Partnership Liquidation

Problems
1. A, B and C are partners sharing profits in the ratio 5:3:2, respectively. A balance sheet
prepared just prior to partnership liquidation show the following:

A B C
Capital balances P122,000 P72,000 P47,000
Loan Balances 43,000 48,000 6,000

Assets are sold and cash is distributed to partners in monthly installments during the course
of liquidation as follows:
January P20,000
February 50,000
March 80,000
April (final distribution) 20,000

Required:
a. Prepare a program to show how cash is to be distributed during the entire course of
liquidation.
b. Using the program developed above, prepare a schedule summarizing the payments to
be made to partners at the end of each month.

2. D, E and F are partners sharing profits in the ratio 40:35:25, respectively. On December
31, 2022, they agree to liquidate. A balance sheet prepared on this date follows:

DEF Partnership
Balance Sheet
As of December 31, 2022

Cash P 2,000 Liabilities P 6,000

Other assets 46,000 E, Loan 5,000
F, Loan 2,500
D, Capital 14,450
E, Capital 12,550
________ F, Capital 7,500
P48,000 P48,000

The results of liquidation are summarized below:

Cash w/held at
end of month for
Cash Expenses of estd. Future
Realizations Book Value Realized Realization expenses Liability Paid
January P12,000 P10,500 P500 P2,000 P4,000
February 7,000 6,000 750 1,250 2,000
March 15,000 10,000 600 500 -
April 12,000 4,000 400 - -

All cash available, except the amount withheld for future expenses, is distributed at the end
of each month.
 Required: Determine the share of each partner every month of distribution.

3. The balance sheet of J, K and L Partnership shows the following information as of

December 31, 2022:

Cash P 2,000 Liabilities P 5,000

Other assets 28,000 J, Loan 2,500
J, Capital 12,500
K, Capital 7,000
________ L, Capital 3,000
P30,000 P30,000

Profit and loss ratio is 3:2:1, respectively for J, K and L. Other assets were realized as
follows:

Date Cash Received Book Value

January 2021 P8,000 P9,000
February 2021 3,500 7,700
March 2021 12,500 11,300

Cash is distributed as assets are realized.

Requirement:
a. How much is the total loss to J?
b. How much is the total cash received by K?
c. How much cash does L received in January?

4. Partners Fredo, Lino, Marvin and Joaquin have been operating FLMJ Partnership for 10
years. Due to a significant reduction in the demand for their product over recent years, the
partners have agreed to liquidate the partnership. At the time of liquidation, balance sheet
accounts consisted of cash, P103,500; non-cash assets, P300,000; liabilities to outsiders,
P60,000; capital credit balances for partners Fredo, Lino, and Marvin, P90,000, P150,000,
and P120,000 respectively; and a debit capital balance for partner Joaquin of P16,500.

Partners share equally in income and loss. It is estimated that the administrative cost of
liquidation will total P4,500. While preparing for liquidation, an unrecorded liability of
P7,500 was discovered.

Requirements:
a. Assuming the available cash of P103,500 was distributed, how much must be the share
of partner Lino?
b. In order for partner Joaquin to receive at least P5,000, how much should the non-cash
assets be sold for?

5. Balance sheet data for the firm W, X, and Y as of January 1, 2022, follow:
Assets P1,225,000 Liabilities P 675,000
W, Capital 200,000
X, Capital 200,000
__________ Y, Capital 200,000
P1,225,000 P1,225,000
 Partners share profits equally after the allowance of a salary to Y, the managing partner, of
P7,500 monthly. As a result of operation losses sustained at the beginning of 2022, W
advanced P150,000 to the firm on April 1; it was agreed that he would be allowed interest at
6%. With continued losses, the members decided to liquidate. Y, agreed to take over
partnership equipment in part settlement of his interest, the transfer being made at an
agreed value of P40,000. On November 1, P200,000 cash was available for distribution to
partners after sale of remaining assets and payment of partnership obligations to outsiders.
Y had withdrawn his salary for January and February but had not received his salary for the
period March to November 1; no other cash payments have been made to partners.
Available cash was distributed on November 1 and the firm was declared dissolved.

Requirement: How much cash should W received in the distribution of P200,000 cash
available?

6. The accounts of the partnership of Lora, Rosa and Joaquin at the end of its fiscal year on
November 30, 2022 are as follows:

Cash P103,750 Loan from Rosa P 20,000

Other non-cash assets 707,500 Lora, Capital (30%) 266,250
Loan to Lora 15,000 Rosa, Capital (50%) 136,250
Liabilities 262,500 Joaquin, Capital (20%) 141,250

Requirement: If in the first distribution, Rosa received P50,000, which of the following is
incorrect?
a. Total amount distributed to partners is P336,250.
b. Total amount paid to creditors is P262,500.
c. Total amount realized from the non-cash assets is P598,750.
d. Lora received an amount equal to P187,500.

7. The partnership of B, O and Y was dissolved on October 30, 2022, and the account
balances after all non-cash assets are converted to cash on November 1, 2022, along with
residual profit and loss sharing ratios are:
Cash P 50,000
Accounts payable 120,000
B, Capital (30%) 90,000
O, Capital (30%) (60,000)
Y, Capital (40%) (100,000)

Personal assets and liabilities of the partners at November 1, 2022 are:

Personal Assets Personal Liabilities
B P80,000 P90,000
O 100,000 61,000
Y 100,000 80,000

Requirements:
If Y contributed P70,000 to the partnership to provide cash to pay the creditors, what
amount of R’s P90,000 partnership equity would appear to be recoverable?
8. The partnership of Daniel, Keith, and Ross, is to be liquidated as soon as possible after
December 31, 2022, and all cash on hand except for P20,000 contingency balance is to be
distributed at the end of each month until the liquidation is complete. Profits and losses are
shared 50%, 30%, and 20% to Daniel, Keith, and Ross, respectively.

A balance sheet of the partnership at December 31, 2022 contains the following account
balances.
Cash P 240,000 Accounts payable P 300,000
Accounts receivable 280,000 Notes payable 200,000
Loan to Ross 40,000 Loan from Keith 20,000
Inventories 400,000 Daniel, Capital 340,000
Land 100,000 Keith, Capital 340,000
Equipment (net) 300,000 Ross, Capital 200,000
Goodwill 40,000 _________
P1,400,000 P1,400,000

In January 2023, the loan to Ross was offset against his capital balance and the goodwill is
written off. P200,000 is collected on account, inventory items that cost P160,000 are sold
for P200,000, and cash is distributed.

Requirement:
a. If available cash is distributed on January 31, 2023, Daniel, Keith and Ross,
respectively, should receive: _______________, ______________, ______________.
b. If a cash distribution plan is developed as of January 1, 2023, the vulnerability ranks (1
is most vulnerable) for Daniel, Keith, and Ross is: __________________.

9. After all partnership assets were converted into cash and all available cash were distributed
to creditors, the following were determined:

Ledger Balances Personal Assets Personal Liabilities

Accounts payable P20,000
Rose, capital (30%) 10,000 P50,000 P45,000
Sol, capital (30%) 60,000 50,000 40,000
Taz, capital (40%) (90,000) 100,000 40,000

The partnership creditors proceed against Taz for recovery of their claims, and the partners
settle their claims against each other. The amount recovered by Sol from Taz is
_______________.

10. Elizabeth, Diana, Anthony and Scarlett were partners who decided to liquidate the affairs of
the partnership. Prior to dissolution, the condensed balance sheet, together with the profit
and loss sharing ratio was derived as follows:

Cash P 100,000 Liabilities P 750,000

Other assets 1,800,000 Diana, loan 60,000
Scarlett, loan 50,000
Elizabeth, capital (30%) 420,000
Diana, capital (30%) 315,000
Anthony, capital (20%) 205,000
__________ Scarlett, capital (20%) 100,000
 P1,900,000 P1,900,000

The other assets were sold for P1,200,000. Payments were made to creditors and final
distributions of cash were made to partners.

Requirements:
a. The partner who got paid the most was _________________.
b. The cash received by Scarlett _________________.

11. Capital balances of partners Q, R and S are the following before liquidation: P87,000;
P95,500 and P106,250 each respectively. The partnership has a loan from partner q in the
amount of P8,000; loan to partner R in the amount of P4,500, advances to partner S in the
amount of P6,500. The partners’ profit and loss ratio is 25:40:35 each respectively.

Requirements:
a. In the first installment sale, the total cash paid to partners is P57,000. How much did
partner S receive?
b. If partner Q received P20,000 in the first installment and partner S received P12,396 in
the second installment, how much is received by partner Q as of the second installment
and how much is the total cash paid to the partners?

12. The following is the financial statement of IKR Partnership as of December 31, 2022:
Assets Liabilities and Equity
Cash P 15,000 Loan from K P 6,000
Non-cash 95,000 Liabilities 20,000
Receivable from I 5,000 I, capital (15%) 33,000
Loan to R 4,000 K, capital (55%) 25,000
________ R, capital (30%) 35,000
Total assets P119,000 Total liabilities and equity P119,000

Requirements:
a. If P40,000 of the book value of the non-cash assets are sold for P18,000, additional
liquidation expenses of P2,500 are incurred and paid, cash withheld is P5,400, and all
of the outside creditors are paid, how much is the total cash paid to partners during the
first installment?
b. During the first installment, the following data are relevant: P56,000 of the book value
of the non-cash assets are sold for P38,000; additional liquidation expenses of P12,000
are incurred and paid; all of the outside creditors are also paid. If I received P11,000
during the first installment, how much is the cash withheld?

13. The balance sheet of the partnership of Nah, Lih and Toh are shown below:

NLT Partnership
Balance Sheet
December 31, 2022

Cash P 50,000 Liabilities P 80,000

Non-cash 250,000 Nah, capital (50%) 100,000
Lih, capital (25%) 75,000
________ Toh, capital (25%) 45,000
Total P300,000 Total P300,000
 On January 2022, certain non-cash assets were sold for a certain amount. Liquidation
expenses and liabilities of P4,000 and P25,000 were paid. Future liquidating expenses of
P5,000 are anticipated. Lih received P42,750 from the first distribution of available cash.

Requirements:
a. How much is the cash received from the realization of the NCAs?
b. Assuming that on February 2023, the remaining non-cash assets were sold for P75,000
and liquidating expenses of P5,000 are paid, how much is the total cash received by
Nah from the two distributions of cash?

14. On December 31, 2022, the Statement of Financial Position of IWP Partnership shows the
following data with profit or loss sharing ratio of 2:3:5.

Cash P15,000,000 Liabilities P20,000,000

Other non-cash assets 40,000,000 I, capital 15,000,000
W, capital 12,500,000
P, capital 7,500,000

On January 1, 2023, the partners decided to wind up the partnership affairs. During the
winding up, liquidation expenses amounting to P2,000,000 were paid. Non-cash assets
with book value of P30,000,000 were sold during January. 40% of total liabilities were also
paid during January. P3,000,000 cash was withheld during January for future liquidation
expenses. On January 31, 2023, partner I received P10,000,000.

Requirements:
a. What is the amount received by partner W on January 31, 2023?
b. What is the net proceeds from the sale of non-cash assets during January 1, 2023?