University of Nueva Caceres

College of Business and Accountancy

J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

Partnership
Theories

1. For financial accounting purposes, assets of an individual partner contributed to a partnership are recorded by the
partnership at
a. Historical Cost
b. Book value
c. Fair market value
d. Lower of cost or market
2. A partnership agreement calls for allocation of profits and losses by salary allocations, a bonus allocation, interest
on capital, with any remainder to be allocated by present ratios. If a partnership has a loss to allocate, generally
which of the following procedures would be applied?
a. Any loss would be allocated equally to all partners.
b. Any salary allocation criteria would not be used.
c. The bonus criteria would not be used.
d. The loss would be allocated using profit and loss ratios only.
3. Which of the following statements is true concerning the treatment of salaries in partnership accounting?
a. Partner salaries may be used to allocate profits and losses; they are not considered expenses of the
partnership.
b. Partner salaries are equal to the annual partner draw.
c. The salary of the partner is treated in the same manner as salaries of corporate employees.
d. Partner salaries are directly closed to the capital account
4. Matt and Jeff partnership agreement provides for Matt to receive a 20% bonus on profits before the bonus.
Remaining profits and losses are divided between Matt and Jeff in the ratio 2:3, respectively. Which partner has a
greater advantage when the partnership has a profit or when it has a loss
Profit Loss
a. Matt Jeff
b. Matt Matt
c. Jeff Matt
d. Jeff Jeff
5. In the Rom-Rol partnership, Rom and Rol had a capital ratio of 3:1 and a profit and loss ratio of 2:1, respectively.
The bonus method was used to record Rod’s admittance as a new partner. What ratio would be used to allocate,
to Rom and Rol, the excess of Rod’s contribution over the amount credited to Rod’s Capital account?
a. Rom and Rol’s new relative capital ratio
b. Rom and Rol’s new relative profit or loss ratio
c. Rom and Rol’s old capital ratio
d. Rom and Rol’s old profit and loss ratio
6. When a partner retires from a partnership and the retiring partner is paid more than the capital balance in her
account, which of the following explains the difference?
I. The retiring partner is receiving a bonus from the other partners.
II. The retiring partner’s goodwill is being recognized.
a. I only b. II only c. either I or II d. Neither I or II
7. When Mill retired from the partnership of Mill, Yill and Lill, the final settlement of Mill’s interest exceeded Mill’s capital
balance. Under the bonus method, the excess
a. Was recorded as goodwill
b. Was recorded as an expense
c. Reduced the capital balances of Yill and Lill
d. Had no effect on the capital balances of Yill and Lill
8. The following is the priority sequence in which liquidation proceeds will be distributed for a partnership:
a. Partnership drawings, partnership liabilities, partnership loans, partnership capital balances.
b. Partnership liabilities, partnership loans, partnership capital balances
c. Partnership liabilities, partnership loans, partnership drawings, partnership capital balances
d. Partnership liabilities, partnership capital balances, partnership loans
9. A simple partnership liquidation requires
a. Periodic payments to creditors and partners determined by a safe payment schedule.
b. Periodic payments to partners as cash becomes available
c. Creditors be paid in an orderly manner
d. Partnership assets be converted into cash with full payment made to outside creditors before remaining
cash is distributed to partners in a lump sum payment
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

10. An advance cash distribution plan is prepared

a. Each time cash is distributed to partners in an installment liquidation
b. Each time a partnership asset is sold in an installment liquidation
c. To determine the order amount of cash each partner will receive as it becomes available for distribution
d. None of these
11. A partner’s maximum loss absorption is calculated by
a. Dividing the partner’s capital balance by his or her profit-and-loss-sharing percentage
b. Multiplying the partner’s capital balance by his or her profit-and-loss-sharing percentage
c. Multiplying distributable assets by the partner’s profit-sharing percentage
d. Dividing the partner’s capital balance by his or her percentage interest in capital
12. In the cash distribution plan, which partner gets the first cash distribution?
a. The partner with the largest loan balance
b. The partner with the largest loss absorption potential
c. The partner with the largest capital balance
d. The partner with the largest profit or loss ratio
13. In a partnership liquidation, the final cash distribution to the partners should be made in accordance with the
a. Partners’ profit or loss ratio
b. Balance of the partners’ loan and capital accounts
c. Ratio of the capital contributions to the partners
d. Ratio of capital contribution less withdrawals by the partners
e.
Problems
PARTNERSHIP FORMATION
1. CC admits DD as a partner in business. Accounts in the ledger for CC on November 30, 2011, just before the
admission of DD, show the following balances:
Cash P 6,800
Accounts Receivable 14,200
Merchandise Inventory 20,000
Accounts Payable 8,000
CC, capital 33,000

It is agreed that for purposes of establishing CC’s interest, the following adjustments shall be made:
a.) An allowance for doubtful accounts of 3% of accounts receivable is to be established.
b.) The merchandise inventory is to be valued at P23,000.
c.) Prepaid salary expense of P600 and accrued rent expense of P800 are to be recognized

DD is to invest sufficient cash to obtain a 1/3 interest in the partnership.

Compute for: (1) CC’s adjusted capital before the admission of DD; and (2) the amount of cash investment by DD

2. The business assets of LL and MM are shown below:

LL MM
Cash P 11,000 P 22,354
Accounts Receivable 234,536 567,890
Inventories 120,035 260,102
Land 603,000 -
Building - 428,267
Furniture and fixture 50,345 34,789
Other assets 2,000 3,600
Total P 1,020,916 P 1,317,002

Accounts payable P 178,940 P 243,650

Notes payable 200,000 345,000
LL, capital 641,976 -
MM, capital - 728,352
Total P 1,020,916 P 1,317,002

LL and MM agreed upon to form a partnership by contributing their respective assets and equities subject to the
following adjustments:
a. Accounts receivable of P20,000 in LL’s books and P35,000 in MM’s are uncollectible.
b. Inventories of P5,500 and P6,700 are worthless in LL’s and MM’s respective books.
c. Other assets of P2,000 and P3,600 in LL’s and MM’s respective books are to be written off.
A. The capital account of the partners after adjustments will be:
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

B. The same information in number 2, how much total assets does the partnership have after formation?

3. On March 1, 2012, PP decided to combine their businesses and form a partnership. Their balance sheets on March
1, before adjustments, showed the following:

PP QQ
Cash P 9,000 P 3,750
Accounts Receivable 18,500 13,500
Inventories 30,000 10,500
Furniture and fixtures (net) 30,000 9,000
Office equipment (net) 11,500 2,750
Prepaid expenses 6,375 3,000
Total P 105,375 P 51,500

Accounts payable P 45,000 P 18,000

Capital 59,625 33,500
Total P 105,375 P 51,500

They agreed to have the following items recorded in their books:

1. Provide 2% allowance for doubtful accounts.
2. PP’s furniture and fixtures should be P31,000, while QQ’s office equipment is under-depreciated by P250
3. Rent expense incurred previously by PP was not yet recorded amounting to P1,000, while salary expense
incurred by PP was not yet recorded amounting to P800.
4. The fair market value of inventory amounted to:
For PP P29,500
For QQ 21,000

A. Compute the net (debit) credit adjustments for PP and QQ

B. The same information in number 3, compute the total liabilities after formation.
C. The same information in number 3, compute the total assets after formation:

4. On March 1, 2012, II and JJ formed a partnership with each contributing the following assets:
II JJ
Cash P300,000 P700,000
Machinery and equipment 250,000 750,000
Building - 2,250,000
Furniture and fixtures 100,000 -

The building is subject to mortgage loan of P800,000, which is to be assumed by the partnership. Partnership
agreement provides that II and JJ share profits and losses 30% and 70% respectively.

A. On March 1, 2012, the balance in JJ’s capital account should be:

B. The same information in number 4, except that the mortgage loan is not assumed by the partnership. On March 1,
2012, the balance of JJ’s capital account should be:

5. The Grey and Redd partnership was formed on January 2, 2012. Under the partnership agreement, each partner
has an equal initial capital balance. Partnership net income or loss is allocated 60% to Grey and 40% to Redd. To
form the partnership, Grey originally contributed assets consisting P30,000 with a fair value of P60,000 on January
2, 2012, and Redd contributed P20,000 cash. Drawings by the partners during 2012 totaled P3,000 by Grey and
P9,000 by Redd. The partnership net income in 2012 was P25,000. Under the bonus method, what is the amount
of bonus?
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

6. On January 1, 2008, Atta and Boy agreed to form a partnership contributing their respective assets and liabilities
subject to adjustments. At that date the following were provided:

Atta Boy
Cash P 26,000 P 62,000
Accounts Receivable 200,000 600,000
Inventories 120,000 200,000
Land 600,000 -
Building - 500,000
Furniture and fixtures 50,000 35,000
Intangible assets 2,000 3,000
Accounts payable 180,000 150,000
Other liabilities 200,000 350,000
Capital 620,000 800,000

The following adjustments were agreed upon:

a. Accounts receivable of P20,000 and P40,000 are uncollectible in A’s aand B’s respective books.
b. Inventories of P6,000 and P7,000 are worthless in A’s and B’s respective books.
c. Intangible assets are to be written off in both books
What will be the capital balances of the partners after adjustments?

7. Mary admits Jane as a partner in the business. Balance sheet accounts of Mary just before the admission of Jane
show: Cash, P26,000, Accounts Receivable P120,000, Merchandise Inventory P180,000 and Accounts payable,
P62,000. It was agreed that for purposes of establishing Mary’s interest, the following adjustments be made: 1.) an
allowance for doubtful accounts of 3% of accounts receivable is to be established. 2.) Merchandise inventory is to
be adjusted upward by P25,000 and, 3.) prepaid expenses of P3,600 and accrued liabilities of P4,000 are to be
recognized. If Jane is to invest sufficient cash to obtain 2/5 interest in the partnership, how much would Jane
contribute to the new partnership?

PARNTERSHIP OPERATION
8. X, Y and Z, a partnership formed on January 1, 2011 had the following initial investments:
X – P100,000
Y – 150,000
Z – 225,000
The partnership agreement states that profit and losses are shared equally by the partners after consideration is
made for the following:
Salaries allowed to partners: P60,000 for X, P48,000 for Y and P36,000 for Z.
- Average partner’s capital balances during the year shall be allowed 10%.
Additional information:
- On June 30, 2011, X invested an additional P60,000.
- Z withdrew from the partnership on September 30, 2011, P70,000.
- Share in the remaining partnership profit was P5,000 for each partner.
The total partnership capital on December 31, 2011 was:

9. The partnership of DD and BB was formed and commenced operations on March 1, 2011, with DD contributing
P30,000 cash and BB investing cash of P10,000 and equipment with an agreed upon valuation of P20,000. On July
1, 2011, BB invested and additional P10,000 in the partnership, DD made a capital withdrawal of P4,000 on May 2,
2011 but reinvested the P4,000 on October 1, 2011. During 2011, DD withdrew P800 per month and BB, the
managing partner, withdrew P1,000 per month. These drawings were charged to salary expense. A preclosing trial
balance taken at December 31, 2011 is as follows:
Debit Credit
Cash P 9,000 P
Accounts Receivable-net 15,000
Equipment-net 50,000
Other assets 19,000
Liabilities 17,000
DD, capital 30,000
BB, capital 40,000
Service revenue 50,000
Supplies expense 17,000
Utilities expense 4,000
Salaries to partners 18,000
Other miscellaneous expense 5,000
Total P 137,000 P 137,000
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

Compute for the share of DD and BB in the partnership net income assuming monthly salary allowances of P800
and P1,000 for DD and BB, respectively, interest allowance at 12% annual rate on average capital balances, and
remaining profits allocated equally.

10. AA and DD created a partnership to own and operate a health food store. The partnership agreement provided that
AA receive a salary of P10,000 and DD a salary of P5,000 to recognize their relative time spent in operating the
store. Remaining profits and losses were divided 60:40 to AA and DD, respectively. Income for 2012, the first year
of operations, of P13,000 was allocated P8,800 to AA and P4,200 to DD.

On January 1, 2013, the partnership agreement was charged to reflect the fact that DD could no longer devote any
time to store’s operations. The new management allows AA a salary of P18,000, and the remaining profits and
losses are divided equally. In 2013, an error was discovered such that the 2012 reported income was understated
by P4,000. The partnership income of P25,000 for 2013 included the P4,000 related to year 2012.
In the reported net income of P25,000 for the year 2013, AA and DD would have:

11. AA and BB formed a partnership in 2012 and made the following investments and capital withdrawals during the
year:
AA BB
Investments Draws Investments Draws
March 1 P30,000 P20,000
June 1 P10,000 P10,000
August 1 20,000 2,000
December 1 5,000

The partnership’s profit and loss agreement provides for a salary of which P30,000 was paid to each partner for
2012. AA is to receive a bonus of 10% on net income after salaries and bonus. The partners are also to receive a
interest of 8% on average annual capital balances affected by both investments and drawings. Any remaining profits
are to be allocated equally among the partners. Assuming net income of P16,000 before salaries and bonus,
determine how the income would be allocated among the partners:

12. AA, BB and CC are partners with average capital balances during 2011 of P472,500, P238,650, and P162,350,
respectively. The partners receive 10% interest on their average capital balances; after deducting salaries of
P122,325 to AA and P82,625 to CC, the residual profits or loss is divided equally.
In 2011, the partnership had a net loss of P125,624 before the interest and salaries to partners.
a. By what amount should AA’s and CC’s capital account change-increase (decrease)?
b. The same information in Number 12, except that the partnership had a net loss of P125,624 after the interest
and salaries to partners, by what amount should BB’s capital account change-increase (decrease)?

13. Downs, Frey and Vick formed the DFV general partnership to act as manufacturer’s representatives. The partners
agreed Downs would receive 40% of any partnership profits and Frey and Vick would each receive 30% of such
profits. It was also agreed that the partnership would not terminate for 5 years. After the 4 th year, the partners agreed
to terminate the partnership. At that time, the partner’s capital accounts were as follow: Downs, P20,000, Frey,
P15,000 and Vick, P10,000. There also were undistributed losses of P30,000.
Vick’s share of the undistributed losses will be:

14. In the calendar year 2006, the partnership of A and B realized a profit of P240,000. The capital accounts of the
partners show the following postings:
A, Capital B, Capital
Debit Credit Debit Credit
January 1 P120,000 P80,000
May 1 P20,000 P10,000
July 1 20,000
August 1 10,000
October 1 10,000 5,000

a. If the profits are to be divided based on average capital, the share of A and B, respectively are:
b. If 20% interest based on the capital at the end of the year is allowed and given and the balance of the P240,000
profit is divided equally, the total share of A and B, respectively are:
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

PARTNERSHIP DISSOLUTION
15. Locsin and Montes are partners with capitals of P240,000 and P120,000 respectively. They share profits in the ratio
3:1. The partners agree to admit Nava as a member of the firm.
Required: Prepare the journal entries on the firm books to record the admission of Nava under each of the following
assumptions:
1. Nava purchases a ¼ interest in the firm. One-fourth of each partner’s capital is to be transferred to the new
partner. Nava pays the partners P90,000 which is divided between them in proportion to the equities given up.
2. Nava purchases a 1/3 interest in the firm. One-third of partners’ capital is to be transferred to the new partner.
Nava pays the partners P96,000 which is divided between them in proportion to the equities given up.
3. Nava purchases a 1/3 interest in the firm. One-third of partners’ capital is to be transferred to the new partner.
Nava pays the partners P180,000 which is divided between them in proportion to the equities given up. Before
Nava’s admission, however, asset revaluation is recorded on the firm books resulting to Nava’s 1/3 interest
being equal to the amount of the payment.
4. Nava invests P180,000 for a ½ interest in the firm. Locsin and Montes transfer part of their capital to that of
Nava as a bonus.
5. Nava invests P180,000 for a ¼ interest in the firm. Asset revaluation is recorded on the firm books prior to
Nava’s admission.
6. Nava invests P240,000 in the firm, P60,000 is considered a bonus to partners Locsin and Montes.
7. Nava invests P240,000 in the firm and is given a credit of P72,000 as a bonus upon admission.
8. Nava investsP150,000 for a ¼ interest in the firm. The total firm capital is to be P510,000
9. Nava invests P165,000 for a ¼ interest in the firm. The total firm capital is to be P660,000
10. Nava invests P144,000 for a 1/3 interest in the firm. The total firm capital is to be P504,000.

16. Concio and Domino wish to acquire the partnership interest of their partner, Montero, on July 1, 2012, Partnership
assets are to be used to acquire Montero’s partnership interest. The statement of financial position on that date is
as follows:

Cash P146,000 Liabilities P90,000

Accounts Receivable (net) 72,000 Concio, Capital 240,000
Equipment (net) 270,000 Domino, Capital 120,000
Other assets 60,000 Montero, Capital 100,000
P550,000 P550,000

Concio, Dominio and Montero share earnings in the ratio of 3:2:1

Required: Record the withdrawal of Montero under each of the following assumptions:
1. Montero is paid P108,000 and the excess payment is recorded as a bonus to Montero from Concio and Domino.
2. Montero is paid P90,000 and the difference is recorded as a bonus to Concio and Domino from Montero.
3. Montero is paid P90,000 and asset revaluation of the partnership is undertaken.
4. Montero accepts cash of P81,000 and an equipment with a current fair value of P18,000. The equipment costs
P60,000, is 60% depreciated and has no residual value. Record any gain or loss on the disposal of the
equipment directly to the partners’ capital accounts.

17. Roy and Gil are partners sharing profits and losses in the ratio of 1:2 respectively. On July 1, 2011, they decided to
form the R&G Corporation by transferring the assets and liabilities from the partnership to the Corporation in
exchange of its shares. The following is the post-closing trial balance of the partnership:

Debit Credit

Cash P 45,000
Accounts Receivable 60,000
Inventory 90,000
Fixed assets (net) 174,000
Liabilities P 60,000
Roy, capital 94,000
Gil, capital 215,000
Total P 369,000 P 369,000

It was agreed that adjustments be made to the following assets to be transferred to the corporation:
Accounts receivable P40,000
Inventory 68,000
Fixed assets 180,600
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

The R&G Corporation was authorized to issue P100 par preference shares and P10 par ordinary share. Roy and
Gil agreed to receive for their equity in the partnership 720 ordinary share each, plus even multiples of 10 shares
for their remaining interest. The total number of shares of preference and ordinary share issued by the Corporation
in exchange of the assets and liabilities of the partnership are:

18. Partners Art and Tony, who share equally in profits and losses, have the following balance sheet as of December
31, 2011:

Cash P120,000 Accounts Payable P172,000

Accounts Receivable 100,000 Accumulated Dep’n. 8,000
Inventory 140,000 Art, Capital 140,000
Equipment 80,000 Tony, Capital 120,000
P440,000 P440,000

They agreed to incorporate their partnership, with the new corporation absorbing the net assets after the following
adjustments: provision of allowance for bad debts of P10,000; restatement of the inventory at its current fair value
of P160,000, and, recognition of further depreciation on the equipment of P3,000. The corporation’s capital stock
has a fair value of P100 and the partners are to be issued corresponding total shares equivalent to their adjusted
capital balances.
The total par value of the shares of capital stock that were issued to partners Art and Tony was:

19. JJ and KK partnership’s balance sheet at December 31, 2012, reported the following:
Total assets P100,000
Total liabilities 20,000
JJ, capital 40,000
KK, capital 40,000

On January 2013, JJ and KK dissolved their partnership and transferred all assets and liabilities to a newly-formed
corporation. At the date of incorporation, the fair value of assets are P12,000 more than the carrying amount of the
partnership’s books, of which P7,000 was assigned to tangible assets and P5,000 was assigned to goodwill. JJ and
KK were each issued 5,000 shares of the corporation’s P1 par value ordinary share. Immediately following
incorporation, share premium/additional paid-in-capital in excess of par should be credited for:

20. The condensed balance sheet of the partnership of China and Japan as of December 31, 2011 showed the
following:
Total assets P200,000
Total liabilities 40,000
China, capital 80,000
Japan, capital 80,000

On this date, the partnership was dissolved and its net assets were transferred to a newly-formed corporation. The
fair value of the assets was P24,000 more than the carrying value on the firm’s books. Each of the partners were
issued 10,000 shares of the corporation’s P1 par common stock. Immediately after affecting the transfer of the net
assets, and the issuance of stock, the corporation’s additional paid-in capital account would be credited for:

21. The condensed balance sheet of Adams and Gray, a partnership, at December 31, 2006, follows:
Current assets P250,000
Equipment (net) 30,000
Total assets P280,000

Liabilities P 20,000
Adams, Capital 160,000
Gray, Capital 100,000
Total liabilities and capital P280,000

On December 31, 2006, the fair values of the assets and liabilities were appraised at P240,000 and P20,000, respectively,
by an independent appraiser. On January 2, 2007, the partnership was incorporated and 1,000 shares of P5 par value
common stock were issued.
Immediately after the incorporation, what amount should the new corporation report as additional paid-in capital?
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

PARTNERSHIP LIQUIDATION
22. W, X and Y are partners sharing profits and losses in the ratio of 4:3:3, respectively. The condensed balance sheet
of Heidi Partnership as of December 31, 2012 is:
Heidi Partnership
Balance Sheet
December 31, 2012
Cash P50,000
Other assets 130,000
Total assets P180,000

Liabilities P40,000
W, capital 60,000
X, capital 40,000
Y, capital 40,000
Total liabilities and capital P180,000

Assume instead that the Heidi partnership is dissolved and liquidated by instalments, and the first realization of P40,000
cash is on the sale of other assets with book value of P80,000. After the payment of liabilities, the available cash shall be
distributed to W, X and Y, respectively, as follows:

23. After all the partnership assets were converted into cash and all available cash was distributed to creditors, the
ledger of Daniela, Erika and Fredline partnership showed the following balances:
Debit Credit

Accounts payable P 20,000

Daniela, capital (40%) 10,000
Erika, capital (30%) 60,000
Fredline, capital (30%) P 90,000
Total P 90,000 P 90,000

Percentages indicated are residual profit and losses sharing ratios. Personal assets and liabilities of the partners
are as follows:
Daniela Erika Fredline
Personal assets P50,000 P50,000 P100,000
Personal liabilities 45,000 40,000 40,000

The partnership creditors proceed against Fredline for recovery of their claims and the partners settle their claims
against each other.
How much would Erika receive?

24. The assets and equities of the Queen, Reed and Stac Partnership at the end of its fiscal year on December 31,
2011 are as follows:
Cash P 15,000 Liabilities P 50,000
Receivables-net 20,000 Loan from Stac 10,000
Inventory 40,000 Queen, Capital 45,000
Plant assets-net 70,000 Reed, Capital 30,000
Loan to Reed 5,000 Stac, Capital 15,000
P150,000 P150,000

The partners decide to liquidate the partnership. They estimate that the noncash assets, other than the loan to
Reed, can be converted into P100,000 cash over the two-month period ending December 31, 2011. Cash is to be
distributed to the appropriate parties as it becomes available during the liquidation process.
a. The partner most vulnerable to partnership losses on liquidation is:
b. Using the information in No. 24, and P65,000 is available for the first distribution, it should be paid to:

25. The partnership of AA, BB, and CC was dissolved on June 30, 2012 and account balances after non-cash assets
were converted into cash on September 1, 2012 are:

Assets Liabilities and Equity

Cash P50,000 Accounts payable P120,000
AA, Capital (30%) 90,000
BB, Capital (30%) (60,000)
CC, Capital (40%) (100,000)
 University of Nueva Caceres
College of Business and Accountancy
J. Hernandez Avenue, Naga City
Advanced Financial Accounting and Reporting II

Personal assets and liabilities of the partners at September 1, 2012 are:

Personal Assets Personal Liabilities
AA P80,000 P90,000
BB 100,000 61,000
CC 192,000 80,000
If CC contributes P70,000 to the partnership to provide cash to pay the creditors, what amount of AA’s P90,000 partnership
equity would appear to be recoverable?

26. A cash distribution plan (payment priority program) for 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?

27. The following condensed balance sheet is presented for the partnership of Axel, Barr, and Cain, who share profits
and losses in the ratio of 4:3:3, respectively:
Cash P100,000
Other assets 300,000
Total assets P400,000

Liabilities P150,000
Axel, Capital 40,000
Barr, Capital 180,000
Gray, Capital 30,000
Total liabilities and capital P400,000

The partners agreed to dissolve the partnership after selling the other assets for P200,000. Upon dissolution of the
partnership, Axel should have received:

28. On January 1, 2012, partners Julian, Lagman and Magno decided to liquidate their partnership. Prior to the
liquidation, the partners had cash of P12,000, non-cash assets of P146,000, liabilities to outsiders of P36,000 and
a note payable to partner Magno of P14,000. The capital balances of the partners were: Julian- P36,000; Lagman-
P54,000; Magno- P18,000. The partners share profits and losses in the ratio of 3:3:4, respectively.

During January, 2012, the partnership received cash of P30,000 from the sale of assets with a book value of
P38,000 and paid P3,600 of liquidation expenses. During February, the partnership realized P44,000 from the sale
of assets with a book value of P35,000 and paid liquidation expenses of P6,400. During March, the remaining assets
were sold for P36,000. The partners agreed to distribute cash at the end of each month.

Required:
a. Prepare a cash priority program
b. Prepare the necessary journal entries to record the liquidation process.