Chapter 6 Partnership Liquidation PDF

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Summary

CHAPTER 6CHAPTER 6 Partnership Liquidation – Lump-sumPartnership Liquidation – Lump-sumExercise 6-1Exercise 6- E2 PartnershipE2 Partnership Statement of LiquidationStatement of Liquidation June 1 - 3! "1#June 1 - 3! "1# NNoonn--ccaassh h CCAAPPIITTAALL CCaassh h AAsssseettss LL...

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CHAPTER 6 Partnership Partnership Liquidation Liquidation –– Lump-sum Lump-sum Exercise 6-1

E2 Partnership Statement of Liquidation June 1 - 3! "1# N on- cas h C as h A ss et s Pr of it and los s r a tio #a lan ce s be for e li qui dat io n Sa le o f n o n-c as h a sse ts and d is tr ib uti on of los s #a lan ce s Pa *men t of li abi li ti es #a lan ce s Pa *men t to par tn er s

P 2 5$! !! ' 5! $! !! P'"5$ !!! ( & 2 5$ !! !) P25!$ !!! ( 25!$! !!)

P %!!$!! ! ( %! !$ !!!)

Li abi li ties P&2 5$ ! !! P&25$ ! !! ( &25$ ! !!)

CAP Enc ab o 225 5 !! P22 5$ !!! ( & &2$5 !!) P &&2$5 !! P & &2$5 !! ( &&2$5 !! )

Exercise 6-"

&+ Elias$ Enrico and Ener Statement of Liquidation ,anuar* &  '&$ 2!&5 Non-cas Non-cash h Ca sh A s se ts Li abili ti es Pr of it and los s r a tio #a lan ces be for e li qui dat io n Sa le o f n o n-c as h asse ts and d is tr ib uti on of los s Pa *men t of li qui dat io n e1 p ense s #a lan ce s Pa *men t of li abi li it es #a lan ce s Ad diti onal i ne st men t o f E li as #a lan ce s Pa *me n t to p ar tn ers 2+

P . .! !$ !!! %' 0$ !! ! ( 20$ !!! ) P % /!$ !!! (2" !$ !! ! ) P 0 2!$ !!! &5 $!!! P 0 '5$ !!! ( 0 '5$ !!! )

P. &!$! !! (.& !$! !!)

P2"!$ !!!

P 2"!$ !! ! (2 "!$ !! ! )

E li as '. P% !$! !! (% %$!! !) ( /$! !!) ( P &5$ ! !! ) ( P&5 $! !!) &5 $!! !

C A P I T A En r ico '. P2/!$!! ! ( %% $!! !) ( /$ !! !) P2&5 $ !!! P2& 5$ !!! P2 &5 $ !! ! ( 2&5 $!!!)

Elias$ Enrico  and Ener Statement of Liquidation ,anuar* &  '&$ 2!&5 Ca sh Pr of i t a nd los s ratio # ala nce s bef ore li qui da t io n Sa le of non - ca sh a s set s and distr i butio n o f los s Pa* men t of liquid a it on e1 pen ses # ala nce s Pa* men t of liabi litie s # ala nce s 3ffset 3ffset of of loan loan a4ainst a4ainst debit debit balance balance in in the the capital balance of Elias # ala nce s Pa* men t to pa rtners

Non-c Non-cash ash Ass ets

P .! $!! ! P. &!$ !! ! %' 0 $!!! ( .& !$ !! !) ( 20$ !! ! ) P %/!$ !! ! (2! !$ !!! ) P 0/!$ !! !

P 0/!$ !! ! ( 0/! $! !!)

Note Pa*ab Pa*able le to Elias

CA

El ias

En

' . P% !$ ! !! (% %$ ! !!) ( /$ ! !!) (P &5$ ! !!)

P2 ( ( P2

P" !$ !!!

(P&5 $ !!! )

P2

( &5$!!!) P5 5$ !!! ( 5 5$ !!! )

&5$!!!

Liabilities

P"!$ !!!

P2! !$ !!!

P" !$ !!!

P2 !!$! !! (2 !!$ ! !!)

P2 ( 2

Elias$ Enrico  and Ener

'+

Statement of Liquidation ,anuar* &  '&$ 2!&5 N from Pr of it and los s r a tio #a lan ce s be fore li qui dat io n Sale Saleof ofnon-cash non-cashassets assetsand anddistribution distributionof ofloss loss

Non-cas Non-cash h Assets

NP to Elias

Liabilities

P"! !$ !! ! ("!! $!!!)

P " !$! !!

P2!! $ !! !

P&&! $!! !

P "! $! !!

P2! !$ ! !! ( 2 !! $!!!)

P&&! $!! !

P "! $! !!

P2 %$

P" !$ ! !! ( "!$! !!)

P2 %$ 2 ( 2 %$

Cash

Enrico

P .!$!! ! %'0 $! !! ( 20 $! !!) P% /!$ ! !! (2 !!$!! !) P0 /!$ ! !!

P& &!$ !! !

Pa *me n t of li quid at io n e1 p ense s #a lan ce s Pa *me n t of li abili it es #a lan ce s 3ffset 3ffset of of receiable receiable a4ainst a4ainst credit credit balance balance in in the capital of Enrico #a lan ce s P0 /!$ ! !! Pa *me n t to p ar tn ers (0 / !$ !!! ) Exercise 6-3 Case &

E Ellias ' P%! $ ! (2 0$ " ( /$ P2 %$ 2

(&&!$!!!)

Enten4 and Estrel Statement of Liquidation ,anuar* &  '&$ 2!&5 3the r

Lo ans6666666

Cap i

#a lances be fore li qui dat ion Sale of other assets 8 dist+ of loss

#a lances Pa *me nt of li abili ti es #a lances 3ffset of loan a4ainst debit balance in the capital of Enten4

#a lances Additional loss to Estrel for the deficienc* of Enten4 #a lances Pa *me nt to partners &+

2+

'+

P 00$!!!

P 0!$!!!

Ca sh Enten4$ Capital Estre l$ Ca pit al 3ther Asse ts

2%.$!!! && .$.!! & '$2 !!

Liabilit ies Cash

2% 0$!!!

Enten4$ Loan E nten4$ Ca pital

0+

Est rel $ Ca pi tal E nte n4$ Capital

5+

Est rel $ Loa n Es trel $ Capit al  C ash

0!!$!!!

2%0$!!!

' %$!!! '%$!!!

Case 2 Enten4 and Estrel Statement of Liquidation

(P

2$.!!) 2$.!!

,anuar* &  '&$ 2!&5 3t her #a lances be fore li qui dat ion Sa le of ot her assets a nd di st ribut ion of l oss #a lances Pa *me nt of li abili ti es #a lances 3ffset of loan a4ainst debit balance in capital account #a lances Pa *me nt to partners

&+

2+

Loans666666 6

P 00$!!!

P '%$!!! (&2$0!!)

Ca sh Enten4$ Capital Estre l$ Capit al 3ther Asse ts

2%.$!!! /2$0!! '/$% !!

Liabilit ies Cash

2%0$!!!

P 0!$!!! ( &/$%!!)

'+

Enten4$ Loan Es tre l$ Lo an E nte n4$ Capita l E strel$ Capi tal

0+

Ent en4 $ Loan Es trel $ Lo an  C ash

0!!$!!!

2%0$!!!

Case ' Enten4 and Estrel Statement of Liquidation ,anuar* &- '&$ 2!&5

(P &2 &2

3the r #a lances be fore li qui dat ion Sale of ot her assets 8 distribut ion of loss #a lances Pa *me nt of li abili ti es #a lances 3ffset of loan a4ainst debit balance in the capit al of Estre l #a lances

Loans66 66 666

P 00$!!!

P '%$! !!

P 0 !$!!! (0 !$ !!!)

Additional loss to Enten4 for the deficienc* of Estrel

#a lances Pa *me nt to partners

&+

2+

'+

Ca sh Enten4$ Capital Estre l$ Capit al 3ther Asse ts

2%.$!!! %%$!!! %%$! !!

Liabilit ies Cash

2%0$!!!

Est rel$ Loa n E st rel$ Cap ita l

0$

Enten4$ Capi ta l Est re l$ Capital

5+

Ent en4 $ Loan Ent en 4$ Capita l  C ash

0!!$!!!

2%0$!!! 0!$!!! 0!$!!!

P &

Exercise 6-#

E s4uerra Cap ital balances before liq uidati on Lo an from partners Total partners 9 interest Lo ss on r eali:ati on (P0% $! !!  P&2$!!!) #ala nces Add itiona l lo ss to p ar tner s #ala nces Add itiona l lo ss to p ar tner s ;istri buti on of cash to p artn ers

(P

%! !) %!!

Esteban

P (

&!! '!!)

Estrad a

P %$/ !! ( 2!!)

Pro$%em 6-1

Ester$ Edna$ Emma$ and Ea Statement of Liquidation 3ctober &-'&$2!&0

#alance s befor e li qui dat ion Sale of asset and distribution of loss

#alance s Pa*ment of lia bili tie s #alance s 3ffset of receiable a4ainst credit balance in the ca pit al ac count of E st er #alance s Additional loss to the partners for the deficienc* of Edna s ha red 0=& =& #alance s 3ffset of loan a4ainst debit balance in thecapital ac count of Ea #alance s Pa*ment to part ners #alance s

P '" $5!!

Es ter (0) P'.&$25! ( 225$!!!) P& 5%$25!

C A P Edna ( 2) P /'$"5! ( &&2$5!!) (P &. $"5!)

P'"$ 5!!

P & 5%$25!

(P &. $"5 !)

P &!! $!!!

P'" $5!!

( %2$5!!) P /'$"5!

(P &. $"5!)

P &!! $!!!

P'" $5!!

( &2 $5!!) P .&$2 5!

P &!! $!!! ( &!!$!!!)

( /$'" 5) P2. $&25 (2%$25!) P &$."5

P .&$2 5! ( "'$"5!) P "$5!!

P &$."5 ( &$."5)

P (

C as h P 5!$!!! 5!!$!!! P 55! $!!! ( 0 5! $! !! ) P &!! $!!!

ec< l from Est er P%2 $5!! P%2$5!! P%2$5!!

Li ab ili ti es P 05!$!!! P 05!$!!! ( 05! $!! !)

E a$ Loa n P'"$5!!

(%2$5!!)

Additional inestment b* Emma

#alance s Pa*ment to part ners

3 the r Asse ts P/5!$ !!! ( /5!$!!!)

P (

/$'"5 /$'"5 /$' "5)

"$ 5!! "$5!!)

&.$ "5!

,ournal entries to record the liquidation of the partnership  &+

Cash Ester$ Capital Edna$ C apital Emma$ Ca pi tal Ea$ Capital 3ther Assets

5!! $!!! 225$!!! &&2$ 5! ! 5%$ 25! 5% $25 !

2+

Liabiliti es  C a sh

05!$! ! !

'+

Es ters$ Capit al ecei able from Ester

%2$ 5!!

0+

Es ter$ Capi tal Emma$ Ca pi tal Ea$ Capital Edna$ C api tal

&2$ 5! ! '$ &2 5 ' $&2 5

5+

Ea$ Loan Ea$ C apital

/$ '"5

%+

Ea$ Loan Ester$ Ca pi tal  C ash

"+

Cash Emm a$ Capi ta l

/$'" 5

Ea$ Loan Ester$ Capital Cash

&$ ."5 "$5!!

.+

2% $25 ! "'$ "5!

Pro$%em

&+

6-"

Esteban$ Capi tal Esteba n$ ;r a>in4 Tota l interest of Est eban Cash recei ed b* E steban

P &00$!!! ( &2$ !!!)

'+

a+

Cas h Eu4e ni o$ Capi tal Ea ri sto$ Capital Este ban$ Capit al 3t her Asset s

b+

Li abilitie s  Cash

c+

Ea risto$ L oan Eu4e nio$ Capi tal Ea ri sto$ Ca pi t al Esteban$ Capital  Cash

Share of Esteban in the loss on liquidation

?ractional share of Esteban Tota l loss on li qui dati on

2+ Eu4enio $ Earisto and Esteban Statement of Liquidation ,anuar* &  '&$ 2!&5

3ther #a lances be fore li qui dat ion Sa le of ot her assets 8 dist ri but ion of lo ss #a lances Pa *ment of li abili ti es #a lances Pa *ment to partners

Pro$%em 6-3

Earisto$

Eu4enio

CA E

Case &

Cash

Estrella$ Espino and Espiritu Statement of Liquidation ,anuar* &- '&$ 2!&5 3the r L 3 Assets Liabil itie s E sp ino

A N E spiritu

C A Es trell a (2)

#a lances be fore li qui dat ion Sale of assets 8 distribution of loss

#a lances Pa *ment of li abili ti es #a lances Pa *ment to partners Case 2 Estrella$ Espino and Espiritu Statement of Liquidation ,anuar* & - '&$ 2!&5

Cash #a lances be fore li qui dat ion Sa le of a sset s 8 dis tri bution of loss #a lances Pa *ment of li abili ti es #a lances P /'$!!! 3ffset of loan a4ainst debit balance in t he capital of Espino #a lances Pa *ment to partners

3 the r Assets

Liabili ti es

L 3 A N Espi no E spi ritu

P 5$!!! ( 2$!!!)

Case ' Estrella$ Espino and Espiritu Statement of Liquidation

P .$! !!

C Estrella (2)

P ''$ !!!

P E

,anuar* & -'&$ 2!&5

Cash

3t he r As se ts

Lia bi li ti es

L 3 E spino

A

N Es pir itu

C A P Estre lla (2) Espi n

#al ances before l iquidat ion Sale of assets 8 distribution of loss

#al ances P a*ment of l iabil it ies #al ances 3ffset of loan a4ainst debit balance in the capital of Espino #al ances P a*ment t o pa rtner s #al ances Additional inestment b* Espino #al ances P a*ment t o pa rtner s

P 2$!!! '$!!!

(P '$! '$!

Estrella$ Espino and Espiritu Schedule to Accompan* Statement of Liquidation Amounts to be Paid to Partners

Capi ta l b al ance s be fore c ash di stribution Add lo an b al anc e Tot al partners9 intere st estricted interest - possible loss to Estrella and Espiritu in the ratio of 2=& i f Es pino fai ls to p a* his defi ci enc* ?r ee interest s - amount s t o be pa id to p artne rs Pa*ment to appl* on= Loan Capit al Cash distributio n

E strel la (2) P 2"$! !!

Espino (2) (P '$!!!)

P 2"$ !!!

(P '$!!!)

( 2$!! !) P 25$!!!

P 25$ !!! P 25$! !!

Case 0 Estrella$ Espino and Espiritu Statement of Liquidation ,anuar* &  '&$ 2!&5

'$!!!

Espir P 0%$!! .$! P 50 $! ( &$!! P 5' $! P .$!! 05$!! P 5' $!!

Cash

3ther Assets

Lia bil it ie s

L 3A N Espino

Espiri tu

CAPTI AL Estrella (2)

#a lances be fore li qui dat ion Sale of assets 8 distribution of loss

#a lances Pa *ment of li abili ti es #a lances 3ffset of loan a4ainst debit balance in t he capital of Espin o #a lances Pa*ment to partners #a lances Additional i ne st ment b* Espin o #a lances Pa*ment to partners

P ''$!!!

P 5$ !!! ( 5$!!!)

P .$!! !

P /$!!!

(

Estrella$ Espino and Espiritu Schedule to Accompan* Statement of Liquidation Amount to be Paid to Partners Es trella (2) Cap ital balances before cash di st ributi on Add loan balance Total partners 9 interest estricted interest - possible loss to Estrella and Espiritu in t he r at io of 2=& if Espino fails to pa* his deficienc* #ala nces estricted interest - possible loss to Espiritu if Estrella fails to pa* his deficienc* ?r ee i nterests - amounts to be paid to partners Pa*ment to appl* on= Loan C apit al Cash dist ribution

(P 5$ !! !) 5$!!!

Espino (2)

Case 5

Cas h #alances be fo re liqui dati on S al e of ass ets 8 distri buti on o f loss #alances P a*ment of li abili ties #alances 3ffset of loan a4ainst debit balance i n the cap ita l of Espi no #alances Additional inestment b* Estrella and Espino #alances Pa*ment of liabilities and pa*ment to partners

Estrella$ Espino and Espiritu Statement of Liquidation ,anuar* & - '&$ 2!&5 3th er 3the r L3A N Assets L iabi li ties E spi no Espiri tu

P 0!$!!!

2$!!!

P .$!!!

Estre lla (2)

(P 5$!!!) 5 $!!!

C E

(P

Problem 6 – 4

&+ Asset

#o o@ al ue

Accounts ecei abl e erchandise I nento r* P repaid Ad e rtisin4 achiner* an d Eq uipment

P %!$ !!! 5! $! !! 2 $!!! 0! $!!! P&52$! !!

C ash eali:ed P%0$!! ! 25$!! ! .! ! 20$ !! ! P& &'$. !!

(Ba (

2+ Easco-Ellor Partnership Statement of Liquidation ,anuar* &  '&$ 2!&5 Cash #alances before liq uidation Sale of assets and distribution o f loss #al ances Dnrecor ded liabilities #al ances Pa*men tof liabiliti es #al ances Additional inestment of Ell or #al ances Additional loss to Easco for the deficienc* of Ell or #al ances Pa*men tto Easco

3ther Assets

P &$!!!

P& 52$! !!

& &'$.!! P& &0$.!!

(&52$! !!)

P& &0$.!! (&!/ $!!!) P 5$.!!

Accounts Pa*able

Notes Pa*able

P2!$! !!

P . %$!!!

P2 !$! !! 2$!!! P2 2$! !! (22$!!!)

P .% $!!! &$! !! P ." $!!! (."$! !!)

CAPI Easco ( 0) P '! $!! ! ( &5 $2. !) P &0$" 2! ( & $2 !!) P &'$5 2! P &'$52 !

0$ !!! P /$.!!

P &'$5 2!

P /$.!! ( /$.!! )

( '$"2 !) P /$. !! ( /$.!!)

'+ a+

Cash E asco$ Capit al El lor $ C apital All o> ance for D ncolle ctible Acc ount s Accum ul ated ;eprecia tion A ccou nts ecei ab le  erchand ise In ento r* P repaid Ad erti sin 4 achiner* and Equ ipm ent

&& '$ .!! &5$ 2.! 22 $ /2! 2 !$!! ! % !$ !!!

d+

Cash E llo r$ Capital

0$ !! !

e+

E as co $ Capit al E llo r$ Capital

'$ "2!

f+

E as co $ Capit al  Cash

/$ .!!

&'LT(PLE CH)(CE

&+

C

To tal assets  Total capital F To tal liabil ities  P% !$!!! F P '$!!! Less Cash  P' $!! ! F P2 2$2 !! - P2 '$ 2! ! #oo@ alue of n oncash asset s

2+

#

P%& $ !!! - P2' $2 !!  P' "$.!! 1 02 &

'+

# Cap i tal bal+ befo re liq uidation Lo ss on reali:at i on #alances Add9l l oss to Es pinosa and Esteb an Cash pa*ments to p artners

0+

C

5+

A

To tal capi tal Less Cash l eft for dist ributi on Loss on reali:ation

Capi tal bal+ bef or e l iquida tio n Loss on reali:ation #alances Addl loss to E& 8 E2 fo r the de ficienc * o f E' Cash p a* men t t o E& %+

"+

;

E& P 0!$ !!! ( 2 &$!! !)

E2 P 25$!! ! (& 0$! !!)

To tal capi tal (P'% !$!!! F P "2$! !!) Total li abi lities Total loss on liqui dation

A Capi tal b alances ;r a>in4 ; ist ribu tion of net income Loss on liqu id ation #alances Additi onal loss to Elor and Este

Espera P &!!$!!! ( % !$! !!) 20 $!! ! (& "2$! !! )

Elor P .!$!!! ( 0!$ !!! ) 20 $!!! ( &" 2$! !! )

/+

#

Escano P& !$! !! ( &. $!!!)

#alances befo re liq uid atio n L oss o n liq uidation - P05$ !!! #alances Additional loss for deficienc* of Escano (P. $!!! - P5$ !!!  P'$!!! ) P a*ment to E elo & !+

;

& &+

C

& 2+

#

Cash t o be r ecei ed b* Escano E scano ca pital b ef or e li quidat ion E scano9 s share in the 4ain on r eali:at ion Escano ith liquidatin4 the bus sellin4 the other assets for P'!!$!!! incurrin4 loss on reali:ation of P&55$5!!+...