Installment Liquidation Problems:

Full Payment of Liabilities

On March 30, 2020, Chen, Jess and Franz partnership had the following fiscal year-end balance
sheet:

Cash P 6,000 Accounts Payable P 10,500

Accounts receivable 9,000 Loan from Franz 7,500
Inventory 21,000 Chen, Capital (40%) 21,000
Plant-assets-net 19,500 Jess, Capital (20%) 15,000
Loan to Chen 7,500 Franz, Capital (40%) 9,000
Total Assets P 63,000 Total Liab & Equity P 63,000

The percentages shown are the residual profit and loss sharing ratios. The partners dissolved
the partnership on January 1, 2020 and began the liquidation process. The partners set the
policy of setting aside P3,000 cash for contingent expenses every month until prior to the last
distribution period. The partnership strictly followed the liquidation process mandated by law.

During January, the following realization of assets and payment of liquidation expenses
occurred:
a. Accounts receivable of P6,000 was collected and the balance is deemed as bad debt.
b. All inventory was sold for P15,000.
c. Liquidation expense of P1,500 was paid.

During February the following realization of assets and payment of liquidation expenses
occurred:
a. The plant assets was sold for P15,000.
b. Liquidation expenses of P2,000 was paid.

REQUIRED:
1. Using Cash Priority Program, how much cash would Jess receive from the cash that is
available for distribution on January 30, 2020?
2. Using Schedule of Safe Payment, how much cash would Chen receive from the cash that is
available for distribution on January 30, 2020?
3. Using Cash Priority Program, how much cash would Franz receive from the cash that is
available for distribution on February 28, 2020?
4. Using Schedule of Safe Payment, how much cash would Jess receive from the cash that is
available for distribution on February 28, 2020?

With Partial Payment of Liabilities

Mhel, Charlie and Justine are partners who share profits and losses in the ratio of 40:30:30,
respectively. On January 1, 2020, they decided to liquidate the partnership and the statement
of financial position was prepared as follows:

ASSETS LIABILITIES & CAPITAL

Cash 20,000 Liabilities 40,000
Non-cash Assets 65,000 Charlie, Loan 5,000
Justine, Loan 7,500
 Mhel, Capital 10,000
Charlie, Capital 10,000
___________ , Capital (40%) _____12,500
Total Assets 85,000 Total Liab & Equity P 85,000

In January, Noncash asset with book value of P35,000 was sold for P30,000 to a Mr.
Thompson; liquidation expense of P5,000 was paid and only 40% of the outstanding liabilities
were paid in January. The partnership withholds cash of P2,500 for next month’s liquidation
expenses.

In February, noncash assets with book value of P15,000 was sold to Mr. James but a loss on
realization of P3,000 was recognized, liquidation expense of P2,750 was paid and only P10,000
recorded liabilities were paid during the month. The partnership withholds cash of P2,000 for
next month’s liquidation expenses and P2,750 in anticipation for future unrecorded liability.

In March, the remaining Noncash assets were sold to Ms. Smith for P12,500. A liquidation
expense of P5,500 was paid. He remaining recorded liability including P2,000 unrecorded
liabilities were paid during the month to end the liquidation process.

Required:
1. How much is the amount of cash available for distribution for the month of January,
February and March?
2. How much should Mhel, Charlie and Justine receive in the month of January?
3. How much should Mhel, Charlie and Justine receive in the month of February?
4. How much should Mhel, Charlie and Justine receive in the month of March ?

On January 1, 2021, the partners of ABC Co. decided to liquidate their partnership. The
following information was made available:

Cash P 20,000
Accounts receivable 60,000
Inventory 120,000
Equipment 300,000
Total P500,000

Accounts payable P 30,000

Payable to B 20,000
A, Capital (20%) 100,000
B, Capital (30%) 150,000
C, Capital (50%) 200,000
Total P500,000

Use the fact pattern above but assume that the partnership will be liquidated over a prolonged
period of time. Distributions to owners shall be made as cash becomes available. Information
on the conversion of noncash assets is as follows:
a. 75% of the accounts receivable was collected for only P30,000.
b. Half of the inventory was sold for P40,000.
c. Equipment with carrying amount of P200,000 was sold for P120,000.
d. P2,000 liquidation expenses were paid. Estimated future liquidation expenses totaled
P1,000.
e. P9,000 cash was retained in the business for potential unrecorded liabilities and anticipated
expenses.

Requirement: Determine the amounts of cash distributed to the partners from the partial
realization of partnership’s assets.