40,000 P ( 6,000) 6,000
6,000 6,000
400,000 5. 264,000 40,000
Enteng, Loan Enteng, Capital Cash
36,000 8,000 44,000
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Balances before liquidation Sale of other assets & distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in the capital of Estrel Balances
Cash P 40,000 268,000 P 308,000 (264,000) P 44,000
Statement of Liquidation January 1- 31, 2009 Other Assets Liabilities P 400,000 P 264,000 (400,000) P 264,000 ( 264,000)
Loans_______ Enteng Estrel P 36,000 P 40,000 P 36,000
P 40,000
Capital______ Enteng Estrel P 80,000 P 20,000 ( 66,000) ( 66,000) P 14,000 (P 46,000)
P 36,000
P 40,000
P 14,000
(40,000) P 44,000
P 36,000
P 44,000 ( 44,000)
P 36,000 ( 36,000)
P 14,000 ( 6,000) P 8,000 ( 8,000)
Additional loss to Enteng for the deficiency of Estrel
Balances Payment to partners
1.
2.
3.
Cash Enteng, Capital Estrel, Capital Other Assets
268,000 66,000 66,000
Liabilities Cash
264,000
Estrel, Loan Estrel, Capital
4,
Enteng, Capital Estrel, Capital
(P 46,000) 40,000 P ( 6,000) 6,000
6,000 6,000
400,000 5. 264,000
Enteng, Loan Enteng, Capital Cash
36,000 8,000 44,000
40,000 40,000
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers page
Exercise 6-4
Capital balances before liquidation Loan from partners Total partners' interest Loss on realization (P46,000 – P12,000) Balances Additional loss to partners Balances Additional loss to partners Distribution of cash to partners
Esguerra P 11,000 2,000 P 13,000 ( 13,600) (P 600) 600 ----------------
Esteban P 10,300
Estrada P 13,700
Eugenio P 9,000
P 10,300 ( 10,200) P 100 ( 300) (P 200) 200 ---------
P 13,700 ( 6,800) P 6,900 ( 200) P 6,700 ( 133) P 6,567
P 9,000 ( 3,400) P 5,600 ( 100) P 5,500 ( 67) P 5,433
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers page
Exercise 6-4
Capital balances before liquidation Loan from partners Total partners' interest Loss on realization (P46,000 – P12,000) Balances Additional loss to partners Balances Additional loss to partners Distribution of cash to partners
Esguerra P 11,000 2,000 P 13,000 ( 13,600) (P 600) 600 ----------------
Esteban P 10,300
Estrada P 13,700
Eugenio P 9,000
P 10,300 ( 10,200) P 100 ( 300) (P 200) 200 ---------
P 13,700 ( 6,800) P 6,900 ( 200) P 6,700 ( 133) P 6,567
P 9,000 ( 3,400) P 5,600 ( 100) P 5,500 ( 67) P 5,433
Chapter 6 - Partnership Liquidation - L ump-Sum Suggested Answers
page
Problem 6-1
Ester, Edna, Emma, and Eva Statement of Liquidation October 1-31,2009
Balances before liquidation Sale of asset and distribution of loss
Balances Payment of liabilities Balances Offset of receivable against credit balance in the capital account of Ester Balances Additional loss to the partners for the deficiency of Edna shared 4:1:1 Balances Offset of loan against debit balance in the capital account of Eva Balances Payment to partners Balances
P37,500
Ester (4) P381,250 ( 225,000) P156,250
C A P I T A L Edna (2) Emma (1) P 93,750 P50,000 ( 112,500) ( 56,250) (P 18,750) (P 6,250)
Eva (1) P50,000 ( 56,250) (P 6,250)
P37,500
P156,250
(P 18,750)
(P 6,250)
(P 6,250)
P 100,000
P37,500
( 62,500) P 93,750
(P 18,750)
(P 6,250)
(P 6,250)
P37,500
( 12,500) P 81,250
18,750
P 100,000
( 3,125) (P 9,375)
( 3,125) (P 9,375)
P 100,000 ( 100,000)
( 9,375) P28,125 (26,250) P 1,875
P 81,250 ( 73,750) P 7,500
P 1,875 ( 1,875)
P (
Cash P 50,000 500,000 P 550,000 ( 450,000) P 100,000
Rec'l from Ester P62,500 P62,500
Liabilities P 450,000 P 450,000 ( 450,000)
P62,500
Eva, Loan P37,500
(62,500)
Additional investment by Emma
Balances Payment to partners
Other Assets P950,000 ( 950,000)
P (
9,375 9,375 9,375)
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
9,375 (P 9,375) (P 9,375) 9,375
7,500 7,500)
page
Journal entries to record the liquidation of the partnership 1.
2.
3.
4.
Cash Ester, Capital Edna, Capital Emma, Capital Eva, Capital Other Assets
500,000 225,000 112,500 56,250 56,250
Liabilities Cash
450,000
950,000
450,000
Esters, Capital Receivable from Ester
62,500
Ester, Capital Emma, Capital Eva, Capital
12,500 3,125 3,125
62,500
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
page
Journal entries to record the liquidation of the partnership 1.
2.
3.
4.
5.
6.
7.
8.
Cash Ester, Capital Edna, Capital Emma, Capital Eva, Capital Other Assets
500,000 225,000 112,500 56,250 56,250
Liabilities Cash
450,000
950,000
450,000
Esters, Capital Receivable from Ester
62,500
Ester, Capital Emma, Capital Eva, Capital Edna, Capital
12,500 3,125 3,125
Eva, Loan Eva, Capital
9,375
Eva, Loan Ester, Capital Cash
62,500
18,750
9,375 26,250 73,750 100,000
Cash Emma, Capital
9,375
Eva, Loan Ester, Capital Cash
1,875 7,500
9,375
9,375
Chapter 6 - Partnership Liquidation - L ump-Sum Suggested Answers
Problem
1.
page
6-2
Esteban, Capital Esteban, Drawing Total interest of Esteban Cash received by Esteban Share of Esteban in the loss on liquidation
Fractional share of Esteban Total loss on liquidation
P 144,000 ( 12,000) P 132,000 111,000 P 21,000 2/10 P 105,000
3.
a.
b.
Cash Eugenio, Capital Evaristo, Capital Esteban, Capital Other Assets
463,000 52,500 31,500 21,000
Liabilities Cash
200,000
Evaristo, Loan Eugenio, Capital Evaristo, Capital Esteban, Capital Cash
40,000 79,500 102,500 111,000
c.
568,000
200,000
333,000
2. Eugenio , Evaristo and Esteban Statement of Liquidation January 1 – 31, 2009
Cash P 70,000 463,000 P 533,000 (200,000) P 333,000 ( 333,000)
Balances before liquidation Sale of other assets & distribution of loss Balances Payment of liabilities Balances Payment to partners
Other Assets P 568,000 ( 568,000)
Liabilities P 200,000 P 200,000 ( 200,000)
Evaristo, Loan P 40,000
CAPITAL Evaristo Esteban (3/10) (2/10) P 134,000 P132,000 ( 31,500) ( 21,000) P 102,500 P 111,000
P 40,000
Eugenio (5/10) P 132,000 ( 52,500) P 79,500
P 40,000 ( 40,000)
P 79,500 ( 79,500)
P 102,500 (102,500)
A N Espiritu P 8,000
P
P 8,000
C A Estrella (2) P 95,000 (36,000) P 59,000
I T Espino (2) P 60,000 (36,000) P 24,000
A L Espiritu (1) P 80,000 (18,000) P 62,000
P 8,000 (8,000)
P 59,000 (59,000)
P 24,000 ( 24,000)
P 62,000 (62,000)
P 111,000 ( 111,000)
Problem 6-3
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Case 1
Balances before liquidation Sale of assets & distribution of loss
Balances Payment of liabilities Balances Payment to partners
Cash P 20,000 250,000 P 270,000 ( 112,000) P 158,000 ( 158,000)
Estrella, Espino and Espiritu Statement of Liquidation January 1- 31, 2009 Other L O Assets Liabilities Espino P 340,000 P 112,000 P 5,000 ( 340,000) P 112,000 P 5,000 (112,000) P 5,000 (5,000)
Case 2 Estrella, Espino and Espiritu Statement of Liquidation January 1 - 31, 2009
Balances before liquidation Sale of assets & distribution of loss Balances Payment of liabilities
Cash P 20,000 185,000 P 205,000 (112,00
Other Assets P 340,000 (340,000)
Liabilities P 112,000 P 112,000 (112,000)
L O A N Espino Espiritu P 5,000 P 8,000 P 5,000
P 8,000
C Estrella (2) P 95,000 (62,000) P 33,000
A P I TA L Espino (2) Espiritu (1) P 60,000 P 80,000 ( 62,000) (31,000) (P 2,000) P 49,000
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Case 1
Balances before liquidation Sale of assets & distribution of loss
Balances Payment of liabilities Balances Payment to partners
Cash P 20,000 250,000 P 270,000 ( 112,000) P 158,000 ( 158,000)
Estrella, Espino and Espiritu Statement of Liquidation January 1- 31, 2009 Other L O Assets Liabilities Espino P 340,000 P 112,000 P 5,000 ( 340,000) P 112,000 P 5,000 (112,000) P 5,000 (5,000)
A N Espiritu P 8,000
P
P 8,000
C A Estrella (2) P 95,000 (36,000) P 59,000
I T Espino (2) P 60,000 (36,000) P 24,000
A L Espiritu (1) P 80,000 (18,000) P 62,000
P 8,000 (8,000)
P 59,000 (59,000)
P 24,000 ( 24,000)
P 62,000 (62,000)
Case 2 Estrella, Espino and Espiritu Statement of Liquidation January 1 - 31, 2009
Balances before liquidation Sale of assets & distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in the capital of Espino Balances Payment to partners
P 5,000
P 8,000
C Estrella (2) P 95,000 (62,000) P 33,000
P 93,000
P 5,000
P 8,000
P 33,000
P 93,000 ( 93,000)
( 2,000) P 3,000 (3,000)
P 8,000 (8,000)
P 33,000 (33,000)
Cash P 20,000 185,000 P 205,000 (112,00 0)
Other Assets P 340,000 (340,000)
Liabilities P 112,000 P 112,000 (112,000)
L O A N Espino Espiritu P 5,000 P 8,000
A P I TA L Espino (2) Espiritu (1) P 60,000 P 80,000 ( 62,000) (31,000) (P 2,000) P 49,000
(P 2,000)
P 49,000
2,000 P 49,000 (49,000)
Case 3
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Estrella, Espino and Espiritu Statement of Liquidation January 1 -31, 2009
Balances before liquidation Sale of assets & distribution of loss
Balances Payment of liabilities Balances Offset of loan against debit balance in the capital of Espino Balances Payment to partners Balances Additional investment by Espino Balances Payment to partners
Cash P 20,000 170,000 P 190,000 ( 112,000) P 78,000
Other Assets P 340,000 (340,000)
Liabilities P 112,000 P 112,000 (112,000)
L O Espino P 5,000
A
N Espiritu P 8,000
P 5,000
P 8,000
C Estrella (2) P 95,000 (68,000) P 27,000
P 5,000
P 8,000
P 27,000
P 8,000 ( 8,000)
P 27,000 ( 25,000) P 2,000
( 5,000) P 78,000 ( 78,000)
3,000 P 3,000 ( 3,000)
A
P I T Espino (2) P 60,000 ( 68,000) (P 8,000) (P 8,000)
5,000 (P 3,000) (P 3,000)
A
L Espiritu (1) P 80,000 (34,000) P 46,000 P 46,000
P 46,000 ( 45,000) P 1,000
3,000 (8,000)
P 2,000 ( 2,000)
P
1,000 ( 1,000)
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Estrella, Espino and Espiritu Statement of Liquidation January 1 -31, 2009
Balances before liquidation Sale of assets & distribution of loss
Balances Payment of liabilities Balances Offset of loan against debit balance in the capital of Espino Balances Payment to partners Balances Additional investment by Espino Balances Payment to partners
Cash P 20,000 170,000 P 190,000 ( 112,000) P 78,000
Other Assets P 340,000 (340,000)
Liabilities P 112,000 P 112,000 (112,000)
L O Espino P 5,000
A
N Espiritu P 8,000
P 5,000
P 8,000
C Estrella (2) P 95,000 (68,000) P 27,000
P 5,000
P 8,000
P 27,000
P 8,000 ( 8,000)
P 27,000 ( 25,000) P 2,000
( 5,000) P 78,000 ( 78,000)
3,000 P 3,000 ( 3,000)
A
P I T Espino (2) P 60,000 ( 68,000) (P 8,000) (P 8,000)
5,000 (P 3,000) (P 3,000)
A
L Espiritu (1) P 80,000 (34,000) P 46,000 P 46,000
P 46,000 ( 45,000) P 1,000
3,000 P 2,000 ( 2,000)
(8,000)
P
Estrella, Espino and Espiritu Schedule to Accompany Statement of Liquidation Amounts to be Paid to Partners
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Capital balances before cash distribution Add loan balance Total partners' interest Restricted interest - possible loss to Estrella and Espiritu in the ratio of 2:1 if Espino fails to pay his deficiency Free interests - amounts to be paid to partners Payment to apply on: Loan Capital Cash distribution
Estrella (2) P 27,000
Espino (2) (P 3,000)
P 27,000
(P 3,000)
( 2,000) P 25,000
P 25,000 P 25,000
3,000
Espiritu (1) P 46,000 8,000 P 54,000 ( 1,000) P 53,000 P 8,000 45,000 P 53,000
1,000 ( 1,000)
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Capital balances before cash distribution Add loan balance Total partners' interest Restricted interest - possible loss to Estrella and Espiritu in the ratio of 2:1 if Espino fails to pay his deficiency Free interests - amounts to be paid to partners Payment to apply on: Loan Capital Cash distribution
Estrella (2) P 27,000
Espino (2) (P 3,000)
P 27,000
(P 3,000)
( 2,000) P 25,000
3,000
Espiritu (1) P 46,000 8,000 P 54,000 ( 1,000) P 53,000 P 8,000 45,000 P 53,000
P 25,000 P 25,000
Case 4 Estrella, Espino and Espiritu Statement of Liquidation January 1 – 31, 2009
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Other Balances before liquidation Sale of assets & distribution of loss
Cash P 20,000
Assets P 340,000
125,000
( 340,000)
LOAN Liabilities P 112,000
Balances
P 145,000
P 112,000
Payment of liabilities
( 112,000)
(112,000)
Balances
P 33,000
Offset of loan against debit balance in the capital of Espino Balances
P 33,000
Payment to partners
Espiritu P 8,000
Estrella (2) P 95,000
( 33,000)
(43,000)
P 5,000
P 8,000
P 9,000
(P26,000)
P 37,000
P 5,000
P 8,000
P 9,000
(P26,000)
P 37,000
P 8,000
P 9,000
5,000 (P21,000)
P 37,000
( 8,000)
( 25,000)
21,000 P 21,000
Payment to partners
( 21,000)
Espiritu (1) P 80,000
(86,000)
P 9,000
Balances
Espino (2) P 60,000
(86,000)
( 5,000)
Balances Additional investment by Espino
Espino P 5,000
CAPTIAL
(P21,000)
P 12,000
21,000 P 9,000 ( 9,000)
P 12,000 ( 12,000)
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Other Balances before liquidation Sale of assets & distribution of loss
Cash P 20,000
Assets P 340,000
125,000
( 340,000)
LOAN Liabilities P 112,000
Balances
P 145,000
P 112,000
Payment of liabilities
( 112,000)
(112,000)
Balances
P 33,000
Offset of loan against debit balance in the capital of Espino Balances
P 33,000
Payment to partners
Espino P 5,000
CAPTIAL Espiritu P 8,000
Estrella (2) P 95,000 (86,000)
(86,000)
(43,000)
P 8,000
P 9,000
(P26,000)
P 37,000
P 5,000
P 8,000
P 9,000
(P26,000)
P 37,000
P 8,000
P 9,000
5,000 (P21,000)
P 37,000
( 5,000) ( 33,000)
( 8,000)
( 25,000) P 9,000
(P21,000)
21,000
Balances
P 21,000
Payment to partners
( 21,000)
Espiritu (1) P 80,000
P 5,000
Balances Additional investment by Espino
Espino (2) P 60,000
P 12,000
21,000 P 9,000 ( 9,000)
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
P 12,000 ( 12,000)
page
Estrella, Espino and Espiritu Schedule to Accompany Statement of Liquidation Amount to be Paid to Partners
Capital balances before cash distribution Add loan balance Total partners' interest Restricted interest - possible loss to Estrella and Espiritu in the ratio of 2:1 if Espino fails to pay his deficiency Balances Restricted interest - possible loss to Espiritu if Estrella fails to pay his deficiency Free interests - amounts to be paid to partners Payment to apply on: Loan Capital
Estrella (2) P 9,000
Espino (2) (P 21,000)
P 9,000
(P 21,000)
(14,000)
21,000
Espiritu (1) P 37,000 8,000 P 45,000 ( 7,000)
(P 5,000)
P 38,000
5,000
( 5,000) P 33,000 P 8,000 25,000
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
page
Estrella, Espino and Espiritu Schedule to Accompany Statement of Liquidation Amount to be Paid to Partners
Capital balances before cash distribution Add loan balance Total partners' interest Restricted interest - possible loss to Estrella and Espiritu in the ratio of 2:1 if Espino fails to pay his deficiency Balances Restricted interest - possible loss to Espiritu if Estrella fails to pay his deficiency Free interests - amounts to be paid to partners Payment to apply on: Loan Capital Cash distribution
Estrella (2) P 9,000
Espino (2) (P 21,000)
P 9,000
(P 21,000)
(14,000)
21,000
Espiritu (1) P 37,000 8,000 P 45,000 ( 7,000)
(P 5,000)
P 38,000
5,000
( 5,000) P 33,000 P 8,000 25,000 P 33,000
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Case 5
Balances before liquidation Sale of assets & distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in the capital of Espino Balances Additional investment by Estrella and Espino Balances Payment of liabilities and payment to partners
Cash P 20,000 90,000 P 110,000 ( 110,000)
Estrella, Espino and Espiritu Statement of Liquidation January 1 - 31, 2009 Other Other LOAN Assets Liabilities Espino Espiritu P 340,000 P 112,000 P 5,000 P 8,000 (340,000) P 112,000 P 5,000 P 8,000 (110,000) P 2,000 P 5,000 P 8,000
CAPITAL Estrella (2) Espino (2) Espiritu (1) P 95,000 P 60,000 P 80,000 (100,000) (100,000) (50,000) (P 5,000) (P 40,000) P 30,000 (P 5,000)
(P 40,000)
P 30,000
(P 5,000) 5,000
5,000 (P 35,000) 35,000
P 30,000
( 5,000) P
2,000
P 8,000
40,000 P 40,000 ( 40,000)
P 2,000 ( 2,000)
P 8,000 (8,000)
P 30,000 ( 30,000)
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Problem 6 – 4 1. Asset
Book Value
Accounts Receivable Merchandise Inventory Prepaid Advertising Machinery and Equipment
P 60,000 50,000 2,000 40,000 P152,000
Cash Realized P64,000 25,000 800 24,000 P113,800
(Gain) Loss (P 4,000) 25,000 1,200 16,000 P 38,200
2. Evasco-Ellor Partnership Statement of Liquidation January 1 – 31, 2009 Cash Balances before liquidation
P 1,000
Other Assets P152,000
Accounts Payable P20,000
Notes Payable P 86,000
CAPITAL Evasco (4) Ellor (6) P 30,000
P 17,000
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Problem 6 – 4 1. Asset
Book Value
Accounts Receivable Merchandise Inventory Prepaid Advertising Machinery and Equipment
P 60,000 50,000 2,000 40,000 P152,000
Cash Realized P64,000 25,000 800 24,000 P113,800
(Gain) Loss (P 4,000) 25,000 1,200 16,000 P 38,200
2. Evasco-Ellor Partnership Statement of Liquidation January 1 – 31, 2009 Cash Balances before liquidation Sale of assets and distribution of loss Balances Unrecorded liabilities Balances Payment of liabilities Balances Additional investment of Ellor Balances Additional loss to Evasco for the deficiency of Ellor Balances Payment to Evasco
Other Assets
P 1,000
P152,000
113,800 P114,800
(152,000)
Accounts Payable
CAPITAL Evasco (4) Ellor (6) P 30,000
P 17,000
(15,280) P 14,720 ( 1,200) P 13,520
(22,920) (P 5,920) ( 1,800) (P 7,720)
P 13,520
(P 7,720)
4,000 P 9,800
P 13,520
4,000 (P 3,720)
P 9,800 ( 9,800)
( 3,720) P 9,800 ( 9,800)
P114,800 (109,000) P 5,800
P20,000
Notes Payable
P20,000 2,000 P22,000 (22,000)
P 86,000
P 86,000 1,000 P 87,000 (87,000)
3,720
3. a.
b.
Cash Evasco, Capital Ellor, Capital Allowance for Uncollectible Accounts Accumulated Depreciation Accounts Receivable Merchandise Inventory Prepaid Advertising Machinery and Equipment Evasco, Capital Ellor, Capital
113,800 15,280 22,920 20,000 60,000 80,000 50,000 2,000 100,000 1,200 1,800
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Accounts Payable Notes Payable c.
d.
e.
f.
2,000 1,000
Accounts Payable Notes Payable Cash
22,000 87,000
Cash Ellor, Capital
4,000
Evasco, Capital Ellor, Capital
3,720
Evasco, Capital Cash
9,800
109,000
4,000
3,720
9,800 MULTIPLE CHOICE
1.
C
2.
A
3.
B
Total assets = Total capital + Total liabilities = P60,000 + P 3,000 Less Cash = P3,000 + P22,200 - P23,200 Book value of noncash assets
P 63,000 ___2,000 P 61,000
P61,000 - P23,200 = P37,800 x 3/21
P 5,400 Espina
Capital bal. before liquidation
Espinosa 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)
4,400
( 3,920)
( 5,880)
5,400
Cash payments to partners C
5.
A
7.
D
A
P 8,320
Total capital Less Cash left for distribution Loss on realization
Capital bal. before liquidation Loss on realization Balances Addl loss to E1 & E2 for the deficiency of E3 Cash payment to E1 6.
Estrellita
P1,000
Add'l loss to Espinosa and Esteban
4.
Esteban
P70,000 28,000 P 42,000 E1 P 40,000 ( 21,000) P 19,000 ( 1,200) P 17,800
E2 P 25,000 (14,000) P 11,000 ( 800)
Total capital (P360,000 + P72,000) Total liabilities Total loss on liquidation
E3 P 5,000 ( 7,000) P( 2,000) 2,000
P432,000 84,000 P516,000 Espera
Elor
Este
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Capital balances Drawing Distribution of net income Loss on liquidation Balances Additional loss to Elor and Este Cash to be distributed to Este 8.
P 100,000 ( 60,000) 24,000 (172,000) (P108,000) 108,000
B Balances before liquidation Loss from sale of non-cash assets Balances Additional loss for deficiency of Escano Balances Add Loan balance Cash to be received by Ender
9.
Escano P10,000 ( 16,000) (P 6,000) 6,000
B Balances before liquidation Loss on liquidation - P45,000 Balances Additional loss for deficiency of Escano (P8,000 - P5,000 = P3,000) Payment to Evelo
10.
D
11.
C
Capital of Echo before liquidation Share in loss from liquidation (P60,000 x 6/10) Amount to be received by Echo
12.
A
Echo Capital balances P50,000 Loss on realization (12,000) P38,000 Addl loss for the deficiency of Elma (13,000) Amt to be received by Egay
13. 14. 15.
A A B
P
80,000 ( 40,000) 24,000 (172,000) P(108,000) ( 54,000)
Ender P35,000 ( 12,000) P23,000 ( 3,000) P20,000 14,000 P34,000
Evelo P41,000 ( 12,000) P29,000 ( 3,000) P26,000
Escano P10,000 ( 18,000) (P 8,000)
Ender P35,000 ( 13,500) P21,500
Evelo P41,000 ( 13,500) P27,500
3,000
( 1,500)
( 1,500) 26,000
Cash to be received by Escano Escano capital before liquidation Escano's share in the gain on realization Escano 's profit share Total gain on realization Book value of non-cash assets Cash realized from sale of non-cash assets
Capital and loan balances Loss on realization
Esmer P 50,000 ( 112,000)
P 300,000 (20,000) 24,000 (172,000) P 132,000 ( 54,000) P 78,000
P12,000 10,000 P 2,000 40% P 5,000 70,000 P75,000 P50,000 (36,000) P14,000 Egay P50,000 (12,000) P38,000 (13,000) P25,000
Estrel P 50,000 ( 56,000)
Elma P10,000 (36,000) (P26,000) 26,000
Ellea P50,000 ( 56,000)
Elmer P 75,000 ( 56,000)
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Balances (P 62,000) (P 6,000) Add'l loss for the def of Estrel ( 3,000) 6,000 Amount to be received from the partnership Personal assets Amount available to personal creditors of Elmer
(P 6,000) ( 1,500)
P 19,000 ( 1,500) P 17,500 200,000 P217,500
TEST MATERIALS Test Material No. 21 1. F 11. T 2. F 12. T 3. T 13. F 4. T 14. T 5. T 15. T 6. F 16. F 7. T 17. T 8. T 18. F 9. F 19. T 10. T 20. T
Test Material No. 22 1. Loan payable 11. Marshaling of assets 2. Lump-sum liquidation 12. Capital deficiency 3. Right of offset 13. Gain on realization 4. Liquidation 14. Liquidation expenses 5. Realization 15. Loss to the other partner 6. Loan rec'l from partner 16. Capital balance 7. Installment liquidation 17. Personal creditors 8. Deficient partner 18. Additional investment 9. Statement of liquidation 19. Addition to capital 10. Insolvent partner 20. Profit and loss ratio
Test Material No. 23
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.
A D D C D C B A C D D A C A C A
17.
C
18.
A
P100,000/4 = P25,000 P120,000 x 1/3 = P40,000; P120,000 x 2/3 = P80,000 P75,000 x 2/5 = P30,000; P75,000 x 3/5 = P45,000 P60,000 + P90,000 - P30,000 = P120,000 Emy Ely Capital balances before liquidation P280,000 P160,000 Distribution of loss on realization ( 70,000) ( 42,000) Balances P210,000 P118,000 Additional loss for the deficiency of Evy ( 5,000) ( 3,000) Balances P205,000 P115,000 Cash payments to partners ( 205,000) ( 115,000) P320,000 - (P120,000 x 4/10) = P272,000
Capital balances before liquidation Distribution of loss on realization
Eden P320,000 ( 144,000)
Elisa P 90,000 ( 180,000)
Evy P20,000 ( 28,000) (P 8,000) 8,000
Elma P110,000 ( 36,000)
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Balances Additional loss for the deficiency of Elisa Payment to Elma 19.
C Capital balances Loan Cash payment to partners
20.
D
P176,000
(P 90,000)
( 72,000)
Estacio (P21,000) 45,000 P24,000
90,000
P 74,000 ( 18,000) P 56,000 Estioco P21,000 P21,000
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Test Material 24 Problem A
Cash Balances before liquidation Sale of assets and dist. of loss Balances Payment of liabilities Balances Offset of loan against deficiency of Empoy Balances Additional loss to Estoy and Empoy for the deficiency of Eloy Balances Additional investment by Empoy and Eloy Balances Payment to Estoy
P 25,000 260,000 P 285,000 ( 240,000) P 45,000
EEE Partnership Statement of Liquidation January 1 – 31, 2009 Non-cash Accounts Loan Payable to Assets Payable Empoy
P 475,000 P 240,000 (475,000) P 240,000 ( 240,000)
P 45,000
P
30,000
Estoy
CAPITAL Empoy
Eloy
P 50,000 (86,000) (P36,000)
P 60,000 (86,000) (P 26,000)
P
30,000
P120,000 (43,000) P 77,000
P
30,000
P 77,000
(P36,000)
(P 26,000)
(
30,000) P 77,000
30,000 (P 6,000)
(P26,000)
( 667) (P 6,667)
1,000 (P25,000)
6,667
25,000
(
P 45,000 31,667 P 76,667 ( 76,667)
333) P 76,667
P 76,667 (76,667)
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
2. a,
Cash
Estoy, Capital Empoy, Capital Eloy, Capital
260,000 43,000 86,000 86,000
Accounts Receivable Inventories Property, Plant and Equipment b.
c.
d.
Accounts Payable Cash Loan Payable to Empoy Empoy, Capital
Estoy, Capital Empoy Capital Eloy, Capital
75,000 100 000 300,000 240,000 240,000 30,000 30,000 333 667 1,000
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
2. a,
Cash
260,000 43,000 86,000 86,000
Estoy, Capital Empoy, Capital Eloy, Capital Accounts Receivable Inventories Property, Plant and Equipment b.
c.
d.
e.
f.
75,000 100 000 300,000
Accounts Payable Cash
240,000 240,000 30,000
Loan Payable to Empoy Empoy, Capital
30,000 333 667
Estoy, Capital Empoy Capital Eloy, Capital
1,000
Cash Empoy, Capital Eloy, Capital
31,667
Estoy, Capital
76,667
6,667 25,000
Cash
76,667
3.
Personal assets Applied to Personal liabilities Partnership liabilities Balances
Estoy
Empoy
Eloy
P250,000
P300,000
P350,000
( 230,000)
( 240,000) ( 6,667) P 53,333
( 325,000) ( 25,000) ---
P 20,000
Problem B
1. a.
Escobar
Elloso
Echaves
Chapter 6 - Partnership Liquidation - Lump-Sum Suggested Answers
Capital balances before liquidation (Receivables) Payables Total partners' interest Loss on realization Balances Additional investment of Escobar Payment to partners b. Capital balances before liquidation (Receivables) Payables Total partners' interest Loss on realization Balances Additional loss to Elloso and Echaves Balances Additional investment of Escobar Payment to partners c. Capital balances before liquidation (Receivables) Payables Total partners' interest Loss on realization Liquidation expenses Balances Additional loss to Elloso and Echaves Payment to partners 2.
P90,000 ( 75,000) P15,000 ( 32,200) (P17,200) 17,200
Escobar P90,000 ( 75,000) P15,000 ( 44,200) (P29,200) 25,200 (P 4,000) 4,000
Escobar P90,000 ( 75,000) P15,000 ( 44,200) ( 9,950) (P39,150) 39,150
P 90,000 40,000 P130,000 ( 32,200) P 97,800
P 30,000 60,000 P 90,000 ( 16,100) P 73,900
( 97,800)
( 73,900)
Elloso P 90,000 40,000 P130,000 ( 44,200) P 85,800 ( 16,800) P 69,000
Echaves P 30,000 60,000 P 90,000 ( 22,100) P 67,900 ( 8,400) P 59,500
( 69,000)
( 59,500)
Elloso P 90,000 40,000 P130,000 ( 44,200) ( 9,950) P 75,850 ( 26,100) ( 49,750)
Echaves P 30,000 60,000 P 90,000 ( 22,100) ( 4,975) P 62,925 ( 13,050) ( 49,875)
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.
