PARTNERSHIP AND CORPORATE LIQUIDATION

EXERCISE 1

A, B, and C are partners sharing profits in the ratio of 5:3:2, respectively. A

balance sheet prepared just prior to partnership liquidation shows the following:

A B C
Capital Balances P122,000 P72,000 P47,000
Loan Balances 43,000 48,000 6,000

Assets are sold and cash is distributed to partners in monthly installments during
the course of liquidation as follows.
January P20,000
February 50,000
March 80,000
April 20,000

Required:
a. Prepare a program to show how cash is to be distributed during the entire course
of liquidation.
b. Using the program developed above, prepare a schedule summarizing the payments
to be made to partners at the end of each month.

EXERCISE 2

D, E and F are partners sharing profits in the ratio of 40:35:25, respectively.

On December 31, 2018, they agreed to liquidate. A balance sheet on this date
follows:

DEF PARTNERSHIP
Balance Sheet
As of December 31, 2018

Cash P2,000 Liablities P6,000

Other Assets 46,000 E, Loan 5,000
F, Loan 2,500
D, Capital 14,450
E, Capital 12,550
______ F, Capital 7,500
48,000 48,000

The results of liquidation are summarized below:

Realizations Book Cash Expenses of Cash Withheld at Liability

Value Realized Realization the end of the Paid
month
January 12,000 10,5000 500 2,000 4,000
February 7,000 6,000 750 1,250 2,000
March 15,000 10,000 600 500 -
April 12,000 4,000 400 - -

All cash available, except the amount withheld for future expenses, is
distributed at the end of each month.

Required.

Determine the share of each partner every month of distribution.

EXERCISE 3

The balance sheet of J, K and L Partnership shows the following information

as of December 31, 2018:

Cash P2,000 Liabilities P5,000

Other Assets 28,000 J, Loan 2,500
J, Capital 12,500
K, Capital 7,000
L, Capital 3,000

ADVANCED FINANCIAL ACCOUNTING 1

PARTNERSHIP AND CORPORATE LIQUIDATION

Profit and loss ratio is 3:2:1, respectively for J,K,and L. Other assets were
realized as follows.

Date Cash Received Book Value

January 2018 P8,000 9,000
February 2018 3,500 7,700
March 2018 12,500 11,300

Cash is distributed as assets are realized.

a. How much is the total loss to J?
b. How much is the total cash received by K?
c. How much cash does L receive in January?

EXERCISE 4
After all Partnership assets were converted into cash and all available cash
were distributed to creditors, the following were determined.:

Ledger Balance Personal Assets Personal Liabilities

Accounts Payable P20,000
Rose, Capital 30% 10,000 P50,000 45,000
Sol, Capital 30% 60,000 50,000 40,000
Tax, Capital 40% (90,000) 100,000 40,000

The partnership creditors proceed againts Taz for recovery of their claims,
and the partners settle their claims against each other. The amount recovered
by Sol from Taz is?:

EXERCISE 5

On December 31, 2017, the statement of Financial Position of IWP Partnership

shows the following data with profits or loss sharing of 2:3:5.

Cash 15,000,000 Liabilities 20,000,000

Other Non Cash Assets 40,000,000 I, Capital 15,000,000
K, Capital 12,500,000
R, Capital 7,500,000

On January 1, 2018, the partners decided to wind up the partnership affairs.

During the winding up, liquidation expenses amounting to P2,000,000 were paid.
Non-cash assets with book value of P30,000,000 were sold during January. 40%
of total liabilities were also paid during January. P3,000,000 cash was
withheld during January for future liquidation expenses. On January 31, 2018,
partner I received P10,000,000.

What amount received by partner K in January 31, 2018?

What is the net proceeds from the sale of Non Cash assets during January 1,
2018?

EXERCISE 6

The following information is available on June 1, 2016 to View Sonic Company

which is having difficulty in paying its liabilities as they become due:

Carrying
Amount
Cash P8,960
Accounts Receivable, net fair value is equal to carrying 103,400
amount
Inventories, current fair value, P40,320 pledged on P47,040 87,360
of notes payable
Machinery and Equipment, net current fair value of P105,976 239,680
pledged on mortgage note payable
Office supplies, current fair value of P5,600 4,480

ADVANCED FINANCIAL ACCOUNTING 2

PARTNERSHIP AND CORPORATE LIQUIDATION

Wages Payable 12,992

Taxes Payable 2,688
Accounts Payable 134,400
Note Payable, P47,040 of which secured by inventories 89,600
Mortgage note Payable 112,896
Common Stock P5 par 224,000
Retained Earnings Defeicit 133,056

Additional Information

i. Estimated liability to the trustee is P58,240

ii. A delivery van previously given to the supervisor was returned to the
company, fair market value P56,000.

Prepare the estimated reciverable amounts to the different types of creditors

in the event of liquidation.

EXERCISE 7

Camella Corp. a closely held corporation was undergoing liquidation. The total
cash value of Carmella’s bankruptcy estate after the sale of all assets and
payment of administrative expenses is P100,000.

Carmella has the following creditors.

• BDO bank is owed P75,000 on a mortgage loan secured by Carmella’s real
property. The property was valued at and sold, in bankkruptcy, for
P70,000.
• The BIR has P12,000 recorded judgement for unpaid corporate income tax.
• National office supplies has an unsecured claim of P3,000 that was timely
filed.
• Ace electric company has an unsecured claim of P10,000 that was timely
filed.
• Cunanan publications has claim of P16,000 which is secured by Camella’s
inventory that was valued and sold, in bankruptcy, for P2,000. The claim
was timely filed.

Required.
a. Calculate the total amount recoverable by partially secured creditors.
b. Calculate the total amount recoverable by unsecured creditors with
priority.
c. Calculate the total amount recoverable by fully secured creditors.
d. Calculate the total amount recoverable by unsecured creditors without
priority.

EXERCISE 8

The following data were taken from the statement of affairs of Robinsons Corp:

Assets pledged for fully secured liabilities (current 90,000

fair value, P75,000)
Assets pledged for partially secured liabilities 74,000
(current fair value P52,000)
Free Assets (current fair value, P40,000) 70,000
Unsecured liabilities with priority 7,000
Fully secured liabilities 30,000
Partially secured liabilities 60,000
Unsecured liabilities without priority 112,000

Determine the amount to be paid for the following creditors.

a. Creditors with priority

b. Fully secured creditors
c. Partially secured creditors
d. Unsecured creditors

ADVANCED FINANCIAL ACCOUNTING 3