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CHAPTER 6Partnership Liquidation – Lump-sumExercise 6- E2 Partnership Statement of Liquidation June 1 - 30, 2014 Non-cash CAPITAL Cash Assets Liabilities Encabo Elorde Profit and loss ratio 225/500 275/ Balances before liquidation P 25,000 P600,000 P125,000 P225,000 P275, Sale of non-cash assets and...

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CHAPTER 6 Partnership Liquidation – Lump-sum Exercise 6-1 E2 Partnership Statement of Liquidation June 1 - 30, 2014 Non-cash Cash Assets Profit and loss ratio Balances before liquidation Sale of non-cash assets and distribution of loss Balances Payment of liabilities Balances Payment to partners

P 25,000 350,000 P375,000 ( 125,000) P250,000 ( 250,000)

P600,000 ( 600,000)

Liabilities P125,000 P125,000 ( 125,000)

CAPITAL Encabo Elorde 225/500 275/500 P225,000 P275,000 ( 112,500) (137,500) P 112,500 P137,500 P 112,500 ( 112,500)

P137,500 (137,500)

Exercise 6-2 1. Elias, Enrico and Ener Statement of Liquidation January 1 – 31, 2015 Non-cash Cash Assets Liabilities Profit and loss ratio Balances before liquidation Sale of non-cash assets and distribution of loss Payment of liquidation expenses Balances Payment of liabilities Balances Additional investment of Elias Balances Payment to partners 2.

P 80,000 634,000 ( 24,000) P690,000 (270,000) P420,000 15,000 P435,000 ( 435,000)

P810,000 (810,000)

P270,000 P270,000 (270,000)

Elias 3/8 P60,000 (66,000) ( 9,000) (P15,000) (P15,000) 15,000

C A P I T A L Enrico Ener 3/8 2/8 P290,000 P270,000 ( 66,000) ( 44,000) ( 9,000) ( 6,000) P215,000 P220,000 P215,000

P220,000

P215,000 ( 215,000)

P220,000 ( 220,000)

Elias , Enrico and Ener Statement of Liquidation January 1 – 31, 2015 Cash Profit and loss ratio Balances before liquidation Sale of non-cash assets and distribution of loss Payment of liquidation expenses Balances Payment of liabilities Balances Offset of loan against debit balance in the capital balance of Elias Balances Payment to partners

P 80,000 634,000 (24,000) P690,000 (200,000) P490,000

Non-cash Assets P810,000 (810,000)

P490,000 (490,000)

Note Payable to Elias

C A P I TA L Liabilities

Elias

Enrico

Ever

3/8 P60,000 (66,000) ( 9,000) (P15,000)

3/8 P290,000 ( 66,000) ( 9,000) P215,000

2/8 P270,000 ( 44,000) ( 6,000) P220,000

P70,000

(P15,000)

P215,000

P220,000

( 15,000) P55,000 ( 55,000)

15,000 P215,000 ( 215,000)

P220,000 ( 220,000)

P70,000

P200,000

P70,000

P200,000 (200,000)

Elias , Enrico and Ener

3.

Statement of Liquidation January 1 – 31, 2015 NR from Cash Profit and loss ratio Balances before liquidation Sale of non-cash assets and distribution of loss

P 80,000 634,000 (24,000) P690,000 (200,000) P490,000

Payment of liquidation expenses Balances Payment of liabilities Balances Offset of receivable against credit balance in the capital of Enrico Balances P490,000 Payment to partners (490,000) Exercise 6-3 Case 1

Enrico P110,000

Non-cash Assets P700,000 (700,000)

NP to Elias

C A P I TA L Liabilities

Elias

Enrico

Ever

3/8 P60,000 (24,750) ( 9,000) P26,250

3/8 P290,000 ( 24,750) ( 9,000) P256,250

2/8 P270,000 ( 16,500) ( 6,000) P247,500

P70,000

P200,000

P110,000

P70,000

P200,000 (200,000)

P110,000

P70,000

P26,250

P256,250

P247,500

P70,000 ( 70,000)

P26,250 ( 26,250)

( 110,000) P146,250 ( 146,250)

P247,500 ( 247,500)

(110,000)

Balances before liquidation Sale of other assets & dist. of loss

Balances Payment of liabilities Balances

Cash P 40,000 268,000 P 308,000 (264,000) P 44,000

Enteng and Estrel Statement of Liquidation January 1 – 31, 2015 Other Loans_______ Assets Liabilities Enteng Estrel P 400,000 P 264,000 P 36,000 P 40,000 (400,000) P 264,000 P 36,000 P 40,000 (264,000) P 36,000 P 40,000

Offset of loan against debit balance in the capital of Enteng

Balances Additional loss to Estrel for the deficiency of Enteng Balances Payment to partners 1.

2.

3.

( 36,000) P 44,000

P 40,000

P 44,000 ( 44,000)

P 40,000 ( 40,000)

Cash Enteng, Capital Estrel, Capital Other Assets

268,000 118,800 13,200

Liabilities Cash

264,000

Enteng, Loan Enteng, Capital

4.

Estrel, Capital Enteng, Capital

Capital______ Enteng (90%) Estrel (10%) P 80,000 P 20,000 (118,800) ( 13,200) (P 38,800) P 6,800 (P 38,800)

P 6,800

36,000 (P 2,800) 2,800

P 6,800 ( 2,800) P 4,000 ( 4,000) 2,800 2,800

400,000 5. 264,000 36,000 36,000

Case 2 Enteng and Estrel Statement of Liquidation

Estrel, Loan Estrel, Capital Cash

40,000 4,000 44,000

January 1 – 31, 2015

Balances before liquidation Sale of other assets and distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in capital account Balances Payment to partners

1.

2.

Other Assets P 400,000 (400,000)

Cash P 40,000 268,000 P 308,000 (264,000) P 44,000

Liabilities P 264,000 P 264,000 ( 264,000)

P 44,000 ( 44,000)

Cash Enteng, Capital Estrel, Capital Other Assets

268,000 92,400 39,600

Liabilities Cash

264,000

3. 400,000 4. 264,000

Case 3 Enteng and Estrel Statement of Liquidation January 1- 31, 2015

Loans_______ Enteng Estrel P 36,000 P 40,000 P 36,000

P 40,000

Capital______ Enteng Estrel P 80,000 P 20,000 ( 92,400) ( 39,600) (P 12,400) (P 19,600)

P 36,000

P 40,000

(P 12,400)

(P 19,600)

(12,400) P 23,600 ( 23,600)

( 19,600) P 20,400 ( 20,400)

12,400

19,600

Enteng, Loan Estrel, Loan Enteng, Capital Estrel, Capital

12,400 19,600

Enteng, Loan Estrel, Loan Cash

23,600 20,400

12,400 19,600

44,000

Balances before liquidation Sale of other assets & distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in the capital of Estrel Balances

Cash P 40,000 268,000 P 308,000 (264,000) P 44,000

Other Assets P 400,000 (400,000)

Liabilities P 264,000 P 264,000 ( 264,000)

Loans_______ Enteng Estrel P 36,000 P 40,000 P 36,000

P 40,000

Capital______ Enteng Estrel P 80,000 P 20,000 ( 66,000) ( 66,000) P 14,000 (P 46,000)

P 36,000

P 40,000

P 14,000

(40,000) P 44,000

P 36,000

P 44,000 ( 44,000)

P 36,000 ( 36,000)

Additional loss to Enteng for the deficiency of Estrel

Balances Payment to partners

1.

2. 3.

Cash Enteng, Capital Estrel, Capital Other Assets

268,000 66,000 66,000

Liabilities Cash

264,000

Estrel, Loan Estrel, Capital

4,

Enteng, Capital Estrel, Capital

P 14,000 ( 6,000) P 8,000 ( 8,000)

(P 46,000) 40,000 P ( 6,000) 6,000

6,000 6,000

400,000 5. 264,000 40,000 40,000

Enteng, Loan Enteng, Capital Cash

36,000 8,000 44,000

Exercise 6-4 Capital balances before liquidation Loan from partners Total partners’ interest Loss on realization (P46,000 – P12,000) Balances Additional loss to partners Balances Additional loss to partners Distribution of cash to partners

Esguerra P 11,000 2,000 P 13,000 ( 13,600) (P 600) 600 ----------------

Esteban P 10,300

Estrada P 13,700

Eugenio P 9,000

P 10,300 P 13,700 ( 10,200) ( 6,800) P 100 P 6,900 ( 300) ( 200) (P 200) P 6,700 200 ( 133) --------P 6,567

P 9,000 ( 3,400) P 5,600 ( 100) P 5,500 ( 67) P 5,433

Problem 6-1 Ester, Edna, Emma, and Eva Statement of Liquidation October 1-31,2014

Balances before liquidation Sale of asset and distribution of loss

Balances Payment of liabilities Balances Offset of receivable against credit balance in the capital account of Ester Balances Additional loss to the partners for the deficiency of Edna shared 4:1:1 Balances Offset of loan against debit balance in the capital account of Eva Balances Payment to partners Balances

P37,500

Ester (4) P381,250 ( 225,000) P156,250

C A P I T A L Edna (2) Emma (1) P 93,750 P50,000 ( 112,500) ( 56,250) (P 18,750) (P 6,250)

Eva (1) P50,000 ( 56,250) (P 6,250)

P37,500

P156,250

(P 18,750)

(P 6,250)

(P 6,250)

P 100,000

P37,500

( 62,500) P 93,750

(P 18,750)

(P 6,250)

(P 6,250)

P37,500

( 12,500) P 81,250

18,750

P 100,000

( 3,125) (P 9,375)

( 3,125) (P 9,375)

P 100,000 ( 100,000)

( 9,375) P28,125 (26,250) P 1,875

P 81,250 ( 73,750) P 7,500

P 1,875 ( 1,875)

P (

Cash P 50,000 500,000 P 550,000 ( 450,000) P 100,000

Rec'l from Ester P62,500 P62,500 P62,500

Liabilities P 450,000 P 450,000 ( 450,000)

Eva, Loan P37,500

(62,500)

Additional investment by Emma

Balances Payment to partners

Other Assets P950,000 ( 950,000)

P (

9,375 9,375 9,375)

9,375

7,500 7,500)

(P 9,375) (P 9,375) 9,375

Journal entries to record the liquidation of the partnership 1.

2. 3. 4.

5. 6.

7. 8.

Cash Ester, Capital Edna, Capital Emma, Capital Eva, Capital Other Assets

500,000 225,000 112,500 56,250 56,250

Liabilities Cash

450,000

950,000 450,000

Esters, Capital Receivable from Ester

62,500

Ester, Capital Emma, Capital Eva, Capital Edna, Capital

12,500 3,125 3,125

Eva, Loan Eva, Capital

9,375

Eva, Loan Ester, Capital Cash

62,500

18,750 9,375 26,250 73,750 100,000

Cash Emma, Capital

9,375

Eva, Loan Ester, Capital Cash

1,875 7,500

9,375

9,375

Problem 1.

6-2

Esteban, Capital Esteban, Drawing Total interest of Esteban Cash received by Esteban Share of Esteban in the loss on liquidation

Fractional share of Esteban Total loss on liquidation

P 144,000 ( 12,000) P 132,000 111,000 P 21,000  2/10 P 105,000

3.

a.

b. c.

Cash Eugenio, Capital Evaristo, Capital Esteban, Capital Other Assets

463,000 52,500 31,500 21,000

Liabilities Cash

200,000

Evaristo, Loan Eugenio, Capital Evaristo, Capital Esteban, Capital Cash

40,000 79,500 102,500 111,000

568,000 200,000

333,000

2. Eugenio , Evaristo and Esteban Statement of Liquidation January 1 – 31, 2015

Balances before liquidation Sale of other assets & distribution of loss Balances Payment of liabilities Balances Payment to partners

Problem 6-3

Cash P 70,000 463,000 P 533,000 (200,000) P 333,000 ( 333,000)

Other Assets P 568,000 ( 568,000)

Liabilities P 200,000 P 200,000 ( 200,000)

Evaristo, Loan P 40,000 P 40,000

Eugenio (5/10) P 132,000 ( 52,500) P 79,500

P 40,000 ( 40,000)

P 79,500 ( 79,500)

CAPITAL Evaristo Esteban (3/10) (2/10) P 134,000 P132,000 ( 31,500) ( 21,000) P 102,500 P 111,000 P 102,500 (102,500)

P 111,000 ( 111,000)

Case 1

Balances before liquidation Sale of assets & distribution of loss

Balances Payment of liabilities Balances Payment to partners

Cash P 20,000 250,000 P 270,000 ( 112,000) P 158,000 ( 158,000)

Estrella, Espino and Espiritu Statement of Liquidation January 1- 31, 2015 Other L O Assets Liabilities Espino P 340,000 P 112,000 P 5,000 ( 340,000) P 112,000 P 5,000 (112,000) P 5,000 (5,000)

A N Espiritu P 8,000

P

P 8,000

C A Estrella (2) P 95,000 (36,000) P 59,000

I T Espino (2) P 60,000 (36,000) P 24,000

A L Espiritu (1) P 80,000 (18,000) P 62,000

P 8,000 (8,000)

P 59,000 (59,000)

P 24,000 ( 24,000)

P 62,000 (62,000)

Case 2 Estrella, Espino and Espiritu Statement of Liquidation January 1 - 31, 2015 Cash P 20,000 185,000 P 205,000 (112,000) P 93,000

Balances before liquidation Sale of assets & distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in the capital of Espino Balances P 93,000 Payment to partners ( 93,000)

Other Assets P 340,000 (340,000)

Liabilities P 112,000 P 112,000 (112,000)

L O A N Espino Espiritu P 5,000 P 8,000 P 5,000

P 8,000

C Estrella (2) P 95,000 (62,000) P 33,000

P 5,000

P 8,000

P 33,000

( 2,000) P 3,000 (3,000)

P 8,000 (8,000)

P 33,000 (33,000)

Case 3 Estrella, Espino and Espiritu Statement of Liquidation

A P I TA L Espino (2) Espiritu (1) P 60,000 P 80,000 ( 62,000) (31,000) (P 2,000) P 49,000 (P 2,000)

P 49,000

2,000 P 49,000 (49,000)

January 1 -31, 2015

Balances before liquidation Sale of assets & distribution of loss

Cash P 20,000 170,000 P 190,000 ( 112,000) P 78,000

Balances Payment of liabilities Balances Offset of loan against debit balance in the capital of Espino Balances P 78,000 Payment to partners ( 78,000) Balances Additional investment by Espino 3,000 Balances P 3,000 Payment to partners ( 3,000)

Other Assets P 340,000 (340,000)

Liabilities P 112,000 P 112,000 (112,000)

L O A N Espino Espiritu P 5,000 P 8,000 P 5,000

P 8,000

C Estrella (2) P 95,000 (68,000) P 27,000

P 5,000

P 8,000

P 27,000

P 8,000 ( 8,000)

P 27,000 ( 25,000) P 2,000

( 5,000)

A P I T Espino (2) P 60,000 ( 68,000) (P 8,000) (P 8,000) 5,000 (P 3,000) (P 3,000)

A

L Espiritu (1) P 80,000 (34,000) P 46,000 P 46,000

P 46,000 ( 45,000) P 1,000

3,000 P 2,000 ( 2,000)

Estrella, Espino and Espiritu Schedule to Accompany Statement of Liquidation Amounts to be Paid to Partners

P

1,000 ( 1,000)

Capital balances before cash distribution Add loan balance Total partners’ interest Restricted interest - possible loss to Estrella and Espiritu in the ratio of 2:1 if Espino fails to pay his deficiency Free interests - amounts to be paid to partners Payment to apply on: Loan Capital Cash distribution

Estrella (2) P 27,000

Espino (2) (P 3,000)

P 27,000

(P 3,000)

( 2,000) P 25,000

P 25,000 P 25,000

Case 4 Estrella, Espino and Espiritu Statement of Liquidation January 1 – 31, 2015

3,000

Espiritu (1) P 46,000 8,000 P 54,000 ( 1,000) P 53,000 P 8,000 45,000 P 53,000

Balances before liquidation Sale of assets & distribution of loss

Cash P 20,000 125,000 P 145,000 ( 112,000) P 33,000

Balances Payment of liabilities Balances Offset of loan against debit balance in the capital of Espino Balances P 33,000 Payment to partners ( 33,000) Balances Additional investment by Espino 21,000 Balances P 21,000 Payment to partners ( 21,000)

Other Assets P 340,000 ( 340,000)

Liabilities P 112,000 P 112,000 (112,000)

LOAN Espino Espiritu P 5,000 P 8,000 P 5,000

P 8,000

CAPTIAL Estrella (2) Espino (2) P 95,000 P 60,000 (86,000) (86,000) P 9,000 (P26,000)

P 5,000

P 8,000

P 9,000

(P26,000)

P 8,000 ( 8,000)

P 9,000

5,000 (P21,000)

( 5,000)

P 9,000 P 9,000 ( 9,000)

(P21,000) 21,000

Espiritu (1) P 80,000 (43,000) P 37,000 P 37,000 P 37,000 ( 25,000) P 12,000 P 12,000 ( 12,000)

Estrella, Espino and Espiritu Schedule to Accompany Statement of Liquidation Amount to be Paid to Partners Capital balances before cash distribution Add loan balance Total partners’ interest Restricted interest - possible loss to Estrella and Espiritu in the ratio of 2:1 if Espino fails to pay his deficiency Balances Restricted interest - possible loss to Espiritu if Estrella fails to pay his deficiency Free interests - amounts to be paid to partners Payment to apply on: Loan Capital Cash distribution

Estrella (2) P 9,000

Espino (2) (P 21,000)

P 9,000

(P 21,000)

(14,000)

21,000

Espiritu (1) P 37,000 8,000 P 45,000 ( 7,000)

(P 5,000)

P 38,000

5,000

( 5,000) P 33,000 P 8,000 25,000 P 33,000

Case 5

Balances before liquidation Sale of assets & distribution of loss Balances Payment of liabilities Balances Offset of loan against debit balance in the capital of Espino Balances Additional investment by Estrella and Espino Balances Payment of liabilities and payment to partners

Cash P 20,000 90,000 P 110,000 ( 110,000)

Estrella, Espino and Espiritu Statement of Liquidation January 1 - 31, 2015 Other Other LOAN Assets Liabilities Espino Espiritu P 340,000 P 112,000 P 5,000 P 8,000 (340,000) P 112,000 P 5,000 P 8,000 (110,000) P 2,000 P 5,000 P 8,000

CAP I TAL Estrella (2) Espino (2) Espiritu (1) P 95,000 P 60,000 P 80,000 (100,000) (100,000) (50,000) (P 5,000) (P 40,000) P 30,000 (P 5,000)

(P 40,000)

P 30,000

(P 5,000) 5,000

5,000 (P 35,000) 35,000

P 30,000

( 5,000) P 2,000

P 8,000

P 2,000 ( 2,000)

P 8,000 (8,000)

40,000 P 40,000 ( 40,000)

P 30,000 ( 30,000)

Problem 6 – 4

1. Asset

Book Value

Accounts Receivable Merchandise Inventory Prepaid Advertising Machinery and Equipment

P 60,000 50,000 2,000 40,000 P152,000

Cash Realized P64,000 25,000 800 24,000 P113,800

(Gain) Loss (P 4,000) 25,000 1,200 16,000 P 38,200

2. Evasco-Ellor Partnership Statement of Liquidation January 1 – 31, 2015 Cash Balances before liquidation Sale of assets and distribution of loss Balances Unrecorded liabilities Balances Payment of liabilities Balances Additional investment of Ellor Balances Additional loss to Evasco for the deficiency of Ellor Balances Payment to Evasco

Other Assets

Accounts Payable

Notes Payable

P 1,000

P152,000

P20,000

P 86,000

113,800 P114,800

(152,000) P20,00...