PRACTICAL ACCOUNTING 2 THEORY & PRACTICE ADVANCED ACCOUNTING Partnership Liquidation & Incorporation QUIZZERADVANCED ACCOUNTING: Partnership Liquidation & Incorporations - NCQ Problems Page 2Partnership Liquidation & Incorporations PARTNERSHIP LIQUIDATION Lumpsum Liquidation Proceeds from sale of noncash assets 1. RR, SS and TT decided to dissolve the partnership on November 30, 2011. Their capital balances and proft ratio on this date, follow: Capital Profit Balances Ratio RR 50,000 40% ss 60,000 30% Tr 20,000 30% The netincome from January 1 to November 30, 2011 is P44,000. Also, on this date, cash and liabilities ere P40,000 and P20,000, respectively. For RR to receive P55,200 in full settlement of his interest in the firm, how much must be realized from the sale of the firm's non-cash assets? a. 196,000 ©. 193,000 b. 177,000 d. 187,000 Dayag 2013 2. Bel, Cl, and Del, partners ofthe BCD partnership, shared profits and losses inthe rato of 5:32, respectively. On December 31,2013, the end of an unprofitable year, they decided to quidate the partnership. The partners' capital account balances on the date were as folows: Bel, capital 22,000 Col, capital 24900 Del, capital 15,000 The liabilities ofthe parinership amounted to P30,000 including a loan of P10,000 payable to Bel. The cash balance was P6,000. The partners planned to realize the non-cesh cash assets in instalment end to distribute cash as it becomes available, All three partners are solvent. If Bel received a total of 20,000 as a result of liquidation, what was the total amount realized by the partnership on the non-cash assets? a. P85,900 c. P67,900 b. P91,900 d. P61,900 Guerrero 2013 Partner's Personal Creditor 3. The Keaton, Lewis and Meador partnership had the following balance sheet just before entering liquidation: Cash 10,000 Liabilities 130,000 Non-cash assets 300,000 Keaton, capital 60,000 Lewis, capital 40,000 Meador, capital 80,000 310,000 310,000 Partnership Liquidation & Incorporations - NCQ Problems Page 1ADVANCED ACCOUNTING: Keaton, Lewis and Meador share profits and losses in a ratio of 24:4. Non- cash assets were sold for PI80,000. Liquidation expenses were PI0,000. Assume that Keaton ‘was personally insolvent with assets of P8,000 and labiities of P60,000. Lewis and Meador ‘were both solvent and able to cover deficits in their capital accounts, if any. What amount of cash could Keaton’'s personal creditors have expected to receive from partnership assets? a PO c. P30.000 b. P26.000 d. P34.000 Dayag 2013 4, Alocal partnership was considering the possibilty of liquidation since one of the pariners is solvent (Tillman) and the others are insolvent. Capital balances at that time were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively. Ding, capital P 60,000 Laurel, capital 67,000 Ezzard, capital 17,000 Tillman, capital 96,000 Ding's creditors fled a P25,000 claim against the partnership's assets. At that time, the partnership held assets reported at P360,000 and labilties of PI20,000. Ifthe assets could be sold for P228.000, whatis the minimum amount that Ding's creditors would have received? a 0 c. P36,000 b. 2,500 d. P38,720 Dayag 2013 Loss on Realization 5. Jar, Ram, and Mill, who divide profits and losses 50%, 30%, and 20%, respectively, have the following October 31, 2011 account balances: ‘Jar, drawing (Dr.) 12,000 illo, rawing (Cr.) 4,800 Accounts receivable - Jar 7200 Loans payable-Ram 14,400 Jar, capital 59,400 Ram, capital 44,400 illo, capital 39,000 The partnership's assets are P211,200 (including cash of P64,200). The partnership is liquidated and Millo receives 33,000 in final settlement. How much is the total loss on realization? a. 10,800 ©. 54.000 b. 31,200 d. 64,200 Dayag 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 2Partnership Liquidation & Incorporations Realized loss allocated to a partner 6. Because of very unprofitable operations, partners Nal, Lou, and Gee decided to dissolve the partnership when their capital balances and profit and loss ratio were’ Nal, capital (30%) 175,000 Lou, capital (20%) 125,000 Gee, capital (50%) 175,000 Total 475,000 Upon liquidation, all ofthe partnership's assets are sold and sufficient cash is realized to pay all abilities except one for P25,000. Gee is personally insolvent, but the others are capable of meeting any indebtedness ofthe fir. By what amount would the capital of Nal change? a. 7,500 decrease ¢. 195,000 decrease b. 150,000 decrease d. No change Punzalan 2014 7. Siverio, Domingo, Reyes, and Pastor are partners, sharing eamings in the rato of 3/21,4/21, 6/21 and 8/21, respectively. The balances oftheir capital accounts on December 31, 2011 are as follows: Siverio 1,000 Domingo 25,000 Reyes 25.000 Pastor ‘3.000 The partners decide to liquidate, and they-aocordingly convert the non-cash assets into P23,200 of cash. After paying the liabiites. amounting to P3,000, they have P2200 to divide. Assume that a debit balance of any partner's capital is uncol” tbl, The share of Silverio in the loss upon conversion of the non-cash assets into cash was: a. P4972 c. P5,400 b. P5,257 d. P5,200 Guerrero 2013 Additional Contribution by a Partner 8. On December 31, 2010, the pariners of MNP Partnership decided to liquidate their business, Immediately before liquidation, the folowing condensed balance sheet was prepared: Cash 50,000 Lisbiltes 375,000 Noncash assets 200,000 Nieva, oan 20,000 Perez, oan 25,000 Munoz, capital (60%) 312,500 Nieva, capital (30%) 107/500 Perez, capital (20%) 50,000 Total 950,000 Total 950,000 Partnership Liquidation & Incorporations - NCQ Problems Page 3ADVANCED ACCOUNTING: The noncash assets were sold for P400,000. Assuming Perez is the only solvent partners, what amount of additional cash willbe invested by Perez? (rounded to the nearest peso) a 37143 c. 5,000 b 25,000 ao Punzalan 2014 9. Bach, Johann, and Straus were partners sharing profits and losses based on 4:4:2 decide to liquidate. All assets ofthe partnership were liquidated. The condensed statement of financial position just prior to liquidation follows: Assets Liabilities and Capital Cash . 100,000, Liabilities Pi 40,000, Other assets 400,000 Bach, Loan 10,000 Bach, capital 45,000 Johann, capital 105,000 Straus, capital 200,000 Total 500,000 Total Liabilties & Capital 500,000 Other assets were sold for P247,500 realizing a loss of P152,500. Parties agreed to ful terminate the partnership's business, thus, nevesstating distribution of cash to partners and in the event of capital defciency, contribution of addtional cash. The three partners were all solvent and could answer any capital deficiency. Name the partner and give the corresponding adcitional cash he had to invest due tohis net cepital deficiency to finally set the liquidation ofthe partnership. a. Bach PI6,000 b. JohamiP44,000 ©. Bach 6,000 d. Straus P30,500 Guerrero 2013, 10. The partners Aiko, Bren, Cinia and Dior who share profits and losses at 30%, 30%, 20% and 20% respectively decided to liquidate. All partnership assets are to be converted into cash. Prior to the liquidation, the condensed statement of financial position is as follows: Cash, P 100,000 Liabilities 750,000 Otherassets 1,800,000 Bren, Loan 60,000 Dior, Loan 50,000 ‘Aiko, Capital 420,000 Bren, Capital 315,000 Cinia, Capital 205,000 Dior, Capital 100,000 Total .go0.009 Total 1.900.000 Partnership Liquidation & Incorporations - NCQ Problems Page4Partnership Liquidation & Incorporations The non-cash assets realize PB00,000, resulting to a loss of P1,000,000. All the partners are solvent, and can contribute any additional cash to cover any deficiency. In the process of liquidaton, deficiency (ies) will occur and will require additonal investment as follows: a. Cinia at P7,500 b. Dior and Cinia for P50,000 and P7,500 respectively ©. Dior at P50,000 d. None Guerrero 2013, Pariner's Share 1. Gardo and Gordo formed a partnership on July 1, 2011 to operate two stores to be managed by each of them. They invested P30,000 and P20,000 and agreed to share earnings 60% and 40%, respectively. All thei transactions were for cash, and all their subsequent transactions were hancled through their respective bank accounts as summarized below: Gardo Gordo Cash receipts P79,100 85,245 Cash disbursements 62275 70,695 On October 31, 2006, all remaining noncash assets in the two stores were sold for cash of 60,000. The partnership was dissolved, and cash settiement was effected. In the distribution of the P 60,000 cash, Gardo received: a. 24000 c. P34.000 b. 26,000 d. 36,000 Dayag 2013 12. After al partnership assets were converted into cash and all available cash was distributed to creditors, the ledger of the Daniela, Erika, and Frediine partnership showed the following balances Debit Credit ‘Accounts payable 20,000 Daniela, capital (40%) 10,000 Erika, capital (30%) 60,000 Frediine, capital (30%) 90,000 90,000 80,000 Percentages indicted ere residual proft and loss sharing ratios. Personal assets and lables ofthe periners areas follows: Daniela Erika Frediine Personal assets 50,000 P50,000 ——PI00,000 Personal liabilities 45,000 40,000 40,000 Partnership Liquidation & Incorporations - NCQ Problems Page 5ADVANCED ACCOUNTING: The partnership crecitors proceed against Fredline for recovery of their claims, and the partners settle their claims against each other. How much would Enka receive? a Po cc PA7.143 b. 45,000 d. Cannotbe determined Daag 2013 13, Arthur, Baker and Carter are partners in textile distribution business, sharing profits and. losses equally. On December 31, 2012 the partnership capital and partners drawings were as, follows: ‘Arthur Baker Carter Total Capital 100,000 80,000 P300,000 480,000 Drawing 60,000 40,000 20,000 120,000 The partnership was unable to collect on trade receivables and was forced to liquidate. Operating profit in 2012 amounted to P72,000 which was all exhausted, including the partnership assets. Unsetied creditors’ claims at December 31, 2012 totalled P64,000. Baker and Carter have substantial private resources, but Arthur has no personal assets. The final cash dstrbution to Carter was: a. 78,000 ©. 108,000 b. 84,000 4. 162,000 Dayag 2013 14. Afterall noncash assets have been converted into cash inthe liquidation of the AA and JJ partnership, the ledger contains the following account balances Debit Credit Cash 34,000 Accounts payable 25,000 Loan payable to AA 9,000 AA, capital 8,000 Ad, capital 8,000 ‘Available cash shoud be cistributed: P25.000 to accounts payable and; Dayag 2013 a. 9,000 loan payable to AA ©. 1,000 to AA and P8,000 to JJ b. P4500 each to AA and JJ 4. P8,000to AA and P1,000 to Wd 15. As of December 31, 2012, the books of Ton Partnership showed capital balances of: T 40,000; 0, P25,000; N, P5,000. The partners’ profit and loss ratio was 3:2:1, respectively. The pariners decided to liquidate and they sold al non-cash assets for P37.000. After settlement of all labities amounting PI2,000, they stil have cash of P28,000 left for distribution. Assuming that any capital debit balance is uncollectible, the share of Tin the distribution of the P28,000 cash would be: a. 17,800 c. 19,000 b. 18,000 17,000 Dayag 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 6Partnership Liquidation & Incorporations 16. Silverio, Domingo, Reyes, and Pastor are partners, sharing earnings in the ratio of 3/21,4/21,6/21 and 8/21, respectively. The balances of their capital accounts on December 31,2011 are as follows: Silverio P 1,000 Domingo 25,000 Reyes 25,000 Pastor 9,000 60,000 The partners decid to liquidate, and they accordingly conver the noncash assets into P23,200 of cash. After paying the liabilities amounting to P3.000, they have P22,200 to divide. Assume that a debit balance in any partners capital is uncollectble After the P22,200 was divided, the capital balance of Domingo was: a. 3,200 ©. 4,500 b. 3,920 d. 17,800 Dayag 2013 17. After operating for five years, the books of the partnership of Bo and By showed the following balances: Net assets 169,000 Bo, capital 110,500 By, cepital 58,500 IFliquidation takes place at this point and the net assets are realized at book value, the partners are entitled to a. Bo to receive P117,000 & By to recsive P52,000 b. Boto receive P126,750 & By to receive P42,250 ©. Boto receive P84,500 & By to receive P84,500 d. Boo receive P110,500 & By to receive P58, 500 Dayag 2013 18. The following condensed balance shest is presented for the partnership of AA, BB, and CC, Who share profits and losses in the ratio of 4:3:3, respectively: Cash 160,000 Other assets 320,000 Total 480,000 Lisbiltes 180,000 AA, capital 48,000 BB, capital 216,000 CC, capital = 36,000 Total ‘480,000 Partnership Liquidation & Incorporations - NCQ Problems Page 7ADVANCED ACCOUNTING: The partners agreed to dissoive the partnership after selling the other assets for P200,000 Upon dissolution ofthe partnership. AA should have received a 0 . 72,000 b. 48,000 d. 84,000 Dayag 2013 19. The following balance sheet is presented for the partnership of A, B, and C, who share profits and losses in the respectively rato of 5:3:2 Assets Liabilties and Capital Cash 120,000 Liabilities 280,000 Other assets 4,080,000 A, capital 560,000 B, capital 320,000 C, capital 40,000 Total 1,200,000 Total 1,200,000 Assume that the three partners decided to liquidate the partnership. If the other assets are: sold for P800,000, how should the available cash be distributed to each partner? A B c a. 280,000 320,000 40,000 b. 324,000 236,000 16,000 c. 410,000 230,000 0 d. 412,000 228,000 0 Punzalan 2014 20. The following condensed balance sheet is presented forthe partnership of Smith and Jones, wio share profits and losses in the ratio of 60:40, respectively: Other assets 450,000, ‘Smith, loan 20,000 470,000 Accounts payable 120,000 Smith, capital 495,000 Jones, capital 455,000 1P470,000 The partners decided to liquidate the partnership. Ifthe other assets are sold for P385,000, what amount of the available cash should be distributed to Smith? a. 136,000 159,000 b. 156,000 d. 195,000 Punzalan 2014 Partnership Liquidation & Incorporations - NCQ Problems Page 8Partnership Liquidation & Incorporations 21. Peter and John, who share profits and losses equally, decided to liquidate their partnership ‘when their net assets amounted to P260,000, and capital balances of P'170,000 and P90,000, respectively. Ifthe noncash assets were sold for amount equal o its book value, what amount of cash should Peter and John received? Peter John a. 130,0 130,000 b. 170,000 90,000 c. 180,000 80,000 d. 195,000 65,000 Punzalan 2014 The following condensed balance sheet is presented for the pertnership of Axel, Barr, and Cain, who share profits and losses in the ratio of 4:3:3, respectivaly Cash 100,000 Other assets 300,000 Total 400,000 Liabilities 150,000 Axel, capital 40,000 Barr, capital 180,000 Cain, capital 30,000 Total 400,000 22. The partners agreed to dissolve the parinership ater seling the other asset for P200,000. Upon dissolution ofthe parinership, Axel should have received a 0 c. 60,000 b. 40,000 d. 70,000 Punzalan 2014 23. Cohen, Butler, and Davis are partners in a partnership and share profits and losses 50%, 30%, and 20%, respectively. The partners have agreed to liquidate the partnership and anticipate that liquidation expenses will total P14,000. Prior to the iquidation, the partnership balance sheet reflects the following book values Cash 21,000 Non-cash assets 248,000 Notes payable to Davis, 32,000 Other liabilities 414,000 Cohen, capital 60,000 Butler, capital (deficit) (10,000) Davis, capital 33,000 Partnership Liquidation & Incorporations - NCQ Problems Page 9ADVANCED ACCOUNTING: Assuming that the actual iquidation expenses are P14.000 and that non-cash assets are sold for P218,000, how would the assets be distributed to partners if Butler has net personal assets of P8500? Cohen Butler. = Davis a. 15,500 b. 21,429 = 49571 ©. 30,650 - 53,260 d. 27,500 - 52,000 Punzalan 2014 24. Batman and Robin decided to liquidate their partnership business on June 1,201, under lump- sum iquidation. The partners hed been sharing profs and losses on 60:40 rato. The statement, of fincial poston prepered on the day of iquidation began wes 2s follows: Assets Liabiltes and Capital Cash P 18,000 Accounts payable P 42,000 Receivables 75000 Batman, loan 24,000 Inventory 90,000 Batman, capital 102,000 Other assets 84,000 Robin, capital 90,000 Robin, drawing 9,000 Total ‘267,000 Total ‘267,000 During June, one-third of the receivables was collected; P45,000 of inventory was sold at an average of 70% of book value; other assets were sold for P36,000, How much should Batman and Robin receive upon liquidation? Batman Robin a. 32,000 P3640 b. PBt00 —P27,400 c. 40,200 P41,600 d. 59,100 P54.400 Guerrero 2013 25. Pepe and Pilar started a partnership some years ago and managed to operate profitably for several years, Recent, however, they lost a substantial legal suit and incurred unexpected losses on accounts receivable and inventories. As a result they decided to liquidate. They sold ll assets and only P162,000 was avalible to pay lables, which amounted to P297,000. Their capital account balances before the liquidation and their proft and loss sharing ratios are shown below: Capital Profit and Balances Loss ratios Pepe 207,000 60% Pilar 121,500 40% Partnership Liquidation & Incorporations - NCQ Problems Page 10Partnership Liquidation & Incorporations Pepe's personally insolvent after investing cash to pay the unpaid creditors, but Pilar has personal assets in excess of P900,000. Inthe settlement to parhers, how much cash should Pepe receive? a. P63,900 ce. P15,300 b. PO! d. P63,000 Guerrero 2013, 26. On July 1, 2013, the Chess Partnership has the folowing statement of financial positon: Liabilties and Capital Cash P 20,400 Accounts payable 122.400 Other assets 219,600 Rook, loan 14,400 Rook, capital (50%) 28,800 _ King, capital (50%) 74,400 Total 240,000 Total 240,000 As of July 1, 2013, the partners have personal net worth as follows: Rook King Assets 62,400 P91,200 Liabilities 56,400 122,400 The personal net worth of each partner does not include any amounts clue to or fom the partnership. Assume the other assets are sold for P 123,600 afferincuring iquidation expenses of P4,800. How much should King receive? a. P-0- ©. 24,000 b. P22,800 d. P16,800 Guerrero 2013, 27. The following statement of nancial position is presented forthe partnership of David, Ebro, and Franco who share profits and losses inthe rafo of 53:2 respectively: Cash 60.000 Liabiities 140,000 Other assets 540,000 David, capital 280,000 Ebro, capital 160,000 Franco, capital 20,000 Total 800,000 Total 600,000 The partners decide to liquidats the partnership. Ifthe other assets are sold for P400,000, how should the available cash be distributed to each partner? a. David, P280,000; Ebro, P160,000; Franco, P20,000 b. David, P210,000; Ebro, P118,000; Franco, F8,000 c. David, P206,000; Ebro, P114,000; Franco, PO d. David, P205,000; Ebro, P115,000; Franco, PO Guerrero 2013, Partnership Liquidation & Incorporations - NCQ Problems Page 11ADVANCED ACCOUNTING: 28. 30. After operating for fve years, the books ofthe partnership of oe and Letty showed the folowing balances: Netassets 130,000 soe, capital 85000 Laty, capital 45,000 Ifliquidaton takes place at this point and the net assets are realized at book value, the partners are entitled to: a. Joe to receive P80,000 & Letty to receive P40,000 b. Joe to receive P97,500 & Letty to receive P32,500 ©. Joe to receive P65,000 & Letty to receive P65,000 d. Joe to receive P85,000 & Letty to receive P45,000 Guerrero 2013 A,B and C are partners in a texte distribution business, sharing profits and losses equally. On December 31, 2013, the partnership capital and the partners’ drawing were as follows: A B c Total Capital P1000 80,000 P300.000 480.000 Drawing 60000 40,000 ©» 20,000 120,000 The partnership was unable to collect on its trade receivables, and it was forced to liquidate. The operating profits for 2013 amounted to P72,000, and was all exhausted including the partnership assets. Unsettied creditors’ claim at December 31,2013 amounted to P84,000. B and C have substantial private resources, but A has no availabe free assets The final cash distibution to C was: a. P162,000 b. P108,000 cc. P84,000 d. P78,000 Guerrero 2013 ‘As of December 31,2018, the books of AME Pernership showed carta belances of A, P40,000; M, 25,000; E, P5,000. The partners prof and loss rato was 3:2: respecively. The parners decided to liquidate and they sold all non-cash assets for P37, 000. After setlement of al abilities amounting o P12,000, they sil have cash of P28,000 let for disbbution. Assuming that any capital debit balance is uncollectible, the share of Ain the distribution ofthe P28,000 cash would be: a. P17,800 c. P19,000 b. P18,000 d. P17,000 Guerrero 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 12Partnership Liquidation & Incorporations Loss absorption by solvent partner 31. Gilbert, Joseph and Li are partners with capital balance of P350,000, P250,000 and P350,000 and sharing profits 30%, 20% and 50% respectively. Partners agree to dissolve the business and upon iguidation, al ofthe partnership assets are sold and sufficient cash is realized to pay all the claims except one for P50,000. Liis personally insolvent, bt the other two partners are able to meet any indebtedness tothe firm. On the remaining clam against the partnership, Gilbert is to absorb. a. P40,000 ce. P30,000 b. P15,000 d. P25,000 Guerrero 2013, Safe Payment Schedule Priority of Payment Parinerto be paid first 32, PP, QQ, and RR, partners toa firm, have capital balances of P11,200, P13,000, and P5,800, respectively, and share profits in the rato of 4:2:1, Prepare a schedule showing how available cash will be given to the partners as it becomes available. Who among the partners shall be paid frst with an available cash of P1400? a. ag c RR b. Noone d. PP Dayag 2013 1st Priority Payment 33, The August, Albert and Gerry partnership became insolvent on Januery 1, 2011, and the partnership is being liquidated as soon as practicable In this respect the following information for the partners has been marshaled: Capital Balances Personal Assets Personal Liabilities August P 70,000 80,000 40,000 Albert (60,000) 30,000 50,000 Gemy (30,000) 70,000 30,000 Total (20,000) Assume that residual profits and losses are shared equally among the three partners. Based on ths information, calculate the maximum amount that August can expect to receive from the partnership liquidation is: a. 20,000 . 70,000 b. 40,000 d. 110,000 Dayag 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 13ADVANCED ACCOUNTING: 34. Partners Almond, Bamey, and Colors have capital balances of P20,000, P50,000, and 90,000, respectively. They split profits in the rafio of 2:44, respectively. Under a safe cash distribution plan, one ofthe partners will get the folowing total amount in liquidation before any other partners get anything a 0 ©. 40,000 b. 15,000 d. 180,000 Punzalan 2014 2 Priority Payment 35. The POR Partnership is being dissolved. Al abilities have been paid and the remaining assets are being realized gradually. The equity ofthe partners is as follows: Loans to Partners! (from) Proft and Accounts Parnership Loss Ratio P —P24,000 6,000 3 Q 36,000 3 R 60,000 (10,000) 4 The second cash payment to any Partner(s) under a program of priorities shall be made thus: a. ToR,P2,000 c. ToR,P8,000 Dayag 2013 b. To Q, P6,000 d. To Q, P6,000 & R, P8,000 1% Protty & Partial 2» Priority 36. NN, 00, PP, and GG, partners to a law firm, shares profits atthe ratio of §:3:1:1. On June 30, relevant pariners’ accounts follow: Advances. Loans Capital Or. Cr. Cr, NN - 20,000 160,000 00 40,000 120,000 PP P18,000 - 60,000 6G 10,000 - 100,000 On this day, cash of P72,000 is declared as available for distribution to partners as profits Who among the partners will benef ftom the P72.000 cash distribution? a. PP andGG All, equally b. OO and GG d. NNand OO Dayag 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 14Partnership Liquidation & Incorporations Third Prony of Payment 37. After incurring losses resulting from very unprofitable operations, the Goh Kong Wei Partnership decided to liquidate when the partners! capital balances were: Goh, capital (40%) 80,000 Kong, capital (40%) 130,000 Wei, capital (20%) 96,000 The non-cash assets were sold in installment. Available cash were distributed to partners in every sale of non-cash assets. Aiter the second sale of non-cash assets, the pariners received the same amount of cash in the distribution. And from the third sale of non-cash assets, cash available for distribution amounts to P28,000, and unsold non-cash assets has a book value of PI2,500. Using cash priority program, what amount did Wei received in the third installment of cash? a 11600 5600 b. 8,000 d 0 Punzalan 2014 6, 2! 83 i 38. A cash distribution plan (payment priority program) for the Matthew, Norell, and Reams partnership appears below: Priority Creditors Matthew Norell Reams First P300,000. 100% Next P8O,000. 70% 30% Next P70,000. an a7 Remainder... 2% = H% = | P550.000 of cash is to be distributed, how much will be received by the priority creditors, Matthew, Norell and Reams? Dayag 2013, Priority Creditors Matthew Norell Reams a. Poo Poo Po Po b. 0 121,000 187,000 242,000 c. 300,000 55,000 85,000 110,000 4. 300,000 108,000 58,000 4,000 Parinership Liquidation & Incorporations - MCQ Problems Page 15ADVANCED ACCOUNTING: First instalment Cash available for safe payment 38. When Mikki and Mylene, partners who share earings equally, were incapacitated in an airplane accident, aiquidator was appointed to wind up theit business. The accounts showed cash, P35,000; other assets, Pl 10,000; Liabilities, P20,000; Mikki, capital, P71,000; and Mylene, cepital, P54,000. Because of highly specialized nature of the noncash assets, the liquidator anticipated that considerable time would be required to dispose them. The expenses of liquidating the business (advertising, rent, travel, et.) are estimated at P10,000. How much cash can be distributed safely to each partner at this point? a. 5,000 to Mikki and PO to Mylene b. 5,000 to Mikki and P500 to Mylene ©. 3,000 to Mikki; and PO to Mylene d,P5,000 to Mikki; and P1,000 to Mylene Dayag 2013 40. Kay and Loy, partners who share profits and losses equally decided to liquidate ther pertnership business in instalment. The statement of nancial postion showed Cash, P35,000; Lables, P20,000, Kay capital, P71,000; and Loy capital, P54,000. Antcinated liquidation expenses amounts to P0000, How much cash can be distributed safely o each partner atthis point? Kay Loy a. P5000 Po b. P5900 P50 c. P3000 PO 4, P5000 1,000 Guerrero 2013 Cash received by a partner 41. AA, BB, and CC are partners in ABC Partnership and share profits and losses 50%, 30% and 20%, respectively. The partners have agreed to liquidate the partnership and some liquidation expenses to be incurred. Prior tothe liquidation, the partnership balance sheet reflects the following book values: Cash P 25,200 Non-cash assets 267,600 Notes payable to CC 38,400 Other liabilities 184,800 AA, capital 72,000 BB, capital deficit ( 42,000) CC, capital 39,600 Assuming that the actual liquidation expenses are P16,800 and that the non-cash assets with a book value of P240,000 are sold for P216,000. How much cash should CC receive? a. 46.457 ©. T4571 b. 39,600 dO Dayag 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 16Partnership Liquidation & Incorporations 42. The partners of the M&N Partnership started liquidating their business on July 1,2012, at which time the partners were sharing profits and losses 40% to M and 60% to N. The balance sheet ofthe partnership appeared as follows: MAN Partnership Balance Sheet - July 1,2012 Assets Liabilities & Equity Cash 8,800 Accounts payable P32,400 Receivable 22,400 M, capital 31.000 Inventory 39,400 M, drawing 5,400) 25,600 Equipment 65,200 N, capital 33,200 Accumulated N, drawing 200) 33,000 Depreciation (30,800)34400 N, loan 74,000 Total 105,000 Total 405,000 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 32.400. How much of the cash was paid to M's capital on July 31, 20127 a. 25.600 c. 320 b. 5,400 a0 Dayag 2013 43. The condensed balance sheet of Alex, Jay, and John as of March 31, 2010 follows Cash 28,000 Liabilities 48,000 Other assets 265,000 Alex, capital 95,000 ay, capital 80,000 ohn, capital 70,000 Total 293,000 Total 203,000 The income and loss ratio is 50:25:25, respectively. The partners voted to dissolve their partnership and liquidate by selling other assets in installments. P70,000 was realized on the first cash sale of other assets with a book valus of P150,000. After settlement with creditors, all cash available was distributed to the partners. How much cash was received by John? a 10,500 21,250 b. 20,000 d. 32500 Punzalan 2014 44, Partners Bee, Cee, Dee and Gee who share profits §:3:1:1, respectively, decide to liquidate their partnership. Capital balances before liquidation are: Bee 60,000 Coe 40,000 Dee 30,000 Gee 10,000 Partnership Liquidation & Incorporations - NCQ Problems Page 17ADVANCED ACCOUNTING: The partners agree to the following: (1), Partnership's computer equipment with a book value of P12,000 is tobe taken over by partner Bee at a price of P15,000. (2) Partnership's labiities are to be paid off and the balance of cash on hand, 30,000 is to be divided in @ manner that will avoid the need for any possible recovery of cash from a partner. How much ofthe P30,000 cash be cistrbuted to Partner Cee? a. P10,000 c. P20,000 b. P-0- d. P15,000 Guerrero 2013 45 The statement of nancial positon of Poe and Ping Partnership on May 1,2013 before liquidation is as follows Assets Lisbilties and Capital Cash 14,000 Liable 35,000 Other assets 71,000 Poe, capital (70%) 28,000 Ping, capital (30%) 22,000 Total 85.000 Total 85,000 In May, assets with a book value of P34,000 are sold for P29,000. Creditors are paid in ful Liguidation expenses of P1,000 is paid, and P3,000is pad to partners In May, how much dd Ping receive? a Po b. P3,000 c. P 900 d. P2,100 Guerrero 2013 46. Jay, Kay, and Ell are partners in JKE Partnership and share profits and losses, 5:3:2, respectively. The partners have agreed to liquidate the partnership. Prior to liquidation, the partnership statement of financial position shows the following book values: Cash 25,200 Non-cash assets 297,600 Notes payable to Ell 38400 Other iailies 164800 day, capital 72000 Kay, capil (12,000) El, capital 39600 Liquidation expenses of P| 6,800 are paid. Non-cash assets with a book value of P240,000 are sold for P216,000. How much cash should Ell recsive? a. P74,571 c. P39,580 b. P46,458 d. P37,600 Guerrero 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 18Partnership Liquidation & Incorporations 47. The statement of financial postion of the Watch Partnership on October 10,2013 when it decided to liquidate was as follows: Cash P 40,000 Liabities P 60,000 Other assets 125,000 Rolex capital (50%) 45,000 ‘Swatch capital (30%) 42,000 Timex capita (20%) 18,000 Total 165,000 Total 165,000 ‘Assume the other assets with a book value of P90,000 are sot for P50,000 and tat all availabe cash, except fora PI,000 contingency fund, is distbuted immediately. In this case Rolex should receive nothing Swatch should receive P10,000 Timex should receive P1,000 The cash should be distributed in the profit and loss ratio Guerrero 2013 48. The condensed statement of financial position of Alex, Jay and John partnership as of March 31,2013 folows: Cash P 28,000 Other assets 265.000 Total 293,000 Libis 48,000 ‘Alex, Capital 95,000 Jay, Capital 80,000 John, Capital 7,000 Total 293,000 Income and loss ratio is 50:25:25 respectively. The partners voted to dissolve the partnership and liquidate by seling assets in instalments, P70,000 was realized on the frst cash sale of other assets which has a book value of PISO,000. After setlement wth creditors, all cash available was distributed topartners. How much cash was received by John? a. P10,500 cc. P21,250 b. 32,500 d. 20,000 Guerrero 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 19ADVANCED ACCOUNTING: Cash received by individual partners 49. balance sheet for the partnership of KK, LL and MM, who share profits 2:1:1 respectively, shows the following balances just before iquidation: Cash Other Assets Liab: KK.Cap, ULCap, MM, Cap 48.000 238,000 80.000 88,000 —P62,000 _P56,000 Inthe first month offiquidation, P'128,000 was received on the sale of certain assets. Liquidation expenses of P4,000 were paid, and addtional liquidation expenses of P3,200 are anticipated before liquidation is completed. Creditors were paid P2400. The available cash was distributed to the partners. The cash to be received by each partner based on the above data: Dayag 2013 KK UL MM KK LL MM a. 56600 28,300 28,300 <, 20400 32700 26,700 b. 86,000 61,000 §5,000 4. 88,000 62000 56,000 50. W, X, and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The condensed balance sheet of Heidi Partnership as of December31,2012 is: Heidi Partnership Balance Sheet December 31,2012 Cash P-50,000 Other assets 130,000 Total assets 180,000 + Libiltios P 40,000 W, capital 60,000 X, capital 40,000 Y, capital 40,000 Total abilities and capital 180,000 Assume instead thatthe Heidi Partnership is dissolved and liquidated by instalments, andthe first relization of P 40,000 cash is onthe sale of other assets with book value of P60.000. After the payment of ables, the available cash shall be distributed to W, X, and Y, respectively, as follows: a. 36,000; P27,000; and, P27,000 . 44,000; P28.000; and, P28,000 a P16,000; P12,000; and, P12,000 d. 24,000; P13,000; and, P13,000 Dayag 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 20Partnership Liquidation & Incorporations 51. The balance sheet ofthe partnership of Salve, Galo, and Norma, who share in the profits and losses in the rato of 5:3:2, respectively is as follows: Assets Liabilities and Capital Cash 30,000 Liabilities, 50,000 Other assets 320,000 Salve, capital 80,000 Galo, capital 115,000 Norma, capital 105,000 Total 360,000 Total 350,000 The partnership is liquidated by instalment. The fst sale of non-cash assets with a book value of P150,000 realizes P100,000, How should the remaining cash be istibuted? Salve Galo 50,000 30,000 40,000 24,000 0 31,000 0 48,000 Punzalan 2014 52, The December 31,2013 statement of financial position of DJM Partnership are as folows: Cash 20,000 Receivable fom Day 20,000 Other assets 420,000 ‘Accounts payable ‘170,000 Day, capital 120,000 say, capil 90,000 May, capital 80,000 The partners’ profi and loss perventage are Day, 50%; Jay, 30%; and May, 20%. On January 1 ofnnext year, the partners decide to liquidate the partnership. They agree that all cash should be cistibuted as it becomes available during the liquidation process. If cash of P220,000, including the P20,000 cash on hand becomes available, it should be distributed first to setle the accounts payable and then to: Day Jay May a. P25,000 P15,000 P10,000 b. P-O- — P26,000 -P24,000 c. PI0,000 32,000 P-8,000 d. P-0- —P18,000 -P32,000 Guerrero 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 21ADVANCED ACCOUNTING: 53. The stalementoffnancal postion of QRST Partnership jus prior to iqudaon shows Assets 90,000 Liabilities 15,000 Q oan 5,000 Q capital 20,000 R, capital 20,000 8, capital 20,000 T, capital 10,000 Total 30,000 Q,R, S, and T share profits and losses in the ratio of 2:1:1, respectively. Certain assets were sold for P45,000. Creditors were paid in full amount owed and cash of P20,000 were distributed to the partners, How would the P20,000 cash be distributed to the partners? Q R s T P2500 P8750 P8750 P-0- PO 20,000 P. P-0- 10,000 P10,000 P-0- P5000 P5000 P10,000 P-0- Guerrero 2013 54. L,M,Nand O partners toa law firm share profits 5:31 respectively. Partners accounts prior to liquidation were as folows: ‘Advances (Dr) Loans (Cr) Capitals (Cr) L - 5,000 40,000 M - 10,000 30,000 N 4,500 15,000 Q 2,500 : 25,000 At this point, cash of Pl 8,000 is availabe for distribution to the partners. How much of the Pl 8,000 cash should be distrbuted to each partner? L M N 0 a Pl —P18.000 PA» PO bo PO | PO PO P1800 c PO =P 6625 PO PL1375 d. P00 P 5400 PI,800 P 1,600 Guerrero 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 22Partnership Liquidation & Incorporations 55. 56. The following statement of financial position is for the partnership of D, E and F: Cash P 20,000 Liabilities, 50,000, Other assets 180,000 _D, capital (40%) 37,000 E, capital (40%) 65,000 F, capital (20%) 48,000 Total « 200000 Total 200,000 Figures shown parentheticlly reflect agreed proft and loss sharing percentages. Ifthe fm as, shown on the original balance sheet, is dissolved and liquidated by seling assets in installments, the frst sale of ion-cash assets having a book value of P20,000 realizes P50.000, and cash of Pl 7,000 after setlement wit creditors is distributed; the respective partners would receive (to the nearest peso. D, P8,000; E, P8,000; F, P4,000 b, D,6,667; E,6,667; F,6,666 ©. 13,333; F,6,667 d ,1,000; F,16,000 Guerrero 2013 Jacob, Santos, and Hervas, partners, share net income and loses in the ratio of 5:32. The partners decided to liquidate the partnership. Their statement of financial postion prior to liquidation is: Assets Liabilities & Capital Cash P.40,000 Liabilities P60,000 Other assets 210,000 Jacob, loan 8,000 Jacob, capital 49,000 Santos, capital 72,000 Hervas, capital 70,000 Total ‘250,000 Total Liabilities & Capital 250,000 The partnership isto be liquidated by installment. The first sale of non-cash assets with a canying amount of P| 20,000 realized P&0,000. Liquidation expenses paid amounted to P2,000. How much cash should be distributed to each partner?. Jacob Santos. Hervas a. None P35,400 45,600 b. 32000 62,400 63,600 c. None 9,600 28,400 d. None 27,600 40,400 Guerrero 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 23ADVANCED ACCOUNTING: 57. The partnership of Javier, Kerim, and Laurel share profits and losses inthe ratio of 53:2, respectively. The partners voted to dissolve the partnership when is assets, iabilties, and capital were as folows: Assets Cash Other assets Total Liabiltes and Capital 40,000 Liabilties 60,000 210,000 Javier, capital 48,000 Karim, capital 72,000 Laurel, capital 70,000 Total 250,000 250,000 The partnership will be quidated over a prolonged period of time! As cash is avaiable it wll be distibuted to the partners. The frst sale of non-cash asseis having a book value of P120,000 realized P90,000. How much cash shouldbe cstributed to each partner ate this sale? a. Javier, PO;Karim, P28,800; Laurel, P41, 200, . Javier, Po;Karim, P30,000; Laurel, P40,000 ¢. Javier, P35,000; Kerim, P21, 000; Laure, P14,000 d. Javier, P45,000; Karim, P27,000; Laurel, P18,000 Comprehensive Questions 1 & 2 are based on the following Guerrero 2013 Dayag 2013 58. The assets and equities of the Queen, Reed, and Stac Partnership at the end of its fiscal year fon October 31, 2011 are as follows: Assets Cash P 15,000 Roceivables-net. 20,000 Inventory 40,000 Plant assets-net........ 70,000 Loan to Reed — 5,000 Total Assets 150,000 Liabilities and Equity Liabilities P 50,000 Loan from Stac 10,000 ‘Queen, capital-30% 45,000 Reed, capital-50% 30,000 Stac, capital - 20% 15,000 Total Liabilties and Equity. PI50,000 The partners decide to liquidate the partnershio. They estimats that the noncash assets, other than the loan to Reed, can be converted into PI00,000 cash over the two-months period ending December 31, 2011. Cashis tobe distributed tothe appropriate parties as itbecomes available during the liquidation process. The partner most vulnerable to partnership losses on liquidation is: a. Queen b. Reed c. Reed and Queen equally d. Stac Partnership Liquidation & Incorporations - NCQ Problems Page 24Partnership Liquidation & Incorporations 59. Using the same information in No. 58, and P85.000 is available for fist distribution, it should be paid to Priority Creditors Queen Reed Stac a 60,000 p5o00 oP 0 P O b. 60,000 1500 2,500 4,000 c. 50,000 5,000 0 10,000 d. 50,000 12,000 0 3,000 60. The partnership of AA, BB, and CC was dissolved on June 30, 2012 and account balances after non-cash assets were converted into cash on September 1,2012 are: Assets Liabilities and Equity Cash ‘..P50.000 Accounts payable 120,000 AA, capital (30%) 90,000 BBB, capital (30%) (60,000) CC, capital (40%) (100,000) Personal assets and labiities of the partners at September 1, 2012 are: Personal Personal Assets _Liabilties AA 80.000 90,000 BB 100,000 61,000 cc 192,000 80,000 FCC contributes P70.000 tothe partnership to provide cash to pay the creditors, what amount of AA's P90,000 partnership equity would aopear to be recoverable? a. 90,000 c. 79,000 b. 81,000 d. None Dayag 2013 61. The following account balances were available for the Perry, Quincy and Renquist partnership just before it entered liquidation: Cash 90,000 Liabilities 170,000 Non-cash assets 300,000 Pemy, capital 70,000 Quincy, capital 50,000 Renquist, capital 400,000 390,000 390,000 Pemy, Quiney and Renquist had shared profits and losses in a ratio of 2:4:4. Liquidation expenses were expected to be P8 000. All partners were solvent, Partnership Liquidation & Incorporations - NCQ Problems Page 25ADVANCED ACCOUNTING: What would be the minimum amount for which the non-cash assets must have been sold for, in order for Quincy to receive some cash from the liquidation? a. Any amount in excess of P175,000 b. Any amount in excess of P117,000 c. Any amount in excess of P183,000 d. Any amount in excess of P198,667 Dayag 2013 Questions 1 & 2 are based on the following Pungalan 2014 The ABC Partnership has assets with book value of P240,000 and a market value of P195,000, outside liabilities of P70,000, loans payable to Pariner Able of P20,000, and capital balances for Parinors Able, Baker, and Chapman of P70,000, P30,000, and P50,000, respectively. The partners share profits and losses equally. 62 How would the first P100,000 of available assets be distributed? a. 70,000 to outside liabilities, P20,000 to Able, and the balance equally among partners, b. 70,000 to outside labilties, and P30,000 to Able. c. 70,000 to outside labilties, P25,000 to Able, and P5,000 to Chapman. d. 0,000 to Able, P20,000 to Chapman, and the balance equally among partners. 63. Ifall outside creditors and loans to partners had been paid. How would the balance of the assets be distributed assuming Chapman had already received assets with a value of P3 0,002 a. Each of the partners would received P25,000. b. Each of the partners would received P40,000. c. Able: P70,000, Beker: P30,000, Chapman: P20,000 d. Able: P55,000, Baker: P15,000, Chapman: P5,000. Questions 1 & 2 are based on the following Punzalan 2014 ‘As of December 31, the books of AME Partnership showed capital balances of: A - P40,000; M - 25,000; and E - P5,000. The partners’ proft and loss ratio was 3:2:1, respectively. The partners decided to dissolve and liquidate. They sold all the non-cash assets for P37,000 cash. After settlement ofall liabilities amounting to P'12,000, they still have P28,000 cash left for distribution 64. The loss on the realization of the non-cash assets was a. 40,000 ©. 44,000 b. 42,000 d. 45,000 65. Assuming that any partner’s capital debit balance is uncollectible, the share of Ain the 28,000 cash for distribution would be a. 19,000 ©. 17,800 b. 18,000 d. 40,000 Partnership Liquidation & Incorporations - NCQ Problems Page 26Partnership Liquidation & Incorporations 66. Partner Morgan is personally insolvent, owing P600,000. Personal assets will only bring 200,000 when liquidated. At the same time, Morgan has a credit capital balance in the partnership of P120,000. The capital amounts of the other partners total a crecit balance of 250,000. Under the doctrine of marshaling of assets, how much the personal creditors of Morgan can collect? a. 120,000 c. 320,000 b. 200,000 d. 570,000 Punzalan 2014 67. Pariners Able, Baker, and Chapman, who share proft and loss equally, heve the following personal assets, personal liabilies, and parinership capital balances: Able Baker Chapman Personal assets P30,000 P 80,000 P60,000 Personal ibltes 25,000 50,000 72,000 Capital balances 50,000 (32000) 70,000 After applying the doctrine of marshalling of assets, the capital balances of Able, Baker, and Chapman, respectively, would be a. P50,000 (2,000) 58,000 b. 48,000 0 56,000 c. 49,000 0 57,000 d. 34,000 0 54,000 Punzalan 2014 Items 95 and 96 are based on the following data Guerrero 2013 On December 31, 2013, the accountng records ofthe STU Partnership included the folowing ledger account balances: (Dr) Cr ‘Sy, drawing (24,000) Uy, drawing (9.000) Ty.loan 30.000 Sy.capital 123.000 Ty, capial 100.500 Uy, capital 108,000 Total assets of the partnership amounted to P478,500, including P52,500 cash. The partnership was liquidated on December 31, 2008 and Uy received P83,250 cash pursuant othe liquidation. Sy, Ty, and Uy shared income and losses in a 5:32 rato, respectively 68. How much is the loss on realization of assets’? a. P178,750 ©. P23,750 b. P78,750 d. 123,750 Partnership Liquidation & Incorporations - NCQ Problems Page 27ADVANCED ACCOUNTING: 69. How much cashis received by Sy? a. P35,625 ce. P37,125 b. P59,625 d. P13,125 70. Partners Beth, John, and Star who shered profit and losses based on 4:42 decided to liquidate. All assets ofthe partnership were liquidated. The condensed statement of nancial position jst prior to liquidation follows Cash P 100,000 Liabilities PI 40,000 Other assets 400,000 Beth, Loan 10,000 Beth, Capital 45,000 John, Capital 105,000 Ster, Capital 200,000 Total 500,000 Total 500,000 Other assets were sold for P247,500 realizing a loss of Pl 52,500. Parties agreed to ful terminats the partnership's business thus, necessitating distibuton of cash to partners and in the event of capital deficiency, contrbuion of additional cash. The three partners all solvent and could answer any capital defciency. The realization of assets, istibution of loss and payment of ikiltes resulted to the folowing partners loan and capital accounts balances prior to final cash settlement Beth Loan Beth, Capital John, Capital Star, Capital a P10.000 10,000 50,000 165,000 b. 10,000 (16,000) 44,000 169,500 c. 10,000 15,000 55,000 165,000 d. 10,000 45,000 105,000 200,000 Guerrero 2013 INCORPORATION OF PARTNERSHIP Additional Paid-in Capital Ti. J & KK partnership's balance sheet at December 31, 2012, reported the following Total assets, 100,000 Total abilities 20,000 sd, capital 40,000 KK, capital 40,000 On January 2, 2013, JU and KK dissolved their partnership and transferred all assets and liabilities to @ newly-formed corporation. At the date of incorporation, the fair value of the net assets was Pl 2,000 more than the carrying amount on the partnership's books, of which 7,000 was assigned to tangible assets and PS,000 was assigned to goodwill. J and KK were teach issued 5,000 shares ofthe corporation's Pl par value ordinary share, Partnership Liquidation & Incorporations - NCQ Problems Page 28Partnership Liquidation & Incorporations Immediately following incorporation, share premriurn/additional paid-in-capital in excess of par should be credited for: a. 68,000 ce. 77,000 b. 70,000 d. 82,000 Dayag 2013 72. The condensed balance sheet of Adams & Gray, a partnership, at December 31, 2010, follows: Current assets 250,000 Equipment (net) 30,000 Total assets 280,000, Liabilities 20,000 Adams, cepital 460,000 Gray, capital 00,000 Total iabiities and capital 280,000, (On December 31, 2010, the fair values of the assets and labilties were appraised at 240,000 and P20,000, respectively, by an independent appraiser. On January 2, 2011, the partnership was incorporated and 1,000 shares of P5 par value common stock were issued, Immediately after the incorporation, what amount should the new corporation report as additional paid in capita? a. 275,000 ©. 215,000 b. 260,000 a0 Punzalan 2014 Shares Issued 73. Roy and Gil are partners sharing profits and losses in the ratio of 1:2, respectively. On July 1,201, they decided to form the R & G Corporation by transferring the assets and lables from the partnership to the Corporation in exchange ofits shares, The following is the post- closing trial balance of the partrership: Debit Credit Cash P 45.000 Accounts Receivable (net) 60,000 Inventory 90,000 Fixed Assets (net) 174,000 Liabilities P 60,000 Roy, Capital 94,800 Gil, Capital 214,200 369,000 369,000 Partnership Liquidation & Incorporations - NCQ Problems Page 29ADVANCED ACCOUNTING: Itwas agreed that adjustments be made to the folowing assets to be transferred to the corporation: Accounts Receivable 40,000 Inventory 68,000 Fixed Assets 180,600 The R & G Corporation was authorized to issue P100 par preference shares and P10 par ordinary share, Roy and Gil agreed to receive for their equity in the partnership 720 ordinary share each, plus even muliples of 10 shares for their remaining interest. The total number of shares of preference and ordinary share issued by the Corporation in exchange of the assets and liabilties ofthe partnership are: Dayag 2013 Preference Ordinary Preference Ordinary Share Share Share Share a. 2,540 shares 1,500 shares c,«2,642shares 1,440 shares. b. 2,592 shares 1,440 shares d._«2,842shares_ “1,550 shares Total Par Value 74. Partners Art and Tony, who share equally in profits and losses, have the folowing balance sheet a8 of December 31, 2011 Cash P120,000 — Alpayable 172,000 ArReceivable 100,000 Accumdep'n 8,000 Inventory 140,000 Art, capital 140,000 Equipment 80,000 Tony, capital 420,000 Total 440000 Total 440,000 They agreed to incorporate their partnership, with the new corporation absorbing the net assets after the following adjustments: provision of allowance for bad debts of P10,000; restatement of the inventory at its current fair value of P160,000; and, recognition of further depreciation on the equipment of P3,000. The corporation's capital stock is to have a par value of P100, and the partners are to be issued corresponding total shares equivalent to their adjusted capital balances The total par value ofthe shares of capital stock that were issued to partners Art and Tony was: a. 260.000 c. 273,000 b. 267,000 d. 280,000 Dayag 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 30Partnership Liquidation & Incorporations Comprehensive Questions 1 & 2 are based on the following Punzalan 2014 Roy and Gil are partners sharing profits and losses in the ratio of 1:2, respectively. On July 1, 2010, they decided to form the R&G Corporation by transferring the assets and labilties ofthe Partnership to the corporation in exchange forthe latte’s stock. The following is the post-closing tral balance ofthe partnership. Debit Credit Cash 45,000 Accounts receivable (net) 60,000 Inventory 90,000 Fixed assets (net) 174,000 Liabiites 60,000 Roy, capital 94,800 Gil, capital 214.200 369,000 369,000 Itwas agreed that adjustments be made to the following assets to be transferred to the corporation: Accounts receivable 40,000 Inventory 68,000 Fixed assets 180,600 ‘The R&G Corporation was authorized to issue P100 par preferred stock and P10 par common, stock. Roy and Gil agreed to receive for their equity in the partnership 720 shares of the common stock each, plus even multiples of 10 shares of preferred stock for their remaining interests, 75. The total number of shares of preferred and common stocks issued by the corporation in exchange forthe assets and liabilies ofthe parinership are: Preferred Common 2540 shares 1,500 shares 2502shares 1,440 shares. 2642 shares 1,440 shares 2642shares ‘1,550 shares Partnership Liquidation & Incorporations - NCQ Problems Page 31ADVANCED ACCOUNTING: 76. The distribution of the stocks to Roy and Gil would be: Roy Gil Prefered Common Preferred Common 785shares 720shares 1.384 shares 720 shares, 773shares 750shares ‘1,843 shares 750 shares 758 shares 720shares ‘1,834 shares 720 shares, 738 shares 720shares «1,758 shares 720 shares, CORRECTION OF ERROR 77. X and ¥ are in partnership, shering pros equally and preparing their accounts to 31 December each year. On 1 July 2011, Z joined in the parinership, and from that date profits are shared X 40%, Y 40%, and Z 20% Inthe year ended 31 December 2011, profits were 6 months to 31 June 2011 200,000 6 months to 31 December 2011 300,000 twas agreed that X and Y only should bear equally the expense for a bad debt of P40,000 written-off in the six months to 31 December 2011 in arriving at the P300,000 profit. Which of the following correctly states X's proft share forthe year? a. 216,000 c. 220,000 b. 200,000 d. 224,000 Dayag 2013 78. J.J and KK are pariners sharing profits 60% and 40% respectively. The average profits for the past two years are to be capitalized at 20% per year (for purposes of admitting a new Partner) in determining the aggregate capital of JJ and KK, after adjusting the profits for the following items omitted from the books: Omissions at Year-End 2011 2012 Prepaid Expense P1600 Accrued Expense 4,200 Deferred Income P1400 Accrued Income 41,000 Other pertinent information are as follows: 2011 2012 Net income of partnership 14,400 P13,600 Capital accounts, end of the year JJ 45,400 54,000 KK 45,000 55,000 Partnership Liquidation & Incorporations - NCQ Problems Page 32Partnership Liquidation & Incorporations The aggregate capital of JJ and KK after capitalizing the average profits at 20% per annum is: a. 67,765 69,000 b. 72,105 d. 71,000 Dayag 2013 79. RR and PP share profits afer the provision of annual salary allowances of P14,400 and 13,200, respectively inthe rato of 6:4. However, if partnership's net income is insufficient to provide for said allowances in full amount, the net income shall be divided equally between the partners. In 2011, the following errors were discovered: Depreciation for 2011 is. understated by P2, 100, and the inventory on December 31, 2011 is overstated by P11,400. The partnership net income for 201 1 was reported to be P19,500, The capital accounts ofthe partners should be increased (decreased) by: a. RR, P(6,540); PP, P(6,540) c. RR, P(6,960); PP, P6,540 b. RR, P3,000; PP,P3,000 4. RR, P(6,750); PP, P(6,750) Dayag 2013 80. Abe, Bert, and Carl are partners sharing profit on a 7:21 ratio. On January 1,2013, Dave was admitted into the parbiership with 15% share in profits, The old partners continue to participate in profs in their orginal ratios. For the year 2013, the partnership showed a prof of P15,000. However, itwas discovered that the folowing items were omitted in the fir's book Unrecorded at year end 2012 2013, Accrued expense P1050 ‘Accrued income 875 Prepaid expenses P1400 Uneamed income P1225 The share of partner Bertin the 2013 net profits: a. P2,197.50 ©. P2,637.00 b. P2,490.50 d. P3,149.75 Guerrero 2013, COMPREHENSIVE Admission & Retirement 81. The partners’ capital (income-sharing ratio in parentheses) of Nunn, Owen, Perk & Quan LLP on May 31, 2012, were as follows: Nunn (20%) 60,000 80,000 70,000 40,000 Total partners’ capital (20%) 250,000 Partnership Liquidation & Incorporations - NCQ Problems Page 33ADVANCED ACCOUNTING: (On May 31, 2012, withthe consent of Nunn, Owen, and Quan: a. Sam Park rated from the partnership and was paid P50,000 cash in full settlement of his interest inthe partnership, b. Lois Reed was admitted to the partnership with a P20,000 cash investment for a 10% interest in the net assets of Nunn, Owen and Quan. The capital account to be credited to Reed is a. 22,000 . 20,000 b. 27,000 d. 25,000 Dayag 2013 Questions 1 & 2 are based on the following Punzalan 2014 On June 30, 2010, the condensed balance sheet for the partnership of Eddy, Fox, and Grimm together with their respective profit and loss sharing percentage, was as follows: Assets, net of lables 320,000 Eddy, capital (50%) 160,000 Fox, capital (30%) 96,000 Grimm, capital (20%) 84,000 320,000 82. Eddy decided to retire from the partnership and by mutual agreement is to be paid P180,000 out of partnership funds for his interest. Total goodwill implicit in the agreement is to be recorded. After Eddy's retirement, what are the capital belances of the other partners? Fox Grimm a. 84,000 56,000 b. 102,000 68,000 ©. 108,000 72,000 d. 120,000 80,000 Assume instead that Eddy remains in the partnership and that Hamm is admitted as anew partner with a 25% interest inthe capital ofthe new partnership fora cash payment of P 140,000. total goodwill implicit in the transaction is to be recorded. 83. Immediately after admission of Hamm, Eddy's capital account balance should be a. 280,000 c. 160,000 b. 210,000 d. 140,000 Partnership Liquidation & Incorporations - NCQ Problems Page 34Partnership Liquidation & Incorporations Admission & Lumpsum Li Questions 1 & 2 are based on the following: Punzalan 2014 The following condensed balance sheet is presented forthe partnership of Alfa and Beda, who share profits and losses in the ratio of 60:40, respectively Cash 45,000 Other assets 625,000 Beda, loan 30,000 700,000 Accounts payable 120,000 Alfa, capital 348,000 Beda, capital 232,000 700,000 84, The assets and liabilities are fairly valued on the balance sheet. Alfa and Beda decide to admit Capp as a new partner with a 20% interest. No gooduill or bonus is to be recorded What amount should Capp contribute in cash or other assets? a. 110,000 c. 140,000 b. 116,000 d. 145,000 85. Instead of admitting a new partner, Alfa and Beda decide to liquidate the partnership. Ifthe other assets are sold for P500,000, what amount ofthe available cash shouid be distributed to Alfa? a. 255,000 ©. 327,000 b. 273,000 d. 348,000 Admission & Instalment Liquidation Questions 1 & 2 are based on the following Punzalan 2014 N,X, and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The condensed balance sheet of NXY Partnership as of December 31, 2008 is: Cash 50,000 Other assets 130,000 Total 180,000 Liabilities 40,000 N, capital 60,000 X, capital 40,000 Y, capital 40,000 Total P 180,000 Partnership Liquidation & Incorporations - NCQ Problems Page 35ADVANCED ACCOUNTING: 86. AH the partners agree to admit Z as a 1/5 partner in the partnership without any goodwill or bonus. Z shall contribute assets amounting to a 28,000 35,000 b. 10,000 d. 60,000 87. The NXY Parinership is dissolved and liquidated by installments. The first realization of P40,000 cash is on the sale of other assets with book value of P80,000. Aiter payment of the liabilities, the cash availabe is distributed to N, X, and Y, respectively as follows: a. 36,000 27,000 27,000 b. 44,000 28,000 28,000 ©. 16,000 12,000 12,000 d. 24,000 13,000 13,000 Formation, Admission & Profit Distribution Questions 1 thru 5 are based on the following: Punzalan 2014 (On May 1, 2010, the business assets of John and Paul appear below: John Paul Cash 11,000 22,354 Accounts receivable 234,536 567,890 Inventories 120,035 260,102 Land 603,000 Building 428,287 Furniture & fixtures 50,345 34,789 Other assets 2,000 3,600 Total Pio20916 —_P,317,002 ‘Accounts payable P 178,940 243,650 Notes payable 200,000 345,000 John, capital 641,976 Paul, capital 728,352 Total Ploz0e16 —_—P1,317,002 John and Paul agreed to form a partnership contributing their respective assets and equities subject tothe following adjustments: 1. Accounts receivable of P20,000 in John’s books and P35,000 in Paul's are uncollectible. b. Inventories of P5,500 and PS,700 are worthless in John's and Paul's respective books. c. Other assets of P2,000 and P3,600 in John's and Paul's respective books are to be written off Partnership Liquidation & Incorporations - NCQ Problems Page 3688. 80. 90. m1. 92 The capital accounts of the partners after the adjustments will be’ a b. c. d How much assets does the partnership have? a. b John's Paul's John's Paul's John's Paul's John's Paul's 614,476 683,052 615,942 717,894 640,876 712,345 613,576 683,350 Partnership Liquidation & Incorporations 2,337,918 ©. 2,265,118 2,237,918 d. 2,365,218 Pater offered to join for a 20% interest inthe firm. How much cash should he contribute? 330,870 c. 344,237 337,487 d. 324,362 b After Peter's admission, the profit and loss sharing ratio was agreed to be 40:40:20, based on capital credits. How much should the cash settlement be batween John and Paul? a b. 33,602 32,930 o d 32272 34,288 During the frst year oftheir operations, the partnership eamed P325,000. Profits were distributed in the agreed manner. Drawings were made in these amounts: John, P50,000; Paul, P65,000; Peter, P28,000. How much are the capital balances after the first year? c. John, capital Paul, capital Peter, capital John, capital Paul, capital Peter, capital John, capital Paul, capital Peter, capital John, capital Paul, capital Peter, capital 750,627 735,177 372,223 728,764 713,764 361,382 757,915 742315 375,837 743,121 727,825 368,501 Partnership Liquidation & Incorporations - NCQ Problems Page 37ADVANCED ACCOUNTING: 93. The inexperienced accountant for Jack, Kiel and Luck Partnership prepared the following journal entries during the year ended August 31,2013: 2013, ‘September 1 Cash 50,000 Goodwill 150,000 Jack, capital (P150,000 x 0.25) 37,500 Kiel, capital (P150,000 x 0.75) 112.500 Luck, capital 50,000 To record admission of Luck for a 20% interest in net assets, with goodwill credited to Kiel in their former income sharing ratio. Goodwill is computed as follows: Implied total capital based on Luck’ investment (P50,000 x5) 250,000 Less: net assets prior to Luck’s admission 100,000 Goodwill 450,000 13 August31 Income Summary 30,000 Jack, capital (P30,000 x .20) 6,000 Kiel, capital (P30,000 x .60) 18,000 Luck, capital (P30,000 x .20) 6,000 To divide net income for the year in the residual income-sharing ratio of Jack, 20% Kiel, 60%, and Luck, 20%. Provision in partnership contract requiring P40 000 annual salary allowance to Luck is disregarded because income before salary is only P 30,000. What should be the adjusted capital balances of old and new pariner(s), respectively, at August 31,2013. a. P192,000 & P88,000 b. 174,000 & P56,000 c. P 192,000 & P56,000 4. P174,000 & P88,000 Guerrero 2013 Partnership Liquidation & Incorporations - NCQ Problems Page 38Partnership Liquidation & Incorporations ANSWER SHEET 1 268 51.C 76.¢ 2D 27D 52D TIA 3D 28.0 53.4 78.6 48 29.0 5AC 79D 5c 30.4 56D 808 6c 31.8 56D 81a 1 32.8 57.8 82 8B 33.4 588 8B 9c 34.0 58.0 840 10.6 35D 60.A 5B 1B 368 61.C 86.C 128 37 628 87D BA 38.0 63D 88.4 14c 39.0 648 89.C 15.4 40.8 65.0 90D 168 418 66.C 91D 47. 420 7c 928 418A 438 68B 93.4 19.c 44.8 688 20.4 458 708 218 46.0 71.0 22.8 4716 72.0 23D 48D 73B 24.4 49.0 743 25.8 50.D 75B ‘ANSWER KEY Page 39