Title | Chapter 2 Exercises - Lump Sum Liquidation |
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Author | Kim Ambrose |
Course | Bachelor of Science in Accountancy |
Institution | Polytechnic University of the Philippines |
Pages | 3 |
File Size | 69.2 KB |
File Type | |
Total Downloads | 416 |
Total Views | 761 |
EXERCISESA. The assets and equities of the NSW Partnership at the end of its fiscal year, October 31, 2020, are as follows: Profit and loss agreement is 30:50:20.Cash P 150, Accounts receivable -net 200, Inventory 400, Plant Assets - net 700, Loan to South 50, Liabilities P 500, West, Loan 100, Nort...
EXERCISES A.
The assets and equities of the NSW Partnership at the end of its fiscal year, October 31, 2020, are as follows: Profit and loss agreement is 30:50:20. Cash Accounts receivable -net Inventory Plant Assets - net Loan to South Liabilities West, Loan North, Capital South, Capital West, Capital
P 150,000 200,000 400,000 700,000 50,000 P 500,000 100,000 450,000 300,000 150,000
The partners decide to liquidate the partnership. They estimate that the non-cash assets other than the loan to South can be realized into P 1,000,000 over the two-month period ending December 31, 2020. Cash is to be distributed to the appropriate parties as it becomes available during the liquidation process. Required: a) Assuming that P 650,000 is available for the first distribution, show how the available cash would be distributed. NSW Partnership Statement of Liquidation October 2020 Cash Other Liabilities West North South West Assets Loan Profit and Loss Ratio 30 50 20 Balances before liquidation 150,000 1,300,000 500,000 100,000 450,000 300,000 150,000 October: 500,000 (650,000) (45,0000) (75,000) (30,000) Sale of assets and distribution of loss Balances 650,000 650,000 500,000 100,000 405,000 225,000 120,000 Payment of Liabilities (500,000 (500,000)
Balances Payment to partners (per schedule) Balances November: Sales of assets and distribution of gain Balances Payment to partners
) 150,000 150,000
500,000
650,000
100,000 (100,000)
225,000
650,000
405,000 240,000 165,000
225,000
120,000 10,000 110,000
(650,000)
45,000
75,000
30,000
120,000 210,000
150,000 300,000
80,000 140,000
500,000 500,000
NSW PARTNERSHIP SCHEDULE TO ACCOMPANY STATEMENT OF LIQUIDATION AMOUNT TO BE PAID TO PARTNERS OCTOBER 2020 North 30 CAPITAL BALANCE BEFORE CASH DISTRIBUTION 450,000 ADD LOANS TOTAL PARTNERS’ INTEREST 450,000 RESTRICTED INTEREST – POSSIBLE LOSS OF 650,000 OF NOTHING IS REALIZED ON REMAINING UNSOLD ASSETS (195,000) BALANCE 255,000 RESTRICTED INTEREST – ADDITIONAL POSSIBLE LOSS OF 25,000 TO NORTH AND WEST IF SOUTH IS UNABLE TO PAY HIS POSSIBLE DEFFIENCY, SHARED IN THE RATIO OF 30:20 (15,000) FREE INTEREST – PAYMENT TO PARTNERS 240,000 PAYMENT TO APPLY ON: LOAN CAPITAL 240,000 TOTAL CASH CONTRIBUTIONS 240,000
South 50 300,000 300,000
West 20 150,000 100,000 250,000
(325,000) (25,000)
(130,000) 120,000
25,000
(10,000) 110,000 100,000 10,000 110,000
b) Assuming that a total amount of P 75,000 is available for distribution to partners after liabilities to outside creditors have been paid, show how the cash will be distributed to the partners.
B.
Pisces, Leo and Gemini share profits in the ration of 5:3:2, respectively. Capital and loan balances just prior to partnership liquidation are: CAPITAL Pisces Leo Gemini
LOANS P 120,000 90,000 40,000
Pisces Leo Gemini
P 45,000 30,000 13,000
Non-cash assets are sold, and cash is distributed to partners in monthly installments during the course of liquidation as follows: January – P 15,000; February – P 40,000; March – P 90,000; April – P 30,000 (final distribution) Required: a) Prepare a program to show how cash should be distributed during the entire course of liquidation,
b) Using the program developed in (a), prepare schedules summarizing the payments to be made to partners at the end of each month. c) Prepare a statement of liquidation to summarize the course of liquidation....