Problem 1: Lump Sum Liquidation

A, B, C and D are partners who shared profits and losses in the ratio of 4:2:1:1. The statement of financial
position of the partnership prior to liquidation is presented below:
Assets Liabilities and Capital
Cash 125,000 Liabilities 1,125,000
Non-cash Assets 2,375,000 D, loan 93,750
Receivable from A 156,250 A, capital 953,125
B, capital 234,375
C, capital 125,000
D, capital 125,000
Total 2,656,250 Total 2,656,250

The non-cash assets are sold for P1,250,000 and available cash is distributed to the proper parties. B is
personally insolvent, but the other partners are able to meet any personal indebtedness to the partnership.
The solvent partners make appropriate contributions to the partnership, and this cash is distributed in final
settlement to partners.

Required: Prepare journal entries and statement of liquidation.

Problem 2: Installment Liquidation

The balance sheet for Paraiso and Ligeralde Partnership on June 1, 2003 before liquidation is as follows:
Assets Liabilities & Capital
Cash 300,000 Liabilities 1,200,000
Other Assets 3,300,000 Paraiso ,capital 1,350,000
Ligeralde, capital 1,050,000
Total Assets 3,600,000 Total Liabilities & Capital 3,600,000

Partners Paraiso and Ligeralde share profits and losses 60:40, respectively. In June, assets with a book
value of P1, 320,000 were sold for P1, 080,000, creditors were paid in full, and P120,000 was paid to
partners. In July, assets with book value of P600,000 were sold for P720,000, liquidation expenses of
P30,000 were paid and cash of P750,000 was paid to partners. In August, the remaining assets were sold
for P1,350,000.

Required:
1. How much cash should Ligeralde receive in June?
2. How much cash should Paraiso receive in July?
3. How much cash should Ligeralde and Paraiso receive in August?
Problem 3: Baby, Fred and Allan decided to dissolve their partnership on November 30, 2020. Their
profit and loss ratio are as follows:

Capital P&L ratio

Baby 400,000 40%
Fred 480,000 30%
Allan 160,000 30%

The net income from January 1, 2020 to November 30 is P352,000. On November 30, the cash balance is
P320,000 and that of liabilities is P720,000. Baby is to receive P441,600 in the settlement of his interest.

The total loss on realization is:

a. 248,000 c. 99,200
b. 228,000 d. 220,800

The amount to be realized from the sale of non-cash assets is:

a. 1,496,000 c. 220,800
b. 2,040,000 d. 1,544,000

Problem 4: Prior to the beginning of liquidation, the liabilities and partners’ capital of ABC Company, whose
partners share profit and losses equally, consisted of Liabilities P60,000; Loan payable to C P21,000; A,
capital P30,000; B P60,000 and C P39,000. If after realization of all non-cash assets and payment of all
outside liabilities, P60,000 cash was available for distribution to partners on February 1, 2020, partner C
should receive:
a. P60,000 c. P30,000
b. P39,000 d. P21,000