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Use the following information for the next four questions: Andrix Asterix Co. has filed for voluntary insolvency and is about to liquidate its business. Andrix Asterix Co.’s s immediately prior to the liquidation process is shown below: Andrix Asterix Co. Statement of financial position As of December 31, 20x0 ASSETS Current assets: Cash Accounts receivable Note receivable Inventory Prepaid assets Noncurrent assets: Land Building, net Equipment, net Total assets

LIABILITIES AND EQUITY Current liabilities: Accrued expenses Current tax payable Accounts payable

160,000 880,000 400,000 2,120,000 40,000 3,600,000

Noncurrent liabilities: Note payable (secured by equipment) Loan payable (secured by land and building)

2,000,000 8,000,000 1,200,000 11,200,000 14,800,000

Capital deficiency: Share capital Retained earnings (deficit) Total liabilities and equity

Additional information: The following were determined before the commencement of the liquidation process: a. Only 76% of the accounts receivable is collectible. b. The note receivable is fully collectible and, in addition, interest of ₱40,000 is expected to be collected. c. The inventory has an estimated selling price of ₱1,680,000 and estimated costs to sell of ₱40,000. d. The prepaid assets are non-refundable. e. The land and building have fair values of ₱8,000,000 and ₱3,200,000, respectively. However, Andrix Aste f. The equipment is expected to be sold at a net selling price of ₱800,000. g. Liquidation costs of ₱120,000 are expected to be incurred. h. The accrued expenses include accrued salaries of ₱100,000. i. Interest of ₱60,000 is expected to be paid on the loan. j. All the other liabilities are stated at their expected net settlement amounts. APTFSC Cash Accounts receivable Note receivable Inventory Land Building, net Equipment, net TOTAL

APTPSC

FA 160,000 668,800 440,000 1,640,000

10,400,000

10,400,000

800,000 800,000

2,908,800

FSL Liquidation costs Accrued salaries Accrued expenses Current tax payable Accounts payable Note payable Loan payable TOTAL

PSL

UL with P 120,000 100,000

UL without

784,000 1,400,000 4,000,000 1,200,000 8,060,000 8,060,000

1,200,000

Assets pledged to fully secured creditors Assets pledged to partially secured creditors Free assets Total realizable assets Fully secured liabilities Unsecured liabilites with priority Partially secured liabilities (secured portion) Net free assets Total unsecured liabilities Partially secured liabilities (unsecured portion) Unsecured liabilities without priority Estimated percentage recovery

1,620,000

4,784,000 10,400,000 800,000 2,908,800 14,108,800 8,060,000 1,620,000 800,000 3,628,800

400,000 4,784,000

5,184,000 70.00%

Andrix Co.’s liquidation was entrusted to a receiver. The receiver identified the following before the start of the a. Liquidation costs of ₱120,000 are expected to be incurred during the winding up of Andrix Co.’s business b. Interest of ₱40,000 is expected to be collected on the note receivable. c. Interest of ₱60,000 is expected to be paid on the loan payable. The following were the actual transactions during the period: a. Only ₱660,000 have been collected on the accounts receivable; the remaining balance was written-off. b. Only 90% of the note receivable was collected; the remaining balance was written-off. The interest was c c. Half of the inventory was sold for ₱1,200,000. Actual costs to sell were ₱20,000. d. The prepaid assets were written-off. e. The land and building were sold for ₱10,400,000. f. The equipment was sold for ₱880,000. g. Accrued expenses of ₱100,000 were paid. The balance remains outstanding. h. The current tax payable was paid in full. i. The loan payable and interest payable were paid in full. j. The lender accepted ₱880,000 as full payment of the note payable. k. Administrative expenses relating to the liquidation amounted to ₱108,000. Statement of realization and liquidation

Assets to be realized Accounts receivable Note receivable Inventory Prepaid assets Land Building, net Equipment, net Assets acquired Interest receivable

Assets realized 880,000 400,000 2,120,000 40,000 2,000,000 8,000,000 1,200,000

40,000

Liabilities liquidated Accrued expenses Current tax payable Loan payable (secured by land and Note payable (secured by equipme Interest payable

100,000 1,400,000 8,000,000 880,000 60,000

Liabilities not liquidated Accrued expenses Accounts payable

784,000 4,000,000

Supplementary expenses Liquidation costs

Assets not realized Inventory

Liabilities to be liquidated Accrued expenses Current tax payable Accounts payable Note payable (secured by eq Loan payable (secured by la Liabilities assumed Interest payable

Supplementary credits 108,000 30,012,000

Opening journal entry: Cash Accounts receivable Note receivable Inventory Prepaid assets Land Building, net Equipment, net Estate deficit

Accounts receivable Note receivable Inventory Land and building Equipment, net Interest receivable

160,000 880,000 400,000 2,120,000 40,000 2,000,000 8,000,000 1,200,000 684,000

Accrued expenses Current tax payable Accounts payable Note payable Loan payable

884,000 1,400,000 4,000,000 1,200,000 8,000,000

tatement of financial position

884,000 1,400,000 4,000,000 6,284,000 1,200,000 8,000,000 9,200,000 2,000,000 -2,684,000 -684,000 14,800,000

rix Co. expects to sell both assets at a single price of ₱10,400,000. Costs to sell are negligible because the pro

e liquidation process: affairs.

collected as expected.

660,000 360,000 1,180,000 10,400,000 880,000 40,000

1,060,000

quipment) and and buildi

884,000 1,400,000 4,000,000 1,200,000 8,000,000

60,000

30,124,000 112,000

ospective buyer agrees to shoulder all costs relating to the transfer of the property.

1. A and B decided to liquidate their partnership. The partnership’s records show the following inform Cash 0 Non-cash assets 80,000 Total assets 80,000

Liabilities Loan payable to Partner A Loan payable to Partner B A, capital (80%) B, capital (20%) Total liabilities and equity

15,000 10,000 17,000 20,000 18,000 80,000

The non-cash assets are to be sold in installments and the partners’ claims are to be settled as cash beco half of the non-cash assets were sold for ₱15,000. How much did A and B receive in the first cash distribu

Cash BBL Soncadol Balances

15,000 15,000

NCA 80,000 40,000 40,000

Liabilities 15,000

P to A 10,000

P to B 17,000

15,000

10,000

17,000

Computation for safe payment Total Interest Total possible loss Balances APL Cash paid

-

A 10,000 32,000 22,000 22,000 0

B 30,000 8,000 22,000 22,000 0

1.

On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership. The following in CA Realized Cash 80,000 Accounts receivable 240,000 40,000 Inventory 480,000 20,000 Equipment 1,200,000 200,000 Total 2,000,000 260,000 Accounts payable Payable to B A, Capital (20%) B, Capital (30%) C, Capital (50%)

120,000 80,000 400,000 600,000 800,000

Total

2,000,000

Information on the conversion of non-cash assets is as follows: · ₱40,000 was collected on accounts receivable; the balance is uncollectible. · ₱20,000 was received for the entire inventory. · The equipment was sold for ₱200,000. · ₱8,000 liquidation expenses were paid. · ₱108,000 was paid to outside creditors, after offset of a ₱12,000 credit memorandum received on · All of the partners are personally solvent. How much did B receive from the settlement of his interest in the partnership?

BBL Soncadol Balances Liquidation Exp Balances Pmt to OC Balances Absorption Balances Cash paid

-

-

Cash 80,000 260,000 340,000 8,000 332,000 108,000 224,000

NCA 1,920,000 -1,920,000 0

120,000

-

224,000 224,000

20% A, Capital 400,000 332,000 80,000 68,000 1,600 80,000 66,400 2,400 80,000 68,800 11,200 80,000 57,600 80,000 57,600

AP Payable to B 120,000 80,000

120,000 120,000 -

-

- -

Cash Distribution Program A 400,000 20% 2,000,000

BBL Divide by LAA Priority 1 Priority 2

-

2,000,000 400,000 1,600,000 A

Cash available P#1 P#2 Cash paid

57,600 57,600

B 680,000 30% 2,266,667 266,667 2,000,000 400,000 1,600,000 B 80,000 86,400 166,400

C 800,000 50% 1,600,000

A

B

80,000 1,600,000 80,000

120,000

1,600,000 C

-

Total 224,000 144,000 144,000

On January 1, 20x1, A and B decided to liquidate their partnership. As of this date, their capital balances respectively. The partners share profits and losses on a 60:40 ratio. Before liquidation, the partnership h liabilities. The partnership incurred loss of ₱480,000 on the sale of non-cash assets. A is solvent but B is

Balances Soncadol Balances Pmt to creditors Balances Cash paid

1. 2. 3.

-

Cash 80,000 760,000 840,000 120,000 720,000 720,000

NCA 1,240,000 1,240,000 -

Liabilities 120,000 -

-

120,000 120,000 - -

A (60%) 400,000 288,000 112,000

B (40%) 800,000 192,000 608,000

112,000 112,000 -

608,000 608,000

How much was the carrying amount of the non-cash assets? How much was the net proceeds from the sale of non-cash assets? How much did A receive from the settlement of his capital balance?

On January 1, 20x1, A and B, who share profits and losses on a 60:40 ratio, decided to liquidate their par assets of the partnership were sold for ₱760,000 and all the ₱120,000 liabilities were settled, the partne among themselves. A received ₱112,000 in the settlement of his ₱400,000 capital balance. 60% 40% Cash NCA Liabilities A, Capital B, Capital BBL 80,000 1,240,000 120,000 400,000 800,000 Soncadol 760,000 1,240,000 288,000 192,000 Balances 840,000 120,000 112,000 608,000 PMT to Creditors 120,000 120,000 Balances 720,000 112,000 608,000 Cash paid 720,000 112,000 608,000

1. 2. 3.

How much was the total assets immediately before liquidation? How much was the beginning capital balance of B? How much did B receive in the settlement of his capital account?

1. On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership on installment b shall be made as cash becomes available. The following information was made available:

Cash Accounts receivable Receivable from C Inventory Equipment Accounts payable Payable to B A, Capital (20%) A, Drawings

Dr. 80,000 240,000 40,000 480,000 1,200,000

Cr.

120,000 80,000 400,000 80,000

B, Capital (30%) C, Capital (50%) C, Drawings Totals

2,120,000

600,000 800,000 120,000 2,120,000

During January, non-cash assets with carrying amount of ₱520,000 were sold for ₱240,000. The cost of d partners are personally insolvent. How much did B receive in the partial settlement of his capital account

BBL Soncadol Balances Expenses Balances

-

Cash 80,000 240,000 320,000 80,000 240,000

Computation for safe payment A, Capital Total Int. 248,000 TPL 280,000 Balances 32,000 APL 32,000 Interest paid -

NCA 1,920,000 520,000 1,400,000

AP 120,000

1,400,000

120,000

B, Capital 572,000 420,000 152,000 32,000 120,000

120,000

Payable to B 80,000

A, Capital 320,000 56,000 80,000 264,000 16,000 80,000 248,000

Period 1 C, Capital 700,000 700,000 -

1. ABC Co. is undergoing liquidation. Information before the start of the liquidation process is as follo Cash 10,000 Accounts payable 80,000 Accounts receivable 80,000 Payable to B 20,000 Receivable from A 10,000 A, Capital (50%) 250,000 Inventory 180,000 B, Capital (30%) 150,000 Equipment, net 320,000 C, Capital (20%) 100,000 Total 600,000 Total Liab. & Equity 600,000 The total cash distributed to the partners after the first and second sales of noncash assets were ₱12,000 How much cash did B receive in the first cash distribution? Cash distribution program BBL Divide by: LAA Priority 1

A 240,000 50% 480,000 480,000

Priority 2

-

B 170,000 30% 566,667 66,667 500,000 20,000 -

C 100,000 20% 500,000 500,000 20,000

A

Priority 1 : B Distrubuted cash

20,000 12,000

mation:

omes available. In the first sale, ution?

A, Capital B, Capital 20,000 18,000 20,000 5,000 13,000

nformation was made available:

January 2, 20x1.

30% 50% B, Capital C, Capital 600,000 800,000 498,000 830,000 102,000 -30,000 2,400 4,000 99,600 34,000 3,600 6,000 103,200 28,000 16,800 28,000 86,400 86,400 -

C

Total

80,000 200,000

were ₱400,000 and ₱800,000, ad ₱80,000 cash and ₱120,000 insolvent.

1,240,000 760,000 112,000

tnership. After all the non-cash rs had ₱720,000 to distribute

1,320,000 800,000 608,000 basis. Distributions to partners

disposal was ₱80,000. All of the t? B, Capital C, Capital 600,000 880,000 84,000 140,000 516,000 740,000 24,000 40,000 492,000 700,000

ows:

0 and ₱30,000, respectively.

B

C

20,000.0 6,000

4,000...