Exercises A and B Installment Liquidation PDF

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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, North...

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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. 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.

a) NSW Partnership Cash Priority Program

North

South

West

North

Capital Balances Add/Deduct Loans

450,000

300,000 (50,000)

150,000 100,000

Total Partners’ Interest Divide P % L ratio

450,000 30%

250,000 50%

250,000 20%

Loss Absorption Balance Alloc 1 Cash to North P250,000 x 30%

1,500,000 500,000 1,250,000

Balances Alloc 2 Cash to North and South N 750,000 x 30% S 750,000 x 20%

1,250,000 500,000 1,250,000

Balances

500,000 =======

(250,000)

Payments South

75,000

(750,000)

225,000 (750,000) 500,000 ======

500,000 ======

150,000 300,000 ======

======

Alloc 3 – P % L Ratio

Cash Available Liabilities

Amount 650,000 (500,000)

Available to partners Alloc 1

150,000 ( 75,000)

Balance Alloc 2 N 75,000 x 30/50 S 75,000 x 20/50

75,000 (45,000) (30,000) =======

Cash settlement

West

North

South

West

75,000

45,000 30,000 120,000 =======

======

30,000 ======

b) Cash Available to partners of P 75,000 will only be allocated to North.

150,000 =======

EXERCISE B Requirement 1 PLG PARTNERSHIP Cash Priority Program January 1, 2020 PAYMENTS Pisces Capital balances Loan balances Total partners’ interest Profit and loss ratio Loss absorption balance

Leo

Gemini

P120,000

P 90,000

P 40,000

45,000

30,000

13,000

P165,000

P120,000

P 53,000

50% P330,000

30% P400,000

Pisces

Leo

20% P265,000

Allocation I - Cash to Leo to reduce LAB to amount reported for Pisces Balances

( 70,000) P330,000

P330,000

( 65,000)

( 65,000)

P265,000

P265,000

P21,000 P265,000

Allocation II - Cash to Pisces and Leo to reduce LAB to amount reported for Gemini Balances Allocation III - Further cash distribution may be made based on P & L ratio

Requirement 2

P265,000

P32,500

19,500

P32,500

P40,500

Gemini

Amount

Pisces

L eo

Gemini

January: Cash available Allocation I - payable to Ureta

P15,000 15,000

P15,000

February: Cash available Allocation I - Bal. payable to Leo

P40,000 6,000

P 6,000

Allocation II - Payable to Pisces and Leo in the ratio of 50:30

P34,000

P21,250

12,750

P21,250

P18,750

18,000

P11,250

P 6,750

P72,000

36,000

21,600

P14,400

P47,250

P28,350

P14,400

P15,000

P 9,000

P 6,000

March: Cash available Allocation II - Balance Allocation III - Based on P & L ratio

P90,000

April: Cash available Allocation III - Based on P & L ratio

P30,000 30,000...