Problem 1

1. If John retired and received P 45,000 as a retirement price, how much will be the bonus to or (from) Henry?
750
2. if John retired and received P 45,000 as a retirement price, how much will be the adjusted capital of lucio under bonus method?
86,250
3. if John retired and received P 50,000, by how much will the adjusted capital of Lucio under revaluation method of assets method traceable to entire entity (full revaluation)?
83,750
4. if John retired and received P 47,500, by how much will be the adjusted capital of Henry be higher or (lower) than Lucion under specific revaluation of asset method?
Adjusted capital of Henry is 75,000 which is lower than Lucio amounted to 10,000.
5. if John retired and received P 47,500, by how much will the adjusted capital of Lucio under specific revaluation of asset method?
85,000

Solution:

For number 1 - 3

Adjustments:
Lucio, Capital (10,000 x 40%) 4,000 ASSETS
Henry, Capital (10,000 x 40%) 4,000 Cash 90,000
John, Capital (10,000 x 20%) 2,000 Inventories 50,000
Inventories 10,000 Equipment 50,000
Income Summary (2017) 25,000
Lucio, Capital (25,000 x 40%) 10,000 215,000
Henry, Capital (25,000 x 40%) 10,000 LIABILITIES AND OWNER'S EQUITY
John, Capital (25,000 x 20%) 5,000 Accounts Payable 7,500
Accum. Depreciation 25,000 John, Loan 5,000
Lucio, Capital 87,000
Lucio, Capital (22,500 x 40%) 9,000 Henry, Capital 77,000
Henry, Capital (22,500 x 40%) 9,000 John, Capital 38,500
John, Capital (22,500 x 20%) 45,000 215,000
Trademarks 22,500

Income Summary (2017) 25,000

Lucio, Capital (25,000 x 40%) 10,000
Henry, Capital (25,000 x 40%) 10,000
John, Capital (25,000 x 20%) 5,000

Number 1 & 2 Lucio (40%) Henry (40%) John (20%)

Balances before retirement 87,000 77,000 38,500
Loans payable to partners 5,000
Total 87,000 77,000 43,500
Payment to retiring partner -45,000
Total 87,000 77,000 -1,500
Allocation of Bonus from Lucio and Henry -750 -750 0
Adjusted Capital Balances after retirement of John 86,250 76,250 0

1. Bonus from Henry 750

2. Adjusted Capital of Lucio 86,250

Number 3 Lucio (40%) Henry (40%) John (20%)

Balances before retirement 87,000 77,000 38,500
Loans payable to partners 5,000
Total 87,000 77,000 43,500
Payment to retiring partner -50,000
Total 87,000 77,000 -6,500
Allocation of Bonus from Lucio and Henry -3250 -3250 0
Adjusted Capital Balances after retirement of John 83,750 73,750 0

3. Adjusted Capital of Lucio 83,750

For number 4 - 5
Adjustments:
ASSETS
John, Capital 10,000 Cash 90,000
Inventories 10,000 Inventories 50,000
Equipment 50,000
John, Capital 25,000 Income Summary (2017) 25,000
Accum. Depreciation 25,000 215,000

John, Capital 22,500 LIABILITIES AND OWNER'S EQUITY

Trademarks 22,500 Accounts Payable 7,500
Loan - John 5,000
Income Summary (2017) 25,000 Lucio, Capital 110,000
Lucio, Capital (25,000 x 40%) 10,000 Henry, Capital 100,000
Henry, Capital (25,000 x 40%) 10,000 John, Capital -7,500
John, Capital (25,000 x 20%) 5,000 215,000

Lucio (40%) Henry (40%) John (20%)

Balances before retirement 110,000 100,000 -7,500
Loans payable to partners 5,000
Total 110,000 100,000 -2,500
Payment to retiring partner -47,500
Total 110,000 100,000 -50,000
Allocation of Bonus from Lucio and Henry -25000 -25000 0
Adjusted Capital Balances after retirement of John 85,000 75,000 0

4. Adjusted Capital of Henry 75,000 Henry 75,000

Lower than Lucio amounted to 10,000 Lucio 85,000
Difference -10,000
Problem 2:

6. What is the capital of Ail and Charish after admitting Blaire?

Ail, Capital = 730,000 Charish, Capital = 770,000
7. What is the capital of Blaire after admission?
750,000
8. How much is the amount of bonus to or (from) Charish?
125,000
9. How much is the amount of revaluation credited to Ail?
250,000

Solution:

Contributed Capital Bonus Total Agreed Capital

Ail 480,000 -125000 355,000
Charish 520,000 -125000 395,000
total 1,000,000 -250,000 750,000
Blaire 500,000 250,000 750,000
Total 1,500,000 0 1,500,000
Additional investment from:
Ail (750,000 x 50%) 375,000
Charish (750,000 x 50%) 375,000
Bonus to new partner 250,000 1,000,000
Total 2,500,000 0 2,500,000

6. Ail & Charish Capital After Admission of Blaire:

Additional investment Total capital
Ail, Capital 355,000 375,000 730,000
Charish, Capital 395,000 375,000 770,000

7. Capital of Blaire after admission (2,500,000 x 30%) 750,000

8. Bonus from Charish (250,000 x 50%) 125,000

9. Revaluation credited to Ail (375,000 - 125,000) 250,000

Problem 3:

10. What is the capital of Aika after admitting Princessita?

679,000
11. What is the capital of Nicole after admitting Princessita?
581,000
12. What is the capital of Princessita after her admission?
420,000

Solution:
Before admission of princessita

Aika (7/10) Nicole (3/10)

Capital Balances 600,000 480,000 Increase in Land of 180,000
Allocation: Increase in Land 126,000 54,000 Aika (180,000 x 7/10) 126,000
Capital Balances before admitting Princessita 726,000 534,000 Nicole (180,000 x 3/10) 54,000

Contributed Capital Bonus Total Contributed Capital

Aika (7/10) 726,000 -47,000 679,000
Nicole (3/10) 534,000 47,000 581,000
Total 1,260,000 0 1,260,000
Princessita 420,000 420,000
Total 1,680,000 1,680,000

Paid by princessita Bonus

Aika = 726,000 x 1/3 = 242,000 195,000 47,000
Nicole = 534,000 x 1/3 = 178,000 225,000 -47,000
Interest purchased by Princessita 420,000 0

10. Capital of Aika after admission of Princessita 679,000

11. Capital of Nicole after admission of Princessita 581,000
12. Capital of Princessita after her admission 420,000
Problem 4

Situation 1: ( 1 ) How much cash should January, June, and July received?
January: 52,500 Situation 4: ( 1 ) How much should June received?
June: 51,500 10,000
July: 21,000
Situation 5: ( 1 ) How much cash should July receive?
Situation 2: ( 1 ) How much cash should January, June, and July received? 10,000
January: 2,500
June: 21,500 ( 2 ) How much is the amount of gain or loss on realization of other assets?
July: 1,000 -50000

Situation 3: ( 1 ) How much cash should January received? ( 3 ) How much is the total proceeds on sale of other assets?
200,000 90,000

( 2 ) How much is the amount of gain or loss on realization of other assets?

300000

Solution:

Situation 1:
Sale of non-cash assets 150,000
Liquidation Expense -5,000
Net cash proceeds 145,000
Less: Carrying amount of non-cash assets 140,000
Total gain 5,000

January (50%) June (30%) July (20%) Total

Capital Balances 30,000 50,000 30,000 110,000
Receivable to July -10,000 -10,000
Total 30,000 50,000 20,000 100,000
Payable to January 20,000 20,000
Total 50,000 50,000 20,000 120,000
Allocation of Gain 2500 1500 1000 5000
Amounts received by the partners 52,500 51,500 21,000 125,000

To check:
Beginning Balance of Cash 50,000
Net proceeds from the sale of Non-cash Assets 145,000
Less: Payment to outside creditors (A/P) -70,000
Cash available for distribution to partners 125,000

Situation 2:
Sale of non-cash assets 50,000
Liquidation Expense -5,000
Net cash proceeds 45,000
Less: Carrying amount of non-cash assets 140,000
Total gain -95,000

January (50%) June (30%) July (20%) Total

Capital Balances 30,000 50,000 30,000 110,000
Receivable to July -10,000 -10,000
Total 30,000 50,000 20,000 100,000
Payable to January 20,000 20,000
Total 50,000 50,000 20,000 120,000
Allocation of Loss -47500 -28500 -19000 -95,000
Amounts received by the partners 2,500 21,500 1,000 25,000

To check:
Beginning Balance of Cash 50,000
Net proceeds from the sale of Non-cash Assets 45,000
Less: Payment to outside creditors (A/P) -70,000
Cash available for distribution to partners 25,000

Situation 3:
January (50%) June (30%) July (20%) Total
Capital Balances 30,000 50,000 30,000 110,000
Receivable to July -10,000 -10,000
Total 30,000 50,000 20,000 100,000
Payable to January 20,000 20,000
Total 50,000 50,000 20,000 120,000
Allocation of Gain 150000 90000 60,000 300000
Amounts received by partners 200,000 140,000 80,000 420,000
 To Identify the gain of July:
Amount Received by July 80,000
Less: Amount after settlement of obligation of July -20,000
Total gain received by July 60,000

Gain received by January and June:

January (60,000/20% x 50%) 150000
June (60,000/20% x 30%) 90000

Situation 4:

Sale of non-cash assets 40,000

Liquidation Expense -10,000
Net cash proceeds 30,000
Less: Carrying amount of non-cash assets 140,000
Total gain -110,000

January (50%) June (30%) July (20%) Total

Capital Balances 30,000 50,000 30,000 110,000
Receivable to July -10,000 -10,000
Total 30,000 50,000 20,000 100,000
Payable to January 20,000 20,000
Total 50,000 50,000 20,000 120,000
Allocation of Loss -55000 -33000 -22000 -110,000
Balances -5,000 17,000 -2,000 10,000
Additional losses to June 5,000 -7,000 2,000 0
Amounts received by the partners 0 10,000 0 10,000

To check:
Beginning Balance of Cash 50,000
Net proceeds from the sale of Non-cash Assets 30,000
Less: Payment to outside creditors (A/P) -70,000
Cash available for distribution to partners 10,000

Situation 5:
January (50%) June (30%) July (20%) Total
Capital Balances 30,000 50,000 30,000 110,000
Receivable to July -10,000 -10,000
Total 30,000 50,000 20,000 100,000
Payable to January 20,000 20,000
Total 50,000 50,000 20,000 120,000
Allocation of Loss -25000 -15,000 -10000 -50000
Amounts received by the partners 25,000 35,000 10,000 70,000

To Identify the gain/loss of June:

Amount Received by June 35,000
Less: Amount after settlement of obligation to July -50,000
Total loss allocated for June -15,000

Loss received by January and June:

January (-15,000/30% x 50%) -25000
July (-15,000/30% x 20%) -10000

For Quetion 3:
Sale of Other Assets 95,000
Liquidation Expense -5,000
Net Proceeds 90,000
Less: Carrying amount of other assets 140,000
Total Loss -50,000

To check:
Beginning balance of Cash 50,000
Net Proceeds 90,000
Less: Payment to outside creditors -70,000
Cash available for distribution to partners 70,000
Problem 5

1. Using cash priority program, how much cash would James received from the cash that is available for distribution on January 30, 2016?
₱ 6,900

2. Using cash priority program, how much cash would Tang received from the cash that is available for distribution on February 28,2016?
₱ 5,200

3. Using schedule of safe payment, how much cash would Garcia received from the cash that is available for distribution on January 30, 2016?
₱ 7,200

4. Using schedule of safe payment, how much cash would james receive from the cash that is available for distribution on february 28, 2016?
₱ 3,200
Solution:
For number 1 & 2 CASH PRIORITY PROGRAM

Maximum Loss Absorption Capacity Garcia (40%) James (20%) Tang (40%)

Capital Balances before Liquidation ₱ 21,000 ₱ 15,000 ₱ 9,000

Loan, Tang ₱ 7,500
Total interest in the partnership ₱ 21,000 ₱ 15,000 ₱ 16,500
Divide by:P/L percentage 40% 20% 40%
Max. loss absorption capacity ₱ 52,500 ₱ 75,000 ₱ 41,250
RANK OF PAYMENT 2nd 1st 3rd

Garcia (40%) James (20%) Tang (40%)

Rank of payment 2nd 1st 3rd
Max. loss absorption capacity ₱ 52,500 ₱ 75,000 ₱ 41,250
Differece between 1st & 2nd -₱ 22,500
Balance ₱ 52,500 ₱ 52,500 ₱ 41,250
Differece between 1st, 2nd, & 3rd -₱ 11,250 -₱ 11,250
Equal balance of MLAC ₱ 41,250 ₱ 41,250 ₱ 41,250

Cash Priority Program

Garcia (40%) James (20%) Tang (40%)
Rank of payment 2nd 1st 3rd
1st priority (22,500*20%) ₱ 4,500
2nd Priority (11,250*40%&20%) ₱ 4,500 ₱ 2,250
Totals ₱ 4,500 ₱ 6,750

JANUARY
Collection of accounts receivables ₱ 6,000
Sale of inventory ₱ 15,000
Liquidation expense -₱ 1,500
Cash set retained for potential future cost -₱ 3,000
Net Proceeds ₱ 16,500
Add: Cash balance, beg. ₱ 6,000
Less: Accounts Payable -₱ 10,500
Cash available for distribution to partners ₱ 12,000

Garcia (40%) James (20%) Tang (40%) TOTAL

Available Cash-January ₱ 12,000
Allocation:
1st Priority ₱ 4,500 -₱ 4,500
2nd Priority ₱ 4,500 ₱ 2,250 -₱ 6,750
Balance ₱ 750
Payment after priorities (750*(40%,20%&40%)) ₱ 300 ₱ 150 ₱ 300 -₱ 750
1st Installment Payment ₱ 4,800 ₱ 6,900 ₱ 300 ₱-

FEBRUARY
Sale of plant assets ₱ 15,000
liquidation expense -₱ 2,000
Cash set retained for potential future cost -₱ 3,000
Net proceeds ₱ 10,000
Add: Cash - February ₱ 3,000
Cash available for distribution to partners ₱ 13,000

Garcia (40%) James (20%) Tang (40%) TOTAL

Available for cash ₱ 13,000
Allocation:
Payment after priorities (13,000*(40%,20%&40%)) ₱ 5,200 ₱ 2,600 ₱ 5,200 -₱ 13,000
Final Installment payment ₱ 5,200 ₱ 2,600 ₱ 5,200 ₱-

For number 3 & 4 SCHEDULE OF SAFE PAYMENT

JANUARY

Loss on collection of accounts receivable (6,000 - 9,000) -₱ 3,000

 Loss on sale of inventory (15,000-21,000) -₱ 6,000
Liquidation expense -₱ 1,500
Actual loss on realization - January -₱ 10,500

Carrying amount of unsold non-cash (9,000-3,000=6,000)(21,000-6,000=15,000) (6,000+15,000) -₱ 21,000

Cash set retained for potential future cost -₱ 3,000
Maximum Loss Possible -₱ 24,000

Garcia,James and Tang Partnership

Safe Payment Schedule
January 30, 2016
Garcia (40%) James (20%) Tang (40%) TOTAL
Payable to Tang ₱ 7,500 ₱ 7,500
Capital Bal. before liquidation ₱ 21,000 ₱ 15,000 ₱ 9,000 ₱ 45,000
Total Interest - Jan. 1, 2016 ₱ 21,000 ₱ 15,000 ₱ 16,500 ₱ 52,500
Allocation of loss on realization - January 2016 (-10,500*40%,20%&40%) -₱ 4,200 -₱ 2,100 -₱ 4,200 -₱ 10,500
Total ₱ 16,800 ₱ 12,900 ₱ 12,300 ₱ 42,000
Allocation of maximum loss possible - January 2016 (-24,000*40%,20%&40%) -₱ 9,600 -₱ 4,800 -₱ 9,600 -₱ 24,000
First Installment payment to partners ₱ 7,200 ₱ 8,100 ₱ 2,700 ₱ 18,000

CASH
Beginning ₱ 6,000
Collection from Accounts Receivable ₱ 6,000
Payment for Liquidation expenses ₱ 1,500
Sale of Inventory ₱ 15,000
Creditors 1st installment ₱ 10,500
Payment to partners ₱ 18,000
₱ 27,000 ₱ 30,000
₱ 3,000

FEBRUARY
Loss of Sale in plant assets (15,000 - 19,500) -₱ 4,500
Liquidation expense -₱ 2,000
Actual loss on realization - February -₱ 6,500

Cash set retained for potential future cost ₱ 3,000

Loss of Sale in plant assets ₱ 4,500
Maximum Loss Possible -₱ 1,500

Garcia,James and Tang Partnership

Safe Payment Schedule
February 28, 2016
Garcia (40%) James (20%) Tang (40%) TOTAL
Payable to Tang ₱ 7,500 ₱ 7,500
Capital Bal. before liquidation ₱ 21,000 ₱ 15,000 ₱ 9,000 ₱ 45,000
Total Interest - Jan. 1, 2016 ₱ 21,000 ₱ 15,000 ₱ 16,500 ₱ 52,500
Allocation of loss on realization - January 2016 (-10,500*40%,20%&40%) -₱ 4,200 -₱ 2,100 -₱ 4,200 -₱ 10,500
First Installment payment to partners -₱ 7,200 -₱ 8,100 -₱ 2,700 -₱ 18,000
Total Interest - February 1, 2016 ₱ 9,600 ₱ 4,800 ₱ 9,600 ₱ 24,000
Allocation of loss on realization - February 2016 (-6,500*40%,20%&40%) -₱ 2,600 -₱ 1,300 -₱ 2,600 -₱ 6,500
Allocation of maximum loss possible - February 2016 (-1,500*40%,20%&40%) -₱ 600 -₱ 300 -₱ 600 -₱ 1,500
Final Payment to partners ₱ 6,400 ₱ 3,200 ₱ 6,400 ₱ 16,000

CASH
February 1, 2016 ₱ 3,000
Sale of plant asset ₱ 15,000
Liquidation expense ₱ 2,000
Final payments to partners ₱ 16,000
₱ 18,000 ₱ 18,000
₱-