Chapter 3

PARTNERSHIPS - LIQUIDATION

PROBLEM 3 - 1

(a)

A, B, and C
Statement of Liquidation
December 31, 20x7

Other Trade B, C, A, B, C,
Cash Assets Creditors Loan Loan Capital Capital Capital
(40%) (40%) (20%)
Balance before liquidation 20,000 340,000 112,000 5,000 8,000 95,000 60,000 80,000
Sale of assets and distribution of loss 250,000 (340,000) (36,000) (36,000) (18,000)
270,000 5,000 8,000 59,000 24,000 62,000
Payment to creditors (112,000) (112,000)
158,000 5,000 8,000 59,000 24,000 62,000
Payment to partners (158,000) (5,000) (8,000) (59,000) (24,000) (62,000)

(b)

A, B, and C
Statement of Liquidation
December 31, 20x7

Other Trade B, C, A, B, C,
Cash Assets Creditors Loan Loan Capital Capital Capital
(40%) (40%) (20%)
Balance before liquidation 20,000 340,000 112,000 5,000 8,000 95,000 60,000 80,000
Sale of assets and distribution of loss 185,000 (340,000) (62,000) (62,000) (31,000)
205,000 112,000 5,000 8,000 33,000 (2,000) 49,000
Payment to creditors (112,000) (112,000)
93,000 5,000 8,000 33,000 (2,000) 49,000
Offset of B’s loan against debit
balance in capital (2,000) 2,000
93,000 3,000 8,000 33,000 49,000
Payment to partners (93,000) (3,000) (8,000) (33,000) (49,000)

(c)

43
 A, B, and C
Statement of Liquidation
December 31, 20x7
Other Trade B, C, A, B, C,
Cash Assets Creditors Loan Loan Capital Capital Capital
(40%) (40%) (20%)
Balance before liquidation 20,000 340,000 112,000 5,000 8,000 95,000 60,000 80,000
Sale of assets and distribution of loss 170,000 (340,000) (68,000) (68,000) (34,000)
190,000 112,000 5,000 8,000 27,000 (8,000) 46,000
Payment to creditors (112,000) (112,000)
78,000 5,000 8,000 27,000 (8,000) 46,000
Offset of B’s loan against debit
balance in capital (5,000) 5,000
78,000 8,000 27,000 (3,000) 46,000
Payment to partners (see schedule) (78,000) (8,000) (25,000) (45,000)
2,000 (3,000) 1,000
Additional investment by B 3,000 3,000
3,000 2,000 1,000
Payment to partners (3,000) (2,000) (1,000)

A, B, and C
Schedule to Accompany Statement of Liquidation
Amounts to be Paid to Partners
December 31, 20x7

A (40%) B (40%) C (20%)

Capital balances before distribution of cash 27,000 (3,000) 46,000
Add loan balances 8,000
27,000 (3,000) 54,000
Restricted interest - possible loss of P3,000 to A and C (2,000) 3,000 (1,000)
Free interest 25,000 53,000

Payment to apply on loan 8,000

Payment to apply on capitals 25,000 45,000
Total cash distribution 25,000 53,000

A, B, and C
Statement of Liquidation
December 31, 20x7

(d)

Other Trade B, C, A, B, C,
Cash Assets Creditors Loan Loan Capital Capital Capital
(40%) (40%) (20%)
Balance before liquidation 20,000 340,000 112,000 5,000 8,000 95,000 60,000 80,000
Sale of assets and distribution of loss 125,000 (340,000) (86,000) (86,000) (43,000)
145,000 112,000 5,000 8,000 9,000 (26,000) 37,000
Payment to creditors (112,000) (112,000)
33,000 5,000 8,000 9,000 (26,000) 37,000
Offset of B’s loan (5,000) 5,000
33,000 8,000 9,000 (21,000) 37,000
Payment to partners (see schedule) (33,000) (8,000) (25,000)
9,000 (21,000) 12,000
Additional investment by B 21,000 21,000
21,000 9,000 12,000
Payment to partners (21,000) (9,000) (12,000)

A, B, and C
Schedule to Accompany Statement of Liquidation

44
 Amounts to be Paid to Partners
December 31, 20x7

A (40%) B, (40%) C, (20%)

Capital balances before distribution of cash 9,000 (21,000) 37,000
Add loan balance 8,000
Total interests 9,000 (21,000) 45,000
Restricted interest- possible loss of P21,000 to A and C (14,000) 21,000 (7,000)
(5,000) 38,000
Restricted interests-additional possible loss of P5,000 to 5,000 (5,000)
C
Free interest 33,000

Payment to apply on loan 8,000

Payment to apply on capital 25,000
Total cash distribution 33,000

PROBLEM 3-1 Concluded

(e)

A, B, and C
Statement of Liquidation
December 31, 20x7

Other Trade B, C, A, B, C,
Cash Assets Creditors Loan Loan Capital Capital Capital
(40%) (40%) (20%)
Balance before liquidation 20,000 340,000 112,000 5,000 8,000 95,000 60,000 80,000
Sale of assets and distribution of loss 90,000 (340,000) (100,000) (100,000) (50,000)
110,000 112,000 5,000 8,000 (5,000) (40,000) 30,000
Payment to creditors (110,000) (110,000)
2,000 5,000 8,000 (5,000) (40,000) 30,000
Offset of B’s loan (5,000) 5,000
2,000 8,000 (5,000) (35,000) 30,000
Investment by A and B 40,000 5,000 35,000
40,000 2,000 8,000 30,000
Payment to creditors (2,000) (2,000)
38,000 8,000 30,000
Payment to partners (38,000) (8,000) (30,000)

PROBLEM 3-2

CARLOS, DECENA, AND ESTON

Statement of Changes in Partners’ Capital Accounts
July 1, 20x7 to February 10, 20x8

Carlos Decena Eston Total

Investment, July 1, 20x7 P25,000 P25,000 P25,000 P75,000
Add loan from Decena 20,000 20,000
Deduct advance made to Carlos (10,000) (10,000)
Loss for 20x7:
Loss on asset realization P50,000
Special compensation to Eston 2,500 2,500 2,500
Interest credited to Decena 400 400 400

45
 P52,900
Deduct interest charged to Carlos 250 (250) (250)
Total loss, distributed equally P52,650 (17,550) (17,550) (17,550) (52,650)
(P2,800) P27,850 P9,950 P35,000
Distribution of cash Dec. 31, 20x7,
leaving capitals of Decena and
Eston with balances that will
enable them to absorb equally
possible loss from Carlos’ (26,450) (8,550) (35,000)
deficiency
(P2,800) P1,400 P1,400
Payment by Carlos to Decena and
Eston on February 10, 20x8 in final
settlement 2,800 (1,400) (1,400)

PROBLEM 3-3
(1)
A, B, C, and D
Statement of Liquidation
April 30, 20x7

Cash Other Receivable Liabilities D, Loan A, B, C, D,Capit

Capital Capital Capital al
Assets from A (4) (2) (1) (1)
Balances before 20,000 380,000 25,000 180,000 12,500 155,000 37,500 20,000 20,000
liquidation
Sale of assets and
distribu-
tion of loss 200,000 (380,000) (90,000) (45,000) (22,500) (22,500)
220,000 25,000 180,000 12,500 65,000 (7,500) (2,500) (2,500)
Payment to creditors (180,000) (180,000)
40,000 25,000 12,500 65,000 (7,500) (2,500) (2,500)
Offset D loan against
capital deficiency (2,500) 2,500
40,000 25,000 10,000 65,000 (7,500) (2,500)
Offset receivable from A
against capital balance (25,000) (25,000)
40,000 10,000 40,000 (7,500) (2,500)
Distribution of cash to
partners (See Schedule) (40,000) (8,000) (32,000)
2,000 8,000 (7,500) (2,500)
Loss to A, C, and D from
insolvency of B distribu-
ted in the ratio 4:1:1 (5,000) 7,500 (1,250) (1,250)
2,000 3,000 (3,750) (1,250)
offset D loan against
capital deficiency (1,250) 1,250
750 3,000 (3,750)
Additional investment by 3,750 3,750
C
3,750 750 3,000
Distribution of cash to
Partners (3,750) (750) (3,000)

46
 A, B, C, and D
Schedule to Accompany Statement of Liquidation
Amounts to be Paid to Partners
April 30, 20x7

A B C D
(4) (2) (1) (1)
Capital balances before distribution of cash 40,000 (7,500) (2,500)
Add loan balance 10,000
40,000 (7,500) (2,500) 10,000
Restricted interests-deficiency of partner B
of P7,500 distributed to A,C and D in the
ratio 4:1:1 (5,000) 7,500 (1,250) (1,250)
35,000 (3,750) 8,750
Restricted interests-deficiency of partner C
of P3,750 distributed to A, and D in the
ratio of 4:1 (3,000) 3,750 (750)
Free interests 32,000 8,000
Payment to apply on loan
Payment to apply on capital 32,000 8,000
Total cash distribution 32,000 8,000
(2)

Cash 200,000
A, Capital 90,000
B, Capital 45,000
C, Capital 22,500
D, Capital 22,500
Other Assets 380,000

Liabilities 180,000
Cash 180,000

D, Loan 2,500
D, Capital 2,500

A, Capital 25,000
Receivable from A 25,000

A, Capital 32,000
D, Loan 8,000
Cash 40,000

A, Capital 5,000
C, Capital 1,250
D, Capital 1,250
B, Capital 7,500

D, Loan 1,250
D, Capital 1,250

Cash 3,750
C, Capital 3,750

A, Capital 3,000
D, Loan 750
Cash 3,750

PROBLEM 3-4

47
Huerta, Capital 150
Profit and Loss 150
Interest charged Huerta, P5,000 at 6% for six months.

Profit and Loss 12,000

Gorgonia, Capital 12,000
Salary allowed Gorgonia for year.

Gorgonia,Capital 9,375
Huerta, Capital 5,625
Profit and Loss 15,000
Loss for year after interest and salary allowances P 15,000, distributed in profit loss ratio 5:3
and

Gorgonio, Capital 14,000

Loss on Asset Realization 3,500
Merchandise 17,500
Transfer of merchandise to Gorgonia at agreed value of P14,000.

Cash 8,000
Loss on Asset Realization 2,000
Accounts Receivable 10,000

Cash 6,800
Loss on Asset Realization 1,700
Equipment 8,500

Accounts Payable 17,500

Cash 17,500

Gorgonia, Capital 4,500

Huerta, Capital 2,700
Loss on Asset Realization 7,200
Loss on asset realization distributed in profit and loss ratio of 5:3

Huerta, Capital 5,000

Advance to Huerta 5,000

Gorgonia, Capital 9,125

Huerta, Capital 1,525
Cash 10,650

PROBLEM 3-5

(1)

Cash 12,000
M, Capital 11,200
N, Capital 5,600
O, Capital 5,600
P, Capital 5,600
Other Assets 40,000
To record sale of assets and distribution of loss of P28,000 to M, N, O,
and P in the ratio 2:1:1:1

M, Capital 300
O, Capital 150
P, Capital 150
N, Capital 600
To write off P600 capital deficiency of N as loss to M, O, and P in the
ratio 2:1:1

48
 P, Loan 750
P, Capital 750
To apply P loan against capital deficiency of P750.

Cash 7,250
M, Capital 6,500
O, Capital 750
Recovery of cash in settlement of capital deficiencies from partners M
and O who are personally solvent.

Liabilities 30,000
P, Loan 1,750
Cash 31,750
Payment of cash to creditors and to partner P with a P1,750 loan
balance

(2)

Amounts to be paid to personal creditors of M, N, O, and P:

M: Amount available for personal creditors, P30,000; claims can be paid in full P20,000

N: Amount available for personal creditors, P5,000; amount that can be paid on
personal claims limited to P5,000

O: Amount available for personal creditors, P20,000; claims can be paid full P17,500

P: Amount available for personal creditors, P16,750 (P15,000 + P1,750

recovered
from firm); amount that can be paid on personal claims limited to. P16,750

The following statement of liquidation is not required by problem instructions, but is prepared to
facilitate development of journal entries for parts (1) and (2) of the problem.

W, X, Y, and Z
Statement of Liquidation
June 15, 20x7

W, X, Y, Z,
Cash Other Liabilitie W, Z, Capital Capital Capital Capital
s
Assets Loan Loan (5) (5) (3) (2)
Balances before liquidation 14,000 60,000 40,000 1,000 2,500 13,500 7,500 5,000 4,500
Sale of assets and distribution
of loss 24,000 (60,000) (300) (12,000) (12,000) (7,200) (4,500)
38,000 40,000 1,000 2,200 1,500 (4,500) (2,200)
Payment to creditors (38,000) (38,000)
2,000 1,000 2,200 1,500 (4,500) (2,200)
Payment to creditors by W (2,000) 2,000
1,000 2,200 3,500 (4,500) (2,200)
Amount due from X and uncol-
lectible, charged to W, Y, and
Z in the ratio 5:3:2 (900) (2,250) 4,500 (1,350)
1,000 1,300 1,250 (3,550)
Amount due from Y and uncol-
lectible, P1,050(P3,550-2,500)
charged to W and Z in ratio 5:2 (300) (750) 1,050
1,000 1,000 500 (2,500)
Payment to W and Z by Y (1,000) (1,000) (500) 2,500

49
 (1)
Cash 24,000
Allowance for Depreciation of Store Fixtures 12,500
W, Capital 12,000
X, Capital 12,000
Y, Capital 7,200
Z, Capital 4,500
Z, Loan 300
Merchandise Inventory 27,500
Accounts Receivable 30,000
Store Fixtures 15,000

Accounts Payable 38,000

Cash 38,000

(2)
Accounts Payable 2,000
W, Capital 2,000

W, Capital 2,250
Y, Capital 1,350
Z, Loan 900
X, Capital 4,500

W, Capital 750
Z, Loan 300
Y, Capital 1,050

W, Loan 1,000
W, Capital 500
Z, Loan 1,000
Y, Capital 2,500

(3)
Accounts Payable 2,000
Y, Capital 2,000

W, Capital 1,500
W, Loan 750
Y, Capital 1,350
Z, Loan 900
X, Capital 4,500

W, Capital 500
W, Loan 250
Z, Loan 300
Y, Capital 1,050

Z, Loan 1,000
W, Capital 500
Y, Capital 500

The following statement of liquidation is not required by problem instructions, but is prepared to
facilitate development of journal entries for part (3) of the problem.

W, X, Y and Z
Statement of Liquidation
June 30, 20x7

50
 W, X, Y, Z,
Liabilities W, Z, Capital Capita Capita Capit
l l al
Loan Loan (5) (5) (3) (2)
Balances after payment to creditors of P38,000 2,000 1,000 2,200 1,500 (4,500) (2,200)
Payment to creditors by Y (2,000) 2,000
1,000 2,200 1,500 (4,500) (200)
Amount due from X and uncollectible, charged
to W, Y, and Z in the ratio 5:3:2
(750) (900) (1,500) 4,500 (1,350)
Amount due from Y and uncollectible, P1,050 250 1,300 (1,550)
(P1,550-500), charged to W and Z in the ratio 5:2
(250) (300) (500) 1,050
Payment to Z by W and Y 1,000 (500) (500)
(1,000) 500 500

PROBLEM 3- 7

A, B, and C
Statement of Liquidation
June 30, 20x7

Profit Salary B, A, B, C,
Cash Other and Accounts Due to Loan Capital Capital Capital
Assets Loss Payable C (2) (2) (1)
Balances before liquidation 500 21,500 5,500 9,000 1,000 2,500 10,000 5,000
Distribution of trading loss (5,500) (2,200) (2,200) (1,100)
500 21,500 9,000 1,000 2,500 7,800 2,800 (1,100)
Sale of assets and distribution
of loss (see schedule) 16,000 (2,200) (2,200) (1,100)
16,500 (21,500) 9,000 1,000 2,500 5,600 600 (2,200)
Payment to creditors (9,000) (9,000)
7,500 1,000 2,500 5,600 600 (2,200)
Offset salary due to C against
his capital deficiency (1,000) 1,000
7,500 2,500 5,600 600 (1,200)
Amount uncollectible from C
charged equally to A and B (600) (600) 1,200
7,500 2,500 5,000
Distribution of cash 7,500 (2,500) (5,000)

A, B, and C
Schedule of Losses on Realization of Other Assets
June 30, 20x7

Book Amount Loss on gain *

Asset Item Value Realized on Realization
Accounts Receivable 12,500 9,000 3,500
Merchandise 5,000 6,500 1,500 *
Furniture and Fixtures 1,500 500 1,000
Goodwill 2,500 2,500
Totals 21,500 16,000 5,500

PROBLEM 3-8

(1)

51
 A AND B DISCOUNT SALES
Computation of Unrecorded Returned Merchandise
December 31, 20x7
Toys Appliances Total
Cash sales 20x7 - peso amount equal P35,000 P35,000 P70,000
Inventory liquidation- peso amounts equal, at a original
Retail 7,000 7,000 14,000
P42,000 P42,000 P84,000
Cost of good sold - toys, P42,000/ 1.40; appliances,
P42,000 / 1.25 P30,000 P33,600 P63,600

Goods available for sale:

Original contributions by partners P18,000
Purchases 36,000
Further contributions by partners (as indicated by liabilities to partners reported
at
the end of the year) 15,000
Total 69,000
Cost of goods sold as summarized above 63,600
Cost of goods returned to Appliance Wholesalers 5,400

(2)

A AND B DISCOUNT SALES

Income Statement
For Year Ended December 31, 20x7
Sales P77,000
Cost of goods sold:
Merchandise Inventory, Jan. 1 P18,000
Purchases (including transfers by partners) 51,000
P69,000
Less unrecorded merchandise return 5,400 63,600
Gross profit on sales P13,400

Expenses:
Operating expenses P26,000
Leasehold improvements 6,000
Liquidating expense 4,000 36,000
Net Loss P22,600

(3)

A AND B DISCOUNT SALES

Statement of Partners’ Capital Accounts
For Year Ended December 31, 20x7
Allen Balta Total
Original capital investments, Jan. 3, 20x7 P 10,000 P 10,000 P 20,000
Increase for payables to partners as of Dec. 31, 20x7 9,740 5,260 15,000
19,740 15,260 35,000
Return of goods to Balta (5,400) (5,400)
P 19,740 P 9,860 P 29,600
Cash distribution, December 31, 20x7 ( 3,500) (3,500) (7,000)
P 16,240 P 6,360 P 22,600
Loss for year divided equally (11,300) (11,300) (22,600)
Capitals, Dec. 31, 20x7 (amount owed by Balta to
Allen in final settlement P4,940 (P4,940)

PROBLEM 3-9

Stock Owned by Partnership - Combined Costs and Values:

52
 Shares Cost Market
Arturo Co 145 P14,500 P35,000
Bay Corporation 45 4,500 15,000
Lory Stores 210 21,000 30,000
400 P40,000 P80,000

Cost Market
To be distributed to M, 75 % of above values P30,000 P60,000
Distributed by agreement ( Arturo Co. stock) 14,500 35,000
Balance to be distributed to M P15,500 P25,000

Equation: Let X = number of shares of Bay Corporation stock to M

Let Y = number of shares of Lory Stores stock to M

Then: (1) P15,000 X + P30,000 Y = P25,000 (market)

45 210

(2) P100X + P100Y = P15,500 (cost)

Multiplying equation(1) by 210 and equation(2) by 300, the following values are
obtained:

1) P 70,000X + P30,000Y = P 5,250,000

2) P 30,000X + P30,000Y = P 4,650,000

Subtracting equation (2) from equation (1), the following equation is obtained and solved.

P 40,000X = P600,000
X = 15 shares of Bay Corporation stock to M

Since M must receive a total of P155 shares (155 x P100 = P15,500 cost of his shares of Bay
Corporation and Lory Stores), he will receive 140 shares of Lory Stores stock.

The distribution of shares is summarized as follows:

M N
Cost Market Cost Market
Arturo Co 145 shares P14,500 P35,000
Bay Corporation 15 shares 1,500 5,000 30 shares P3,000 P10,000
Lory Stores 140 shares 14,000 20,000 70 shares 7,000 10,000
Totals P30,000 P60,000 P10,000 P20,000

PROBLEM 3-10
(1)

53
 X, Y, and Z PARTNERSHIP
Schedule of Distributions to Creditors
November 15, 20x7
Partnership creditors: Capital Accounts
Cash Other Liabilities X Y Z
Assets
Balances before
liquidation P500 P60,500 P37,000 P10,000 P6,000 P8,000
Sale of assets and distribu-
tion of loss in 4:3:2 ratio 33,500 (60,500) (12,000) (9,000) (6,000)
Balances after sale of assets P34,000 P37,000 P2,000 (P3,000) P2,000
Additional loss due to
perso-
nal insolvency of Y (2,000) 3,000 (1,000)
(P4,000) P1,000
Contribution to partnership
by X from personal assets 4,000 4,000
Cash distribution P38,000 (P37,000) (P1,000)

Personal Creditors: Creditors of

X Y Z
Personal liabilities P20,000 P11,900 P5,000
Amount available for
payment to personal
creditors
Personal assets P31,000 9,450 P4,000
Add amount recovered
from firm by Z 1,000
31,000 9,450 5,000
Loss to personal creditors None P2,450 None

(2)
In order to pay off his creditors, Y must receive at least P2,450 from the partnership. Since Y’s capital in
the firm is only P6,000, the maximum loss that can be charged to him is P 3,550 which is 3/9 of total
loss. The amount that must be realized on the sale of assets may be calculated as follows:
Book value of assets P60,500
Loss that will reduce Y’s capital to P2,450 (3,550 = 3/9) 10,650
Amount that must be realized on sale of assets to permit a cash distribution to Y that
will satisfy his personal
creditors in full 49,850

PROBLEM 3-11

(1)

54
 ANSON, BELLO, CLARTE, AND DEANO
Summary of Operations
January 1, 20x6 to December 31, 20x7
Six months ended
6-30-x6 12-31-x6 6-30-x7 12-31-x7 Total
Sales 51,000 170,000 255,000 374,000 850,000
Cost of good sold:
1st period - 70% of P 51,000 37,700
2nd period - 75% of P170,000 127,500
3rd period - 80% of P255,000 204,000
4th period - 80 % of P374,000 299,200 666,400
Gross profit 15,300 42,500 51,000 74,800 183,600
Rent and other fixed costs 8,820 8,820 8,820 8,820 35,280
Other expenses (including
merchandise
loss) 4,200 14,000 21,000 30,800 70,000
Total expenses 13,020 22,820 29,820 39,620 105,280
Net income 2,280 19,680 21,180 35,180 78,320

Calculations:
Merchandise “loss”:
Payments for purchases, P65,871 + P152,382 + P 185,699 + P338,546 + P338,546 P742,498
Add purchase not paid for, 12/31/x7 14,285
Total purchases P756,783
Deduct merchandise inventory, 12/31/x7 83,084
Cost of goods sold P673,699
Cost of goods sold as estimated above 666,400
Merchandise “loss” to be added to other expenses P7,299

Allocation of total rents and fixed costs:

Determination of total rents and fixed costs:
6-30-x6 P 5,698
12-31-x6 6,550
6-30-x7 10,891
12-31-x7 12,141
Total P35,280
Allocation to each 6 month period: 1/4 x P35,280, or P8,820.

Allocation of other expenses, P70,000 (including P7,299 merchandise loss):

For 6-30-x6, (51,000 / 850,000) x P70,000 = P 4,200
12-31-x6, (170,000/ 850,000) x P70,000 = P14,000
6-30-x7, (255,000/ 850,000) x P70,000 = P21,000
12-31-x7, (374,000/ 850,000) x P70,000 = P30,800

PROBLEM 3-11 Continued

(2)

55
 ANSON AND BELLO
Statement of Changes in Partners’ Capital Accounts
For Six Months Ended June 30, 20x6

Anson Bello Total

Investments, January 1, 20x6 20,000 30,000 50,000
Salaries allowed for the six months period 4,000 4,000 8,000
24,000 34,000 58,000
Loss after salaries divided 3:3 or equally (2,860) (2,860) (5,720)
21,140 31,140 52,280
Drawings (1,800) (1,800) (3,600)
Capital balances, June 30, 20x6 19,340 29,340 48,680

ANSON, BELLO, AND CLARTE

Statement of Changes in Partners’ Capital Accounts
For Six Months Ended December 31, 20x6

Anson Bello Clarte Total

Capital balances, July 1, 20x6 19,340.00 29,340.00 25,000.00 73,680.00
Salaries allowed for the six month
period 4,000.00 4,000.00 3,750.00 11,750.00
23,340.00 33,340.00 28,750.00 85,430.00
Profit after salaries divided 3:2:2 2,973.75 2,973.75 1,982.50 7,930.00
26,313.75 36,313.75 30,732.50 93,360.00
Drawings (1,800.00) (1,800.00) (1,800.00) (5,400.00)
Capital balances, December 31, 24,513.75 34,513.75 28,932.50 87,960.00
20x6

ANSON, BELLO, CLARTE, AND DEANO

Statement of Changes in Partners’ Capital Accounts
For Six Months Ended June 30, 20x7

Anson Bello Clarte Deano Total

Capital balances, Jan.1, 20x7 24,513.75 34,513.75 28,932.50 12,000.00 99,960.00
Salaries allowed for the six
month period 4,000.00 4,000.00 3,750.00 3,000.00 14,750.00
28,513.75 38,513.75 32,682.50 15,000.00 114,710.00
Profit after salaries divided
3:3:2:2 1,929.00 1,929.00 1,286.00 1,286.00 6,430.00
30,442.75 40,442.75 33,968.50 16,286.00 121,140.00
Drawings (1,800.00) (1,800.00) (1,800.00) (1,800.00) (7,200.00)
Capital balances, June 30, 28,642.75 38,642.75 32,168.50 14,486.00 113,940.00
20x7

PROBLEM 3-11 Concluded

ANSON, BELLO, CLARTE, AND DEANO

Statement of Changes in Partners’ Capital Accounts

56
 For Six Months Ended December 31,20x7

Anson Bello Clarte Deano Total

Capital balances, July 1, 1977 28,642.75 38,642.75 32,168.50 14,486.00 113,940.00
Salaries allowed for the six
months period 4,000.00 4,000.00 3,750.00 3,000.00 14,750.00
32,642.75 42,642.75 35,918.50 17,486.00 128,690.00
Profit after salaries divided
3:3:2:2 6,129.00 6,129.00 4,086.00 4,086.00 20,430.00
38,771.75 48,771.75 40,004.50 21,572.00 149,120.00
Drawings (1,800.00) (1,800.00) (1,800.00) (1,800.00) (7,200.00)
Capital balances, Dec.31,20x7 36,971.75 46,971.75 38,204.50 19,772.00 141,920.00

(3)

ANSON, BELLO, CLARTE AND DEANO

Balance Sheet
December 31, 20x7

Assets Liabilities and Capital

Cash P33,121.00 Accounts payable 14,285.00
Accounts receivable 40,000.00 A, capital 36,971.75
Merchandise Inventory 83,084.00 B, capital 46,971.75
C, capital 38,204.50
D, capital 19,772.00
Total assets P156,205.00 Total liabilities and capital P156,205.00

Cash Balance:

Receipts:
Investments P87,000
Sales, 6/30/x6 P36,600
12/31/x6 130,400
6/30/x7 231,100
12/31/x7 411,900 810,000
Total receipts P897,000

Payments:
Purchases P742,498
Rent and other fixed costs 35,280
Other expenses 62,701
Withdrawals 23,400
Total payments 863,879
Cash balance, 12/31/x7 P33,121

PROBLEM 3 -12

LUGUE, MASCARDO, NOLASCO, SUAREZ, AND DURADO

Statement of Changes in Partners’ Capital and Drawing Accounts
For Three Years Ended December 31, 20x7
Net Lugue, Equity Mascardo Equity Nolasco, Equity Suarez Equity Durado, Equity

57
 Assets Capital Drawing Capital Drawing Capital Drawing Capital Drawin Capital Drawing
g
Jan.1,x5 Investment in

ratio 50:25:25 50,000 25,000 12,500 12,500

Dec.31,x5 Profit for
year
Firm I (L50:M25:N25)
Receivable
P80,000
Disbursement 70,000 10,000 5,000 2,500 2,500
60,000 25,000 5,000 12,500 2,,500 12,500 2,500
Dec.31,x5 Drawings for
the year (52,000) (10,500) (27,750) (13,750)
8,000 25,000 (5,500) (12,500) (25,250) 12,500 (11,250)
Jan.1/x6 Death of Mas-
cardo, and transfer of
ca-
pital balance to drawing (12,500) 12,500
8,000 25,000 (5,500) (12,750) 12,500 (11,250)
Jan.1/x6 Payment to
Mas
cardo’s estate of
original
capital balance (12,500) (12,500)
(4,500) 25,000 (5,500) (25,250) 12,500 (11,250)
Jan. 1/x6 Admission of
Suarez and change of
Capitals
(L45: N35: S20) (2,500) 2,500 5,000 (5,000) 10,000 (10,000)
(4,500) 22,500 (3,000) (25,250) 17,500 (16,250) 10,000 (10,000)
Jan.1/x6 Payment to
Lugue for portion of
interest sold (2,500) (2,500) 36,250
(7,000) 22,500 (5,500) (25,250) 17,500 20,000 10,000 (10,000)
Dec. 31/x6 Profit for the
year, Firm I
( L50:M25:
N25) 145,000 72,500 36,250
138,000 22,500 67,000 11,000 17,500 10,000 (10,000)
Dec. 31/x6 Loss for the
year,
Firm 2:
Receipts
P40,000
Disburse-
ments (Note 1)
80,000
Loss (40,000)
P40,000
Prof
guaranteed 10,000 10,000
P50,000
(L45:N35) (28,125) (21,875)
98,000 22,500 38,875 11,000 17,500 (1,875) 10,000
Dec.31/x6 Drawings for
the year (56,750) (40,000) (4,750) (5,000) (7,000)
41,250 22,500 (1,125) 6,250 17,500 (6,875) 10,000 (7,000)
Jan.1/x7 Withdrawal of
Nolasco (17,500) 17,500
41,250 22,500 (1,125) 6,250 10,625 10,000 (7,000)
Payment to Nolasco for
interest sold (17,500) (17,500)
23,750 22,500 (1,125) 6,250 (6,875) 10,000 (7,000)
Jan. 1/x7 Admission of
Durado (l55:S30:D15) 5,000 (5,000) 5,000 (5,500) 7,500 (7,500)

58
 23,750 27,500 (6,125) 6,250 (6,875) 15,000 (12,000) 7,500 (7,500)
Dec.31/x7 Profit for
year,
Firm 2 (l45:N35:S:20 50,000 28,125 21,875
No participation to S
who
was allowed P10,000 in
1976) 73,750 27,500 22,000 6,250 15,000 15,000 (12,000) 7,500 (7,500)
Dec.31/x7 Loss for year,
Firm 3 (L55:S30:D15)
Receipts
P70,000
Disbursement (20,000) (11,000) (6,000) (3,000)
90,000
53,750 27,500 11,000 6,250 15,000 15,000 (18,000) 7,500 (10,500)
Dec. 31/x7 Drawings for
the year (37,500) (10,000) (5,000) (15,000) (2,500) (5,000)
Dec. 31/x7 Balances 16,250 27,500 1,000 1,250 15,000 (20,500) 7,500 (15,500)

Note: Disbursement for 20x8, P80,000. (30,000 + 50,000)

Problem 3-12 Concluded

Net Lugue, Equity Mascardo Equity Nolasco, Equity Suarez Equity Durado, Equity
Assets Capital Drawing Capital Drawing Capital Drawing Capital Drawing Capital Drawing
Dec. 31/x6 Profit for the
Year 13,8000 22,500 67,000 11,000 17,500 20,000 10,000 (10,000)
Firm 2:
Receipts
P40,000
Disbursement
30,000
Profit 10,000 10,000
10,000
Profit guaran
teed
10,000
-o
-
148,000 22,500 67,000 11,000 17,500 20,000 10,000
Dec.31/x6 Drawings for
the year (56,750) (40,000) (4,750) (5,000) (7,000)
91,250 22,500 27,000 6,250 17,500 15,000 10,000 (7,000)
Jan.1/x7 Withdrawal of
of Nolasco (17,500) 17,500
91,250 22,500 27,000 6,250 32,500 10,000 (7,000)
Payment to Nolasco for
interest sold (17,500) (17,500)
73,750 22,500 27,000 6,250 15,000 10,000 (7,000)
Jan.1/x7 Admission of
Durado (l55:S30:D15) 5,000 (5,000) 5,000 (5,000) 7,500 (7,500)
73,750 27,500 50,125 6,250 15,000 15,000 (12,000) 7,500 (7,500)
Dec.31/x7 Profit for the
year,
Firm 2 (L45:N35:S20)
(No participation to S,
who was allowed
10,000
in 1976) 50,000 28,125 21,875
123,750 27,500 50,125 6,250 36,875 15,000 (12,000) 7,500 (7,500)
Dec.31/x7 Loss for the
year
Firm 3 (L55:S30:D15)
Receipts P
70,000
Disbursement

59
90,000
Loss P (20,000) (11,000) (6,000) (3,000)
20,000
103,750 27,500 39,125 6,250 36,875 15,000 (18,000) 7,500 (10,500)
Dec. 31/x7 Drawings for
the year (37,500) (10,000) (5,000) (15,000) (2,500) (5,000)
Dec.31/x7 Balances 66,250 27,500 29,125 1,250 21,875 15,000 (20,500) 7,500 (15,500)

PROBLEM 3-13

W, X, Y, AND Z
Schedule Showing Settlement Between Partners

Cash Assets Liabilitie W X Y Z

s
Balance before liquidation 110,000 40,000 20,000 5,000 9,000 36,000
Realization of assets and distribution
of loss 30,000 (110,000 (20,000) (20,000) (20,000) (20,000)
)
30,000 40,000 (15,000) (11,000) 16,000
Payment to creditors (30,000) (30,000)
Y’s deficiency shared by X and Z (5,500) 11,000 (5,500)
Payment to creditors by Z (10,000) 10,000
Cash contribution by X 20,500 20,500
Final cash distribution (20,500) (20,500)

W, X, Y, AND Z
Schedule Showing Settlement Between Partners

Cash Assets Liabilitie W X Y Z

s
Balance before liquidation 110,000 40,000 20,000 5,000 9,000 36,000
Realization of assets and distribution
of loss 30,000 (110,000 (20,000) (20,000) (20,000) (20,000)
)
Balances after realization 30,000 40,000 (15,000) (11,000) 16,000
Payment of liabilities (30,000) (30,000)
Contribution from X and Y 26,000 15,000 11,000
Payment to creditors (10,000) (10,000)
Final cash settlement (16,000) (16,000)

60
 PROBLEM 3-14

B, D, R, AND P
Schedule Showing Partners’ Capital Balances
At December 31, 20x5, 20x6, and 20x7

B 30 % D 30% R 30% P 10% Total

Capital balance, December 31, 20x4 80,000 50,000 40,000 170,000
Admission of P, Jan. 1, 20x5 (20,000) 20,000
Distribution of profit, 20x5:
Salaries 15,000 12,000 10,000 7,500 44,500
Bonus 3,000 3,000
Remainder 9,000 9,000 9,000 3,000 30,000
Sub total 87,000 71,000 59,000 30,500 247,500
Drawings, 20x5 (20,000) (15,000) (10,000) (7,500) (52,500)
Dec.31, 20x5 capital balances 67,000 56,000 49,000 23,000 195,000
20x6 loss after salaries or remainder (7,500) (7,500) (7,500) (2,500) (25,000)
Salaries 15,000 12,000 10,000 7,500 44,500
Profit 7,500 4,500 2,500 5,000 19,500
Drawings (15,000) (10,000) (10,000) (7,500) (42,500)
Dec. 3120x6 capital balances 59,500 50,500 41,500 20,500 172,000
20x7 Profit
Salaries 15,000 12,000 10,000 7,500 44,500
Bonus 1,000 1,000
Remainder 3,000 3,000 3,000 1,000 10,000
19,000 15,000 13,000 8,500 55,500
Drawings (25,000) (12,000) (10,000) (7,500) (54,500)
Dec. 31, 20x7 Capital balances 53,500 53,500 44,500 21,500 173,000

Schedule to show cash distribution to partners:

B R D P Total
January 26,800 26,800 17,800 12,600 84,000
February 3,000 3,000 3,000 1,000 10,000
March 4,667 4,667 4,666 14,000

Program of Priorities
in cash distribution to partners
Payable to
B R D P B R D P

61
Capital balances 46,000 46,000 37,000 19,000
P/L ratio .3 .3 .3 .1
Loss absorption 153,333 153,333 123,333 190,000
Bal.
Alloc. 1 (36,667 3,667
)
153,333 153,333 123,333 153,333
Alloc. 2 (30,000 (30,000 (30,000 9,000 9,000 3,000
) ) )
123,333 123,333 123,333 123,333
Alloc 3 P/L 17,800 17,800 17,800 5,933
26,800 26,800 17,800 12,600

Computations of cash distributable in January 20X8:

Total Capital 12/31/x7 P173,000
Add: Liabilities 100,000
Total P273,000
Less: Book value of non-cash assets 239,000
Cash balance 12/31/x7 P 34,000
Add: Net cash realized 50,000
Amount available to partners in January P 84,000

62