CHAPTER 6

Partnership Liquidation Lump-sum

Exercise 6-1
E2 Partnership
Statement of Liquidation
June 1 - 30, 2014
Non-cash CAPITAL
Cash Assets Liabilities Encabo Elorde
Profit and loss ratio 225/500 275/500
Balances before liquidation P 25,000 P600,000 P125,000 P225,000 P275,000
Sale of non-cash assets and distribution of loss 350,000 ( 600,000) ( 112,500) (137,500)
Balances P375,000 P125,000 P 112,500 P137,500
Payment of liabilities ( 125,000) ( 125,000)
Balances P250,000 P 112,500 P137,500
Payment to partners ( 250,000) ( 112,500) (137,500)

Exercise 6-2
1.
Elias, Enrico and Ener
Statement of Liquidation
January 1 31, 2015
Non-cash C A P I T A L
Cash Assets Liabilities Elias Enrico Ener
Profit and loss ratio 3/8 3/8 2/8
Balances before liquidation P 80,000 P810,000 P270,000 P60,000 P290,000 P270,000
Sale of non-cash assets and distribution of loss 634,000 (810,000) (66,000) ( 66,000) ( 44,000)
Payment of liquidation expenses ( 24,000) ( 9,000) ( 9,000) ( 6,000)
Balances P690,000 P270,000 (P15,000) P215,000 P220,000
Payment of liabilities (270,000) (270,000)
Balances P420,000 (P15,000) P215,000 P220,000
Additional investment of Elias 15,000 15,000
Balances P435,000 P215,000 P220,000
Payment to partners ( 435,000) ( 215,000) ( 220,000)

2.
 Elias , Enrico and Ener
Statement of Liquidation
January 1 31, 2015
Non-cash Note Payable C A P I T A L
Cash Assets to Elias Liabilities Elias Enrico Ever
Profit and loss ratio 3/8 3/8 2/8
Balances before liquidation P 80,000 P810,000 P70,000 P200,000 P60,000 P290,000 P270,000
Sale of non-cash assets and distribution of loss 634,000 (810,000) (66,000) ( 66,000) ( 44,000)
Payment of liquidation expenses (24,000) ( 9,000) ( 9,000) ( 6,000)
Balances P690,000 P70,000 P200,000 (P15,000) P215,000 P220,000
Payment of liabilities (200,000) (200,000)
Balances P490,000 P70,000 (P15,000) P215,000 P220,000
Offset of loan against debit balance in the
capital balance of Elias ( 15,000) 15,000
Balances P490,000 P55,000 P215,000 P220,000
Payment to partners (490,000) ( 55,000) ( 215,000) ( 220,000)
3. Elias , Enrico and Ener
Statement of Liquidation
January 1 31, 2015
NR from Non-cash NP C A P I T A L
Cash Enrico Assets to Elias Liabilities Elias Enrico Ever
Profit and loss ratio 3/8 3/8 2/8
Balances before liquidation P 80,000 P110,000 P700,000 P70,000 P200,000 P60,000 P290,000 P270,000
Sale of non-cash assets and distribution of loss 634,000 (700,000) (24,750) ( 24,750) ( 16,500)
Payment of liquidation expenses (24,000) ( 9,000) ( 9,000) ( 6,000)
Balances P690,000 P110,000 P70,000 P200,000 P26,250 P256,250 P247,500
Payment of liabilities (200,000) (200,000)
Balances P490,000 P110,000 P70,000 P26,250 P256,250 P247,500
Offset of receivable against credit balance in
the capital of Enrico (110,000) ( 110,000)
Balances P490,000 P70,000 P26,250 P146,250 P247,500
Payment to partners (490,000) ( 70,000) ( 26,250) ( 146,250) ( 247,500)
Exercise 6-3
Case 1
 Enteng and Estrel
Statement of Liquidation
January 1 31, 2015
Other Loans_______ Capital______
Cash Assets Liabilities Enteng Estrel Enteng (90%) Estrel (10%)
Balances before liquidation P 40,000 P 400,000 P 264,000 P 36,000 P 40,000 P 80,000 P 20,000
Sale of other assets & dist. of loss 268,000 (400,000) (118,800) ( 13,200)
Balances P 308,000 P 264,000 P 36,000 P 40,000 (P 38,800) P 6,800
Payment of liabilities (264,000) (264,000)
Balances P 44,000 P 36,000 P 40,000 (P 38,800) P 6,800
Offset of loan against debit balance in
the capital of Enteng ( 36,000) 36,000
Balances P 44,000 P 40,000 (P 2,800) P 6,800
Additional loss to Estrel for the 2,800 ( 2,800)
deficiency of Enteng
Balances P 44,000 P 40,000 P 4,000
Payment to partners ( 44,000) ( 40,000) ( 4,000)

1. Cash 268,000 4. Estrel, Capital 2,800

Enteng, Capital 118,800 Enteng, Capital 2,800
Estrel, Capital 13,200
Other Assets 400,000

2. Liabilities 264,000 5. Estrel, Loan 40,000

Cash 264,000 Estrel, Capital 4,000
Cash 44,000

3. Enteng, Loan 36,000

Enteng, Capital 36,000

Case 2

Enteng and Estrel

Statement of Liquidation
 January 1 31, 2015

Other Loans_______ Capital______

Cash Assets Liabilities Enteng Estrel Enteng Estrel
Balances before liquidation P 40,000 P 400,000 P 264,000 P 36,000 P 40,000 P 80,000 P 20,000
Sale of other assets and distribution of loss 268,000 (400,000) ( 92,400) ( 39,600)
Balances P 308,000 P 264,000 P 36,000 P 40,000 (P 12,400) (P 19,600)
Payment of liabilities (264,000) ( 264,000)
Balances P 44,000 P 36,000 P 40,000 (P 12,400) (P 19,600)
Offset of loan against debit
balance in capital account (12,400) ( 19,600) 12,400 19,600
Balances P 44,000 P 23,600 P 20,400
Payment to partners ( 44,000) ( 23,600) ( 20,400)

1. Cash 268,000 3. Enteng, Loan 12,400

Enteng, Capital 92,400 Estrel, Loan 19,600
Estrel, Capital 39,600 Enteng, Capital 12,400
Other Assets 400,000 Estrel, Capital 19,600

2. Liabilities 264,000 4. Enteng, Loan 23,600

Cash 264,000 Estrel, Loan 20,400
Cash 44,000

Case 3

Enteng and Estrel

Statement of Liquidation
January 1- 31, 2015
 Other Loans_______ Capital______
Cash Assets Liabilities Enteng Estrel Enteng Estrel
Balances before liquidation P 40,000 P 400,000 P 264,000 P 36,000 P 40,000 P 80,000 P 20,000
Sale of other assets & distribution of loss 268,000 (400,000) ( 66,000) ( 66,000)
Balances P 308,000 P 264,000 P 36,000 P 40,000 P 14,000 (P 46,000)
Payment of liabilities (264,000) ( 264,000)
Balances P 44,000 P 36,000 P 40,000 P 14,000 (P 46,000)
Offset of loan against debit balance
in the capital of Estrel (40,000) 40,000
Balances P 44,000 P 36,000 P 14,000 P ( 6,000)
Additional loss to Enteng for the deficiency of Estrel ( 6,000) 6,000
Balances P 44,000 P 36,000 P 8,000
Payment to partners ( 44,000) ( 36,000) ( 8,000)

1. Cash 268,000 4, Enteng, Capital 6,000

Enteng, Capital 66,000 Estrel, Capital 6,000
Estrel, Capital 66,000
Other Assets 400,000

2. Liabilities 264,000 5. Enteng, Loan 36,000

Cash 264,000 Enteng, Capital 8,000
Cash 44,000
3. Estrel, Loan 40,000
Estrel, Capital 40,000
Exercise 6-4

Esguerra Esteban Estrada Eugenio

Capital balances before liquidation P 11,000 P 10,300 P 13,700 P 9,000
Loan from partners 2,000
Total partners interest P 13,000 P 10,300 P 13,700 P 9,000
Loss on realization (P46,000 P12,000) ( 13,600) ( 10,200) ( 6,800) ( 3,400)
Balances (P 600) P 100 P 6,900 P 5,600
Additional loss to partners 600 ( 300) ( 200) ( 100)
Balances -------- (P 200) P 6,700 P 5,500
Additional loss to partners 200 ( 133) ( 67)
Distribution of cash to partners --------- --------- P 6,567 P 5,433
Problem 6-1

Ester, Edna, Emma, and Eva

Statement of Liquidation
October 1-31,2014

Other Rec'l from Eva, C A P I T A L

Cash Assets Ester Liabilities Loan Ester (4) Edna (2) Emma (1) Eva (1)
Balances before liquidation P 50,000 P950,000 P62,500 P 450,000 P37,500 P381,250 P 93,750 P50,000 P50,000
Sale of asset and distribution of loss 500,000 ( 950,000) ( 225,000) ( 112,500) ( 56,250) ( 56,250)
Balances P 550,000 P62,500 P 450,000 P37,500 P156,250 (P 18,750) (P 6,250) (P 6,250)
Payment of liabilities ( 450,000) ( 450,000)
Balances P 100,000 P62,500 P37,500 P156,250 (P 18,750) (P 6,250) (P 6,250)
Offset of receivable against
credit balance in the
capital account of Ester (62,500) ( 62,500)
Balances P 100,000 P37,500 P 93,750 (P 18,750) (P 6,250) (P 6,250)
Additional loss to the partners
for the deficiency of Edna
shared 4:1:1 ( 12,500) 18,750 ( 3,125) ( 3,125)
Balances P 100,000 P37,500 P 81,250 (P 9,375) (P 9,375)
Offset of loan against debit
balance in the capital
account of Eva ( 9,375) 9,375
Balances P 100,000 P28,125 P 81,250 (P 9,375)
Payment to partners ( 100,000) (26,250) ( 73,750)
Balances P 1,875 P 7,500 (P 9,375)
Additional investment by Emma 9,375 9,375
Balances P 9,375 P 1,875 P 7,500
Payment to partners ( 9,375) ( 1,875) ( 7,500)
Journal entries to record the liquidation of the partnership

1. Cash 500,000
Ester, Capital 225,000
Edna, Capital 112,500
Emma, Capital 56,250
Eva, Capital 56,250
Other Assets 950,000

2. Liabilities 450,000
Cash 450,000

3. Esters, Capital 62,500

Receivable from Ester 62,500

4. Ester, Capital 12,500

Emma, Capital 3,125
Eva, Capital 3,125
Edna, Capital 18,750

5. Eva, Loan 9,375

Eva, Capital 9,375

6. Eva, Loan 26,250

Ester, Capital 73,750
Cash 100,000

7. Cash 9,375
Emma, Capital 9,375

8. Eva, Loan 1,875

Ester, Capital 7,500
Cash 9,375
Problem 6-2

1. Esteban, Capital P 144,000 3. a. Cash 463,000

Esteban, Drawing ( 12,000) Eugenio, Capital 52,500
Total interest of Esteban P 132,000 Evaristo, Capital 31,500
Cash received by Esteban 111,000 Esteban, Capital 21,000
Share of Esteban in the loss on liquidation P 21,000 Other Assets 568,000
Fractional share of Esteban 2/10
Total loss on liquidation P 105,000 b. Liabilities 200,000
Cash 200,000

c. Evaristo, Loan 40,000

Eugenio, Capital 79,500
Evaristo, Capital 102,500
Esteban, Capital 111,000
Cash 333,000

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

CAPITAL
Other Evaristo, Eugenio Evaristo Esteban
Cash Assets Liabilities Loan (5/10) (3/10) (2/10)
Balances before liquidation P 70,000 P 568,000 P 200,000 P 40,000 P 132,000 P 134,000 P132,000
Sale of other assets & distribution of loss 463,000 ( 568,000) ( 52,500) ( 31,500) ( 21,000)
Balances P 533,000 P 200,000 P 40,000 P 79,500 P 102,500 P 111,000
Payment of liabilities (200,000) ( 200,000)
Balances P 333,000 P 40,000 P 79,500 P 102,500 P 111,000
Payment to partners ( 333,000) ( 40,000) ( 79,500) (102,500) ( 111,000)

Problem 6-3
Case 1
Estrella, Espino and Espiritu
Statement of Liquidation
January 1- 31, 2015
Other L O A N C A P I T A L
Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (1)
Balances before liquidation P 20,000 P 340,000 P 112,000 P 5,000 P 8,000 P 95,000 P 60,000 P 80,000
Sale of assets & distribution of loss 250,000 ( 340,000) (36,000) (36,000) (18,000)
Balances P 270,000 P 112,000 P 5,000 P 8,000 P 59,000 P 24,000 P 62,000
Payment of liabilities ( 112,000) (112,000)
Balances P 158,000 P 5,000 P 8,000 P 59,000 P 24,000 P 62,000
Payment to partners ( 158,000) (5,000) (8,000) (59,000) ( 24,000) (62,000)

Case 2
Estrella, Espino and Espiritu
Statement of Liquidation
January 1 - 31, 2015

Other L O A N C A P I TA L
Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (1)
Balances before liquidation P 20,000 P 340,000 P 112,000 P 5,000 P 8,000 P 95,000 P 60,000 P 80,000
Sale of assets & distribution of loss 185,000 (340,000) (62,000) ( 62,000) (31,000)
Balances P 205,000 P 112,000 P 5,000 P 8,000 P 33,000 (P 2,000) P 49,000
Payment of liabilities (112,000) (112,000)
Balances P 93,000 P 5,000 P 8,000 P 33,000 (P 2,000) P 49,000
Offset of loan against debit balance in
the capital of Espino ( 2,000) 2,000
Balances P 93,000 P 3,000 P 8,000 P 33,000 P 49,000
Payment to partners ( 93,000) (3,000) (8,000) (33,000) (49,000)

Case 3

Estrella, Espino and Espiritu

Statement of Liquidation
 January 1 -31, 2015

Other L O A N C A P I T A L
Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (1)
Balances before liquidation P 20,000 P 340,000 P 112,000 P 5,000 P 8,000 P 95,000 P 60,000 P 80,000
Sale of assets & distribution of loss 170,000 (340,000) (68,000) ( 68,000) (34,000)
Balances P 190,000 P 112,000 P 5,000 P 8,000 P 27,000 (P 8,000) P 46,000
Payment of liabilities ( 112,000) (112,000)
Balances P 78,000 P 5,000 P 8,000 P 27,000 (P 8,000) P 46,000
Offset of loan against debit
balance in the capital of
Espino ( 5,000) 5,000
Balances P 78,000 P 8,000 P 27,000 (P 3,000) P 46,000
Payment to partners ( 78,000) ( 8,000) ( 25,000) ( 45,000)
Balances P 2,000 (P 3,000) P 1,000
Additional investment by
Espino 3,000 3,000
Balances P 3,000 P 2,000 P 1,000
Payment to partners ( 3,000) ( 2,000) ( 1,000)

Estrella, Espino and Espiritu

Schedule to Accompany Statement of Liquidation
Amounts to be Paid to Partners
 Estrella (2) Espino (2) Espiritu (1)
Capital balances before cash distribution P 27,000 (P 3,000) P 46,000
Add loan balance 8,000
Total partners interest P 27,000 (P 3,000) P 54,000
Restricted interest - possible loss to Estrella and Espiritu in the
ratio of 2:1 if Espino fails to pay his deficiency ( 2,000) 3,000 ( 1,000)
Free interests - amounts to be paid to partners P 25,000 P 53,000
Payment to apply on:
Loan P 8,000
Capital P 25,000 45,000
Cash distribution P 25,000 P 53,000

Case 4

Estrella, Espino and Espiritu

Statement of Liquidation
January 1 31, 2015
 Other LOAN CAPTIAL
Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (1)
Balances before liquidation P 20,000 P 340,000 P 112,000 P 5,000 P 8,000 P 95,000 P 60,000 P 80,000
Sale of assets & distribution of loss 125,000 ( 340,000) (86,000) (86,000) (43,000)
Balances P 145,000 P 112,000 P 5,000 P 8,000 P 9,000 (P26,000) P 37,000
Payment of liabilities ( 112,000) (112,000)
Balances P 33,000 P 5,000 P 8,000 P 9,000 (P26,000) P 37,000
Offset of loan against debit balance
in the capital of Espino ( 5,000) 5,000
Balances P 33,000 P 8,000 P 9,000 (P21,000) P 37,000
Payment to partners ( 33,000) ( 8,000) ( 25,000)
Balances P 9,000 (P21,000) P 12,000
Additional investment by Espino 21,000 21,000
Balances P 21,000 P 9,000 P 12,000
Payment to partners ( 21,000) ( 9,000) ( 12,000)
 Estrella, Espino and Espiritu
Schedule to Accompany Statement of Liquidation
Amount to be Paid to Partners

Estrella (2) Espino (2) Espiritu (1)

Capital balances before cash distribution P 9,000 (P 21,000) P 37,000
Add loan balance 8,000
Total partners interest P 9,000 (P 21,000) P 45,000
Restricted interest - possible loss to Estrella and Espiritu in
the ratio of 2:1 if Espino fails to pay his deficiency (14,000) 21,000 ( 7,000)

Balances (P 5,000) P 38,000

Restricted interest - possible loss to Espiritu if Estrella
fails to pay his deficiency 5,000 ( 5,000)
Free interests - amounts to be paid to partners P 33,000
Payment to apply on:
Loan P 8,000
Capital 25,000
Cash distribution P 33,000
 Case 5
Estrella, Espino and Espiritu
Statement of Liquidation
January 1 - 31, 2015
Other Other LOAN CAP I TAL
Cash Assets Liabilities Espino Espiritu Estrella (2) Espino (2) Espiritu (1)
Balances before liquidation P 20,000 P 340,000 P 112,000 P 5,000 P 8,000 P 95,000 P 60,000 P 80,000
Sale of assets & distribution of loss 90,000 (340,000) (100,000) (100,000) (50,000)
Balances P 110,000 P 112,000 P 5,000 P 8,000 (P 5,000) (P 40,000) P 30,000
Payment of liabilities ( 110,000) (110,000)
Balances P 2,000 P 5,000 P 8,000 (P 5,000) (P 40,000) P 30,000
Offset of loan against debit balance
in the capital of Espino ( 5,000) 5,000
Balances P 2,000 P 8,000 (P 5,000) (P 35,000) P 30,000
Additional investment by Estrella and 40,000 5,000 35,000
Espino
Balances P 40,000 P 2,000 P 8,000 P 30,000
Payment of liabilities and payment ( 40,000) ( 2,000) (8,000) ( 30,000)
to partners
 Problem 6 4
1.
Asset Book Value Cash (Gain) Loss
Realized
Accounts Receivable P 60,000 P64,000 (P 4,000)
Merchandise Inventory 50,000 25,000 25,000
Prepaid Advertising 2,000 800 1,200
Machinery and Equipment 40,000 24,000 16,000
P152,000 P113,800 P 38,200

2.
Evasco-Ellor Partnership
Statement of Liquidation
January 1 31, 2015

Cash Other Accounts Notes CAPITAL

Assets Payable Payable Evasco (4) Ellor (6)
Balances before
liquidation P 1,000 P152,000 P20,000 P 86,000 P 30,000 P 17,000
Sale of assets and
distribution of loss 113,800 (152,000) (15,280) (22,920)
Balances P114,800 P20,000 P 86,000 P 14,720 (P 5,920)
Unrecorded liabilities 2,000 1,000 ( 1,200) ( 1,800)
Balances P114,800 P22,000 P 87,000 P 13,520 (P 7,720)
Payment of liabilities (109,000) (22,000) (87,000)
Balances P 5,800 P 13,520 (P 7,720)
Additional investment of
Ellor 4,000 4,000
Balances P 9,800 P 13,520 (P 3,720)
Additional loss to Evasco
for the deficiency of
Ellor ( 3,720) 3,720
Balances P 9,800 P 9,800
Payment to Evasco ( 9,800) ( 9,800)

3.

a. Cash 113,800
Evasco, Capital 15,280
Ellor, Capital 22,920
Allowance for Uncollectible Accounts 20,000
Accumulated Depreciation 60,000
Accounts Receivable 80,000
Merchandise Inventory 50,000
Prepaid Advertising 2,000
Machinery and Equipment 100,000

b. Evasco, Capital 1,200

Ellor, Capital 1,800
Accounts Payable 2,000
Notes Payable 1,000

c. Accounts Payable 22,000

Notes Payable 87,000
Cash 109,000
 d. Cash 4,000
Ellor, Capital 4,000

e. Evasco, Capital 3,720

Ellor, Capital 3,720

f. Evasco, Capital 9,800

Cash 9,800

MULTIPLE CHOICE

1. C Total assets = Total capital + Total liabilities

= P60,000 + P 3,000 P 63,000
Less Cash = P3,000 + P22,200 - P23,200 ___2,000
Book value of noncash assets P 61,000

2. B P61,000 - P23,200 = P37,800 x 4/21 P 7,200

3. B Espina Espinosa Esteban Estrellita

Capital bal. before liquidation P1,000 P25,000 P25,000 P 9,000
Loss on realization ( 5,400) ( 7,200) ( 10,800) ( 14,400)
Balances (P4,400) P17,800 P14,200 (P5,400)
Addl loss to Espinosa and Esteban 4,400 ( 3,920) ( 5,880) 5,400
Cash payments to partners P 8,320

4. C Total capital P70,000

Less Cash left for distribution 28,000
Loss on realization P 42,000

5. A E1 E2 E3
Capital bal. before liquidation P 40,000 P 25,000 P 5,000
Loss on realization ( 21,000) (14,000) ( 7,000)
Balances P 19,000 P 11,000 P( 2,000)
Addl loss to E1 & E2 for the deficiency of E3 ( 1,200) ( 800) 2,000
Cash payment to E1 P 17,800

6. D Total capital (P360,000 + P72,000) P432,000

Total liabilities 84,000
Total loss on liquidation P516,000

7. A Espera Elor Este

Capital balances P 100,000 P 80,000 P 300,000
Drawing ( 60,000) ( 40,000) (20,000)
Distribution of net income 24,000 24,000 24,000
Loss on liquidation (172,000) (172,000) (172,000)
Balances (P108,000) P(108,000) P 132,000
Additional loss to Elor and Este 108,000 ( 54,000) ( 54,000)
Cash to be distributed to Este P 78,000

8. B Escano Ender Evelo

Balances before liquidation P10,000 P35,000 P41,000
Loss from sale of non-cash assets ( 16,000) ( 12,000) ( 12,000)
Balances (P 6,000) P23,000 P29,000
Additional loss for deficiency of Escano 6,000 ( 3,000) ( 3,000)
Balances P20,000 P26,000
Add Loan balance 14,000
Cash to be received by Ender P34,000
9. B Escano Ender Evelo
Balances before liquidation P10,000 P35,000 P41,000
Loss on liquidation - P45,000 ( 18,000) ( 13,500) ( 13,500)
Balances (P 8,000) P21,500 P27,500
Additional loss for deficiency
of Escano (P8,000 - P5,000 = P3,000) 3,000 ( 1,500) ( 1,500)
Payment to Evelo 26,000

10. D Cash to be received by Escano P12,000

Escano capital before liquidation 10,000
Escanos share in the gain on realization P 2,000
Escano 's profit share 40%
Total gain on realization P 5,000
Book value of non-cash assets 70,000
Cash realized from sale of non-cash assets P75,000

11. C Capital of Echo before liquidation P50,000

Share in loss from liquidation (P60,000 x 6/10) (36,000)
Amount to be received by Echo P14,000

12. B Echo Egay Elma

Capital balances P50,000 P50,000 P10,000
Loss on realization (12,000) (12,000) (36,000)
P38,000 P38,000 (P26,000)
Addl loss for the deficiency of Elma (13,000) (13,000) 26,000
Amt to be received by Egay P25,000

13. A Esmer Estrel Ellea Elmer

14. A Capital and loan balances P 50,000 P 50,000 P50,000 P 75,000
15. B Loss on realization ( 112,000) ( 56,000) ( 56,000) ( 56,000)
Balances (P 62,000) (P 6,000) (P 6,000) P 19,000
Addl loss for the def of Estrel ( 3,000) 6,000 ( 1,500) ( 1,500)
Amount to be received from the partnership P 17,500
Personal assets 200,000
Amount available to personal creditors of Elmer P217,500

TEST MATERIALS
Test Material No. 21 Test Material No. 22
1. F 11. T 1. Loan payable 11. Marshaling of assets
2. F 12. T 2. Lump-sum liquidation 12. Capital deficiency
3. T 13. F 3. Right of offset 13. Gain on realization
4. T 14. T 4. Liquidation 14. Liquidation expenses
5. T 15. T 5. Realization 15. Loss to the other partner
6. F 16. F 6. Loan recl from partner 16. Capital balance
7. T 17. T 7. Installment liquidation 17. Personal creditors
8. T 18. F 8. Deficient partner 18. Additional investment
9. F 19. T 9. Statement of liquidation 19. Addition to capital
10. T 20. T 10. Insolvent partner 20. Profit and loss ratio

Test Material No. 23

1. A
 2. D
3. D
4. C
5. D
6. C
7. B
8. A
9. C
10. D
11. D
12. A P100,000/4 = P25,000
13. B P120,000 x 2/3 = P80,000; P120,000 x 1/3 = P40,000
14. C P80,000 x 3/5 = P48,000; P80,000 x 2/5 = P32,000
15. D P60,000 + P90,000 P20,000 = P130,000
16. A Emy Ely Evy
Capital balances before liquidation P280,000 P160,000 P20,000
Distribution of loss on realization ( 70,000) ( 42,000) ( 28,000)
Balances P210,000 P118,000 (P 8,000)
Additional loss for
the deficiency of Evy ( 5,000) ( 3,000) 8,000
Balances P205,000 P115,000
Cash payments to partners ( 205,000) ( 115,000)

17. C P320,000 - (P120,000 x 4/10) = P272,000

18. A Eden Elisa Elma

Capital balances before liquidation P320,000 P 90,000 P110,000
Distribution of loss on realization ( 144,000) ( 180,000) ( 36,000)
Balances P176,000 (P 90,000) P 74,000
Additional loss for the deficiency of
Elisa ( 72,000) 90,000 ( 18,000)
Payment to Elma P 56,000

19. C Estacio Estioco

Capital balances (P21,000) P21,000
Loan 45,000
Cash payment to partners P24,000 P21,000

20. A P140,000 + P10,000 = P150,000

P120,000 = P30,000/40% = P75,000
Test Material 24
Problem A
EEE Partnership
Statement of Liquidation
January 1 31, 2015
Cash Non-cash Accounts Loan Payable to CAPITAL
Assets Payable Empoy Estoy Empoy Eloy
Balances before liquidation P 25,000 P 475,000 P 240,000 P 30,000 P120,000 P 50,000 P 60,000
Sale of assets and dist. of loss 260,000 (475,000) (43,000) (86,000) (86,000)
Balances P 285,000 P 240,000 P 30,000 P 77,000 (P36,000) (P 26,000)
Payment of liabilities ( 240,000) ( 240,000)
Balances P 45,000 P 30,000 P 77,000 (P36,000) (P 26,000)
Offset of loan against deficiency of
Empoy ( 30,000) 30,000
Balances P 45,000 P 77,000 (P 6,000) (P26,000)
Additional loss to Estoy and Empoy
for the deficiency of Eloy ( 333) ( 667) 1,000
Balances P 45,000 P 76,667 (P 6,667) (P25,000)
Additional investment by Empoy and
Eloy 31,667 6,667 25,000
Balances P 76,667 P 76,667
Payment to Estoy ( 76,667) (76,667)
2.
a, Cash 260,000
Estoy, Capital 43,000
Empoy, Capital 86,000
Eloy, Capital 86,000
Accounts Receivable 75,000
Inventories 100 000
Property, Plant and Equipment 300,000

b. Accounts Payable 240,000

Cash 240,000

c. Loan Payable to Empoy 30,000

Empoy, Capital 30,000

d. Estoy, Capital 333

Empoy Capital 667
Eloy, Capital 1,000

e. Cash 31,667
Empoy, Capital 6,667
Eloy, Capital 25,000

f. Estoy, Capital 76,667

Cash 76,667

3.

Estoy Empoy Eloy

Personal assets P250,000 P300,000 P350,000
Applied to
Personal liabilities ( 230,000) ( 240,000) ( 325,000)
Partnership liabilities ( 6,667) ( 25,000)
Balances P 20,000 P 53,333 ---

Problem B

1. a. Escobar Elloso Echaves

Capital balances before liquidation P90,000 P 90,000 P 30,000
(Receivables) Payables ( 75,000) 40,000 60,000
Total partners interest P15,000 P130,000 P 90,000
Loss on realization ( 32,200) ( 32,200) ( 16,100)
Balances (P17,200) P 97,800 P 73,900
Additional investment of Escobar 17,200
 Payment to partners ( 97,800) ( 73,900)

b. Escobar Elloso Echaves

Capital balances before liquidation P90,000 P 90,000 P 30,000
(Receivables) Payables ( 75,000) 40,000 60,000
Total partners interest P15,000 P130,000 P 90,000
Loss on realization ( 44,200) ( 44,200) ( 22,100)
Balances (P29,200) P 85,800 P 67,900
Additional loss to Elloso and Echaves 25,200 ( 16,800) ( 8,400)
Balances (P 4,000) P 69,000 P 59,500
Additional investment of Escobar 4,000
Payment to partners ( 69,000) ( 59,500)

c. Escobar Elloso Echaves

Capital balances before liquidation P90,000 P 90,000 P 30,000
(Receivables) Payables ( 75,000) 40,000 60,000
Total partners interest P15,000 P130,000 P 90,000
Loss on realization ( 44,200) ( 44,200) ( 22,100)
Liquidation expenses ( 9,950) ( 9,950) ( 4,975)
Balances (P39,150) P 75,850 P 62,925
Additional loss to Elloso and Echaves 39,150 ( 26,100) ( 13,050)
Payment to partners ( 49,750) ( 49,875)

2. Partnership assets of P455,500 (excluding cash) less partnership liabilities of P308,500 is

partnership net assets of P147,000. Price offered is P140,000; the loss on sale of the
business is P7,000. Therefore, it is wiser to accept the offer for the purchase of the
business for P140,000. The loss shall be P7,000 compared with liquidating the business and
selling the other assets for P300,000 incurring loss on realization of P155,500.