PARTNERSHIP LIQUIDATION

The partners of the M&N Partnership started liquidating their business on July 1, 20x5,
at which time the partners were sharing profits and losses 40% to M and 60% to N.
The balance sheet of the partnership appeared as follows:

Assets Liabilities & Equity

Cash P 8,800 Accounts Payable P 32,400
Receivable 22,400 M, capital P 31,000
Inventory 39,400 M, drawing ( 5,400) 25,600
Equipment P 65, 200 N, capital P 33,200
Accumulated N, drawing ( 200) 33,000
Depreciation (30,800) 34,400 N, loan 14,000

Total P 105,000 Total P 105,000

During the month of July, the partners collected P600 of the receivables with no loss.
The partners also sold during the month the entire inventory on which they realized a
total of P32,400. How much of the cash was paid to M's capital on July 31, 20x5?

a. P25,600 c. P320

b. 5,400 d. 0

(PhilCPA)

Answer: (c)

M N
Drawing P(5,400) P(200)

Loan - 14,000

Partnership Liquidation | ©jipb162021

Capital 31,000 33,200

Total interest P25,600 P47,000

Loan on realization: 40%: 60% P 600
Receivables – collection

Less: book value 22,400 P21,800

Proceeds – inventory P32,400

Less: book value 39,400 7,000

Unrealized noncash assets 34,400

P63,200 (25,280) (37,920)

P 320 P 9,080

Partnership Liquidation | ©jipb162021