PARTNERSHIP LIQUIDATION

1. The PQR partnership is being dissolved. All liabilities have been paid and the remaining assets
being realized gradually. The equity if the partners are as follows:

Partners Loans to Profit and

Accounts (from) Partnership Loss Ratio
P P24,000 P6,000 3
Q 36,000 - 3
R 60,000 (10,000) 4
The second cash payment to any Partner(s) under a program of priorities shall be made thus:
a. To R P2,000 c. To R P8,000
b. To Q P6,000 d. To Q P6,000 and R P8,000

2. A cash distribution plan (payment priority program) for the Matthew, Norell, and Reams
partnership appears below:
Priority Creditors Matthew Norell Reams
First P300,000 100%
Next P80,000 70% 30%
Next P70,000 3/7 4/7
Remainder 22% 34% 44%
If P550,000 of cash is to be distributed, how much will be received by the priority creditors,
Matthew, Norell and Reams?
Priority Creditors Matthew Norell Reams
a. 0 0 0 0
b. 0 121,000 187,000 242,000
c. 300,000 55,000 85,000 110,000
d. 300,000 108,000 58,000 84,000
3. A partnership has gone through liquidation and now reports the following account balances:

Cash .. 16,000
Loan from JJ.. 3,000
WW, Capital (2,000)(deficit)
JJ, Capital... (5,000)(deficit)
FF, capital 13,000
RR, capital 7,000

Profits and losses are allocated on the following basis: WW, 30 percent; JJ, 20 percent; FF,
30 percent; RR, 20 percent. Which of the following events should occur now?
a. JJ should receive P3,000 cash because of the loan balance.
 b. FF should receive 11,800 and RR P4,200.
c. FF should receive P10,600 and RR P5400.
d. JJ should receive P3,000, FF P8,800, and RR P4,200
4. X, Y, Z have capital balances of P90,000, P60,000, and P30,000, respectively. Profits are
allocated 35% to X, 35% to Y, and 30% to Z. The partners have decided to dissolve and liquidate
the partnership. After paying all creditors, the amount available for distribution is P60,000. X, Y,
and Z are all personally solvent. Under the circumstances, Z will
a. receive P18,000
b. receive P30,000
c. personally have to contribute an additional P6,000
d. personally have to contribute an additional P36,000
5. The Keaton, Lewis and Meador partnership had the following balance sheet just before
entering liquidation:
Cash .. P 10,000 Liabilities P 130,000
Noncash assets 300,000 Keaton, capital.. 60,000
Lewis, capital.. 40,000
Meador, capital. 80,000
Total P 310,000 Total P 310,000
Keaton, Lewis and Meador share profits and losses in a ratio of 2:4:4. Non-cash assets were
sold for P180,000. Liquidation expenses were P10,000. Assume that Lewis was personally
insolvent and could not contribute any assets to the partnership, while Keaton and Meador were
both solvent. What amount of cash would Keaton have received from the distribution of the
partnership assets?
a. P38,000 c. 24,000
b. P30,000 d. 34,000
6. A local partnership has assets of cash of P5,000 and a building worth P80,000. All liabilities
have been paid and the partners are all insolvent. The partners capital accounts are as follows
Harry P40,000, Landers P30,000 and Waters P15,000. The partners share profits and losses
4:4:2. If the building is sold for 50,000, how much cash will Harry receive in the final settlement?
a. P5,000 d. P28,000
b. P9,000 e. P55,000
c. P18,000
Use the following information for 7 and 8:
Tom, Dick, and Harry are partners in an equipment leasing business that has not been able to
generate the type of revenue expected by the partners. They share profits and losses in a ratio
of 5:3:2. They have decided to liquidate the business and have sold all the assets except for one
piece of heavy machinery. All partnership liabilities have been settled and all the partners are
personally insolvent. The machinery has a book value of P85,000, and the partners have capital
account balances as follows:

Tom, capital P 40,000

Dick, capital. .. 10,000
Harry, capital .. 15,000

7. What amount of cash will each partner receive as a liquidating distribution if the machinery is
sold for P 65,000?
 Tom Dick Harry Tom Dick Harry
a. P40,000 P10,000 P15,000 c. P50,000 P16,000 P19,000
b. P30,000 P4,000 P11,000 d. P40,000 P 4,000 P14,000
8. What amount of cash will each partner receive as liquidating distribution if the machinery is
sold for P21,100?
Tom Dick Harry Tom Dick Harry
a. P1,100 P0 P0 c. P1,500 P0 P 400
b. P8,050 P9,170 P2,220 d. P1,500 P0 P0
Use the following information for 9 and 10:
The balance sheet for the partnership of JJ CC and TT, whose shares of profits and losses are
40, 50, 10, percent, is as follows:
Cash P 50,000 Accounts Payable.. P 150,000
Inventory. 360,000 JJ, Capital... 160,000
CC, Capital.. 45,000
TT, Capital 55,000
Total Assets P 410,000 Total liabilities and Equities. P 410,000

9. If the inventory is sold for P300,000, how much should JJ received upon liquidation of the
partnership?
a. 48,000 c. 136,000
b. 100,000 d. 160,000
10. If the inventory is sold for P180,000, how much should TT receive upon liquidation of the
partnership?
a. 28,000 c. 37,000
b. 32,500 d. 55,000

1. Claire, Doris, and Jeff are partners. The company is currently being liquidated. The partners'
capital accounts when the liquidation starts are P50,000, P45,000 and P45,000, respectively.
The partners have residual profit and loss ratios of 25%, 30% and 45%. Inventory with a book
value of P15,000 is sold for P9,000.
A. P47,625
B. P50,000
C. P46,250
D. P48,625

2. Refer to data No. 1, what is Doris' capital account balance after the transaction is completed?
A. P40,500
B. P43,350
C. P45,000
D. P42,150

3. Gonda, Herron, and Morse is considering possible liquidation because Morse is insolvent. The
partners have the following capital balances: P60,000, P70,000 and P40,000, respectively and
share profits and losses 30%, 45% and 25%, respectively. The partnership has P200,000 in
assets that can be sold for P150,000. What is the minimum that Morse's creditors would receive
if they have filed a claim for P50,000?
A. P-0-
B. P27,500
C. P45,000
D. P47,500

4. During the liquidation of Gym, Hob and Ing Partnership, Partner Hob withdrew equipment with
a cost to the partnership of P18,000, accumulated depreciation of P8,000, and a current fair value
of P13,000. The partners shared net income and losses equally. The net debit to Hob's capital
account (including any gain or loss on disposal of the equipment), assuming the noncash asset
may be distinguished safely to Hob, is:
A. P10,000
B. P12,000
C. P13,000
D. P18,000

5. During the liquidation of the partnership of Karr, Rice, and Long. Karr accepts, in partial
settlement of interest, a machine with a cost to the partnership of P150,000, accumulated
depreciation of P70,000 and a current fair value of P110,000. The partners share net income and
loss equally. The net debit to Karr's account (including any gain or loss on disposal of the
machine) is
A. P90,000
B. P100,000
C. P110,000
D. P15,000

6. A, B, and C have capital balances of P80,000, P80,000 and P40,000, respectively. Profits are
allocated 40% to A, 40% to B and 20% to C. The partners have decided to dossolve and liquidate
the partnership. After paying all creditors the amount available for distribution is P20,000. A and
B are personally solvent. C is personally insolvent. Under the circumstances, A and B will each
A. Receive P10,000
B. Receive P9,000
C. Receive P8,000
D. Receive P6,000

7. Assume that a partnership had assets with a book value of P240,000 and a market value of
P195,000, outside liabilities of P70,000, loans payable to partner Able of P20,000, and capital
balances for partners Able, Baker, and Chapman of P70,000, P30,000 and P50,000.
How much would able receive upon liquidation of the partnership assuming profits and losses are
allocated equally?
A. P55,000
B. P70,000
C. P75,000
D. P90,000

8. A local partnership was in the process of liquidating and reported the following capital balances:
Justice, capital (40% share of all profits and losses)...................... P 23,000
Zobart, capital (35%)...............................................................................22,000
Douglass, capital (25%)........................................................................(14,000)
Douglass indicated that the P14,000 deficit would be covered by a forthcoming contribution.
However, the two remaining partners asked to receive the P31,000 that was then available. How
much of this money should Justice receive?
A. P15,000 C. P17,333
B. P15,467 D. P15,333

9. A balance sheet for the partnership of Tree, Nee and Dad who share profits in the ratio of 2:1:1,
shows the following balances just before the liquidation:
Cash....................................................P 12,000
Other assets..........................................59,500
Liabilities...............................................20,000
Tree, capital..........................................22,000
Nee, capital...........................................15,500
Dad, capital...........................................14,000
On the first installment of the liquidation, certain assets are sold for P32,000. Liquidation
expenses of P1,000 are paid, and additional liquidation expenses are anticipated. Liabilities are
paid amounting to P5,400, and sufficient cash is retained to insure the payment to creditors before
making payment to partners. On the first payment to partners, Tree receives P6,250.
The total cash payment to partners in the first installment is:
A. P25,000 C. P12,500
B. P20,000 D. P10,000

10. Refer to data No.9, the amount of cash withheld for anticipated liquidation expenses and
unpaid liabilities are:
A. P2,000 C. P16,000
B. P14,600 D. P17,600