1.1.

4 PARTNERSHIP LIQUIDATION (M – 13 S-8 )=21

1. The condensed balance sheet and profit and loss ratios of the partnership of Bean, Dean, and Jean
are as follows:

Cash P 1,125,000 Liabilities P 2,625,000

Rec. from Bean 375,000 Payable to Jean 500,000
Other assets 10,250,000 Bean, capital (40%) 3,750,000
Dean, capital (30%) 2,500,000
Jean, capital (30%) 2,375,000

Partners agree to liquidate and all non- cash assets were sold for P7,500,000.

How much of the available cash will go to Bean?

a. P3,750,000
b. P2,275,000
c. P2,650,000
d. P2,125,000

Bean Dean Jean Total

3,750,000 2,500,000 2,375,000
(375,000) 500,000
3,375,000 2,500,000 22,187,500 8,750,000
(1,100,000) (825,000) (825,000) (2,750,000) loss
B 2,275,000 1,675,000 2,050,000 6,000,000

Cash beginning 1,125,000

Proceeds 7,500,000
Liabilities (2,625,000)
Net 6,000,000

2. Dolly, Folly, and Golly have capital balances of P800,000; P1,000,000; and P360,000, respectively
and profit sharing ratios of 4:2:1, respectively.

If Dolly received P160,000 upon liquidation of the partnership, the total amount received by all the
partners was:
a. P2,160,000 b. P1,120,000 c. P1,040,000 d. P480,000

3. Dolly, Folly, and Golly have capital balances of P800,000; P1,000,000; and P360,000, respectively
and profit sharing ratios of 4:2:1, respectively. If Dolly received P520,000 as a result of the
liquidation.

The amount Golly received as part of the liquidation is:

a. P520,000 b. P290,000 c. P360,000 d. P280,000

4. Alston, Boyer, and Cane are partners with a profit and loss ratio of 5:4:1. The partnership was
liquidated, and prior to the liquidation process, the partnership balance sheet shows the following:

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 Cash 80,000 Alson, capital 320,000
Other assets 720,000 Boyer, capital 320,000
______ Cane, capital 160,000
800,000 800,000

After the partnership was liquidated and the cash was distributed, Boyer received P128,000 in cash in
full settlement of his interest. The amount of realization loss on the sale of the other assets is:
a. P480,000 b. P320,000 c. P672,000 d. P330,000

Capital of Boyer before realization loss P320,000

Cash received by Boyer 128,000
Share on the realization loss P192,000
 4/10
Total realization loss P480,000 A

5. Partners Jones, Kerr, and Lyons have decided to liquidate their partnership. The partnership’s
balance sheet reveals the following:
Cash 50,000 Liabilities 60,000
Other assets 500,000 Jones, capital 180,000
Kerr, capital 240,000
_______ Lyons, capital 70,000
550,000 550,000
The partners share profits and losses in a 4:4:2 ratio and all partners are personally solvent. Lyons
received P98,000 in cash in full settlement for her share of the partnership.
The selling price for the other assets is:
a. P690,000 b. P640,000 c. P360,000 d. P410,000

Capital balance of Lyons P 70,000

Cash received by Lyons 98,000
Share on the realization gain P 28,000
 2/10
Total realization gain P140,000
Add: Book value of other assets 500,000
Selling price of other assets P640,000 B

6. On January 1, 2016, the partners of Max, Sax, and Tax, who share profits and losses in the ratio of
5:3:2, respectively, decided to liquidate their partnership. On this date, the partnership’s condensed
balance sheet was as follows:

Cash P150,000 Liabilities P180,000

Other assets 750,000 Max, capital 240,000
Sax, capital 270,000
Tax, capital 210,000
P900,000 P900,000

On January 15, 2016, the first cash sale of other assets with a carrying amount of P450,000 realized
P360,000. Safe installments to the partners were made the same day. How much cash should be
distributed to Max, Sax, and Tax, respectively?

a. P45,000; P153,000; and P132,000. c. P165,000; P99,000; and P66,000.

b. P120,000; P135,000; and P105,000. d. P180,000; P108,000; and P72,000

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 7. Benny, Jenny, and Kenny are partners in a trading business. They participate in the profits and
losses equally. As of December 31, 2014, the partners’ capital and drawing accounts are as
follows:
Benny Jenny Kenny Total
Capital P200,000 P160,000 P600,000 P960,000
Drawing 120,000 80,000 40,000 240,000

The partners decided to liquidate the partnership. The operating profit for the year 2014 amounted
to P144,000, which was all exhausted including partnership assets. As of December 31, 2014, unpaid
liabilities still amounted to P168,000. Benny is personally insolvent, but both Jenny and Kenny have
substantial private resources.

The total loss on realization was:

a. P720,000 b. P888,000 c. P960,000 d. P1,032,000

8. The following balance sheet is for the Ad Gen Da partnership. The partners, Ad, Gen and Da, share
profits and losses in the ratio of 5:3:2, respectively.
Cash P30,000 Liabilities P70,000
Other assets 270,000 Ad, capital 140,000
Gen, capital 80,000
Da, capital 10,000

The assets and liabilities are fairly valued on the above balance sheet and the partnership wishes to
admit Melvin as a partner with a one-fifth interest without recording goodwill or bonus. How much
should Melvin contribute in cash or other assets?

a. P36,800 b. P46,000 c. P57,500 d. P60,000

9. Partners Jones, Kerr, and Lyons have decided to liquidate their partnership. The partnership’s
balance sheet reveals the following:
Cash 50,000 Liabilities 60,000
Other assets 500,000 Jones, capital 180,000
Kerr, capital 240,000
_______ Lyons, capital 70,000
550,000 550,000
The partners share profits and losses in a 4:4:2 ratio and all partners are personally solvent. Lyons
received P98,000 in cash in full settlement for her share of the partnership.
The selling price for the other assets is:
a. P690,000 b. P640,000 c. P360,000 d. P410,000

Capital balance of Lyons P 70,000

Cash received by Lyons 98,000
Share on the realization gain P 28,000
 2/10
Total realization gain P140,000
Add: Book value of other assets 500,000
Selling price of other assets P640,000 B

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10. Victor, Waldo, and Xeres are partners sharing profits equally. The partnership and also certain
partners are insolvent and the partnership is liquidated. Upon distribution of the partnership loss from
liquidation, a statement is drawn up summarizing the status of each partner as follows:
Personal Status Firm Status
(Exclusive of Firm Interest) Interest Amount Owed
Partner Assets Liabilities in Firm to Firm
Victor P300,000 P 100,000 P 50,000
Waldo 50,000 100,000 P 50,000
Xeres 150,000 100,000 150,000

Against whom can firm creditors proceed for the recovery of their unpaid claims?
a. Against Victor for P150,000.
b. Against Victor for P100,000
c. Against Xeres, for P50,000
d. Against Xeres, for P50,000, Victor, P100,000

Total unpaid claims must be

Total amount owed to the firm by partners Waldo and Xeres P200,000
Total interest in the firm by partner Victor ( 50,000)
Total liabilities still unpaid P150,000
Waldo and Xeres must pay their capital deficiency, but Waldo’s liabilities are even greater than his
personal assets so Waldo is insolvent and cannot pay. Xeres has still excess assets over liabilities of
P50,000, therefore, Xeres must contribute the excess of P50,000. The balance of P100,000 liabilities
must be paid by Victor. D

11. X, Y, and Z have capital balances of P30,000, P15,000, and P5,000, respectively, in the XYZ
partnership. The general partnership agreement is silent as to the manner in which partnership
losses are to be allocated but does provide that partnership profits are to be allocated as follows:
40% to X, 25% to Y, and 35% to Z. The partners have decided to dissolve and liquidate the
partnership. After paying all creditors, the amount available for distribution will be P20,000. X, Y, and
Z are individually solvent. Under the circumstances, Z will:

a. Receive P7,000.
b. Receive P12,000.
c. Personally have to contribute an additional P5,500.
d. Personally have to contribute an additional P5,000.

X Y Z Total
Capital balances P30,000 P15,000 P 5,000 P50,000
Liquidation loss ( 12,000) ( 7,500) (10,500) ( 30,000)
Balances P18,000 P 7,500 (P5,500) P20,000
C

12. The partnership of Folly and Frill is in the process of liquidation. On January 1, 2014, the ledger
shows account balances as follows:

Cash P10,000 Accounts payable P15,000

Accounts receivable 25,000 Folly capital 40,000
Lumber inventory 40,000 Frill capital 20,000

On January 10, 2014 the lumber inventory is sold for P25,000, and during

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 January, accounts receivable of P21,000 are collected. No further collections on the receivables are
expected. Profits are shared 60% to Folly and 40% to Frill. Of the total equity of Folly, what amount,
appear to be recoverable?
a. P40,000 b. P28,600 c. P24,600 d. P37,600

Cash available to partners:

Cash beginning P10,000
Accounts receivable collected 21,000
Lumber inventory sold 25,000
Total cash P56,000
Less liabilities paid 15,000 P41,000
Folly Frill Total
Capital balances P40,000 P20,000 P60,000
Liquidation loss ( 11,400) ( 7,600) ( 19,000)
Cash distribution P28,600 P12,400 P41,000
B

13. Terry, Vivian, and Walter have decided to liquidate their partnership. Account balances on January 1,
2014 are as follows:
Cash P120,000 Accounts payable P 40,000
Other assets 120,000 Terry capital (30%) 85,000
P240,000 Vivian capital (30%) 25,000
Walter capital (40%) 90,000
P240,000

The partners agree to keep a P10,000 contingency fund and to distribute available cash immediately.
How much cash will be distributed to Terry?
a. P21,000 b. P33,000 c. P46,000 d. P40,000

Cash available to partners

Cash beginning P120,000
Less: Liabilities ( 40,000)
Contingency fund ( 10,000) P70,000

Terry Vivian Walter Total

Capital balance P85,000 P25,000 P90,000 P200,000
Liquidation loss ( 39,000) ( 39,000) ( 52,000) ( 130,000)
Deficiency of Vivian ( 6,000) 14,000 ( 8,000) __
Cash distribution P40,000 -0- P30,000 P 70,000
D

14. After paying all their liabilities, Mark, Lark, and Park had the following balances:
Partner Capital Loans P & L ratio
Mark P102,960 P90,000 12/25
Lark 89,040 36,000 8/25
Park 68,100 39,900 5/25

Cash available for distribution amounts to P37,800, remaining assets of P382,200 will be realized
piecemeal in the next month. How much of the P37,800 cash should Park receive?

a. P30,600 b. P7,200 c. P7,560 d. Zero

Mark Lark Park Total

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 102,960 89,040 68,100 260,100
(90,000) (36,000) (39,900) 159,900
192,960 119,040 108,000 420,000
(183,456) (122,304) (76,440) (382,200)
9,504 (3,264) 31,560 37,800
(2,304) 3,264 (960) ________
7,200 30,600 A 37,800

SITUATIONAL QUESTIONS

A. The balance sheet for Coney, Honey, and Money partnership shows the following information as of
December 31, 2015:
Cash P 40,000 Liabilities P100,000
Other assets 560,000 Coney, loan 50,000
Coney, capital 250,000
Honey, capital 140,000
Money, capital 60,000
P600,000 P600,000

Profit and loss ratio is 3:2:1 for Coney, Honey, and Money, respectively. Other assets were realized
as follows:
Date Cash Received Book Value
January 2016 P120,000 P180,000
February 2016 70,000 154,000
March 2016 250,000 226,000

Cash is distributed as assets are realized.

1. The total loss to Coney is:

a. P60,000 b. P40,000 c. P20,000 d. None

2. The total cash received by Honey is:

a. P40,000 b. Zero c. P100,000 d. P30,000

3. Cash received by Money in January 2016 is:

a. P4,000 b. P20,000 c. P10,000 d. Zero

4. The doctrine of marshaling of assets:

a. Is applicable only if the partnership is insolvent
b. Allow partners to first contribute personal assets to unsatisfied partnership creditors
c. Is applicable if either the partnership is insolvent or individual partners are insolvent
d. Amount owed to personal creditors and to the partnership for debit capital balances are
shared proportionately from the personal assets of the partners.

B. The following condensed balance sheet is presented for the partnership of Nick, Pick, and Rick, who
share profits and losses in the ratio of 4:3:3, respectively:

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Cash P 45,000 Accounts payable P105,000
Other assets 415,000 Rick, loan 15,000
Nick, loan 10,000 Nick, capital 155,000
Pick, capital 100,000
Rick, capital 95,000
P470,000 P470,000

1. Assume that the assets and liabilities are fairly valued on the balance sheet and that the
partnership decides to admit Tick as a partner, with a 20% interest. No goodwill or bonus is to
be recorded. How much should Tick contribute in cash or other assets?

a. P70,000 b. P71,000 c. P87,500 d. P88,750

2. Assume that instead of admitting a new partner, the partners decide to liquidate the
partnership. If the other assets are sold for P350,000, how much cash should be distributed to
Nick?

a. P115,000 b. P119,000 c. P129,000 d. P155,000

3. Assume that the assets are understated by P 75,000.00 on the balance sheet date and that the
partnership decided to admit Tick as a partner with 15% interest by purchasing from the old
partners at P80,000. No goodwill is to be recorded. How much should Tick contribute in cash or
other assets to the partnership?
a. P63,750 b. P50,000 c. P80,000 d. 75,000

4. Assume that the assets are overstated by P 50,000.00 on the balance sheet date and that the
partnership decided to admit Tick to invest as a partner with 10% interest for P50,000.00.
Partial goodwill is to be used. How much of Tick’s payment (net) shall be recorded in the
partnership books?

a. P33,333.33 b. P50,000.00 c. P30,000.00 d. P100,000