Answer the following questions with explanation and solutions.

Partnership Dissolution

\f. D's capital credit is based on the book values of the selling partners' capital balances. . D's capital credit reflects the fair value of his interest in the partnership's net assets. The partnership's net assets on D's admission date are fairly valued. a. 12,000 25,000 c. 25,000 30,000 b. 25,000 12,000 d. 12,000 30,000 6. The admission of a new partner to a 20% interest in a partnership for an investment of P18,000, but with a capital credit based on P75,000 total contributed capital, will result in a. . bonus to the old partners. b. bonus to the new partner. c. goodwill to the old partners. d. goodwill to the new partner. (RPCPA - Adapted) 7. The capital accounts and profit and loss sharing ratios of A, B and C are as follows: Capital PIL 139,200 1/2 B 208,800 1/3 96,000 1/6 On this date, D is admitted to the partnership when he purchased, for P132,000, a proportionate interest from A and B in the net assets and profits of the partnership. As a result of the transaction, D acquired one-fifth interest in the net assets and profits of the firm. What is the combined gain realized by A and B upon the sale of a portion of their interest in the partnership to D? a. 0 b. 43,200 c. 62,400 (AICPA) d. 82,000 8. The capital balances of partners Ming and Piw are P80,000 and P40,000, respectively. They share in profits and losses in the3. It is the initial report prepared at the start of the liquidation process. a. statement of affairs b. statement of realization and liquidation c. statement of corporate liquidation and reorganization d. statement of love affairs 4. The estimated deficiency to unsecured creditors without priority is computed as a. net free assets less total unsecured liabilities without priority. b. net free assets divided by total unsecured liabilities without priority. C. total assets at realizable values less total liabilities at expected net settlement amounts. d. a or c 5. ABC Co. has filed a petition for bankruptcy. ABC will not liquidate but will be administered by another party appointed by a court of law over the next 10 years. Which of the following best describes this event? a. Troubled debt restructuring b. Quasi-reorganization c. Recapitalization d. Corporate rehabilitationPROBLEM 1: TRUE OR FALSE Fact pattern: Foot Corp. has total assets of P100 and total liabilities of P150. The assets are expected to be realized at an average of 90% of carrying amount. The expected net settlement amount of the liabilities is equal to the carrying amount. Of the total liabilities, P60 represent secured and priority claims. 1. The "net free assets" are P40. 2. Unsecured non-priority creditors would expect to recover only one-third (1/3) of their claim. 3. Mr. A has a P30 loan receivable from Foot Corp. The loan is secured by an asset with a carrying amount of P40. Mr. A can expect payment of P21 on the loan. 4. Mr. B has a P15 note receivable from Foot Corp. The note is secured by an asset with a carrying amount of P10. Mr. B can expect payment of P11 on the note. 5. You are a major shareholder of Foot Corp. You own 70 out of the 100 outstanding ordinary shares with Pl par value per share. You can expect to recover nothing on the liquidation of Foot Corp. PROBLEM 2: MULTIPLE CHOICE - THEORY 1. Which of the following is not a correct classification of assets in the statement of affairs? a. Assets pledged to fully secured creditors b. Assets pledged to partially secured creditors C. Free assets d. Current assets 2. In the statement of affairs, assets are measured at a. realizable value. c. book value. b. fair value. d. mixture of costs and values.3. The partnership has total liabilities of P200,000. If. ajj partnership assets are realized for P500,000, how much will Jack receive from the liquidation? a. 243,000 c. 300,000 b. 57,000 d. 133,000 4. If after all partnership assets are realized and all liabilities are settled the partnership has remaining cash of P120,000, how much will Beans receive from the liquidation? a. 189,000 c. 69,000 b. 120,000 d. 0 5. If on the final settlement of the partners' claims Beans received P99,000, how much did Jack receive? a. 261,000 c. 89,000 b. 234,000 d. 0 6. Before the realization of non-cash assets, the partnership has a zero balance in its cash account and a P200,000 balance in its liabilities. If Jack received P261,000 on the final settlement of the partners' claims, how much were the net proceeds from the sale of the non-cash assets? a. 560,000 c. 290,000 b. 360,000 d. 0 7. Partners A, B and C decided to liquidate their partnership. A .summary of the partnership's statement of financial position is shown below: Assets Liabilities A (20%) Equity Cash Noncash 20,000 480,000 30,000 B (30%) 100,000 170,000 C (50%) 200,000 One-third of the noncash assets were sold for $70,000. The partnership paid $8,000 liquidation expenses. Partner C is insolvent. How much cash did A receive from the settlement of the partners' interests?a. 12,400 c. 13,600 b. 16,800 d. 12,800 Use the following information for the next two questions: A. B and C decided to liquidate their partnership business. The financial position of the partnership shows the following partners' equity: A, capital (30%) 210,000 B, capital (20%) 150,000 C, capital (50%) 210,000 Total 570,000 Upon liquidation, all the partnerships' assets are sold and sufficient cash is realized to pay all liabilities except one for P30,000. All partners are solvent except C. 8. By what amount would the capital of A change? a. 180,000 decrease c. 24,000 increase b. 234,000 decrease d. 0 (AICPA - Adapted) 9. How much is the additional contribution required of B? a. 6,000 c. 24,000 b. 18,000 d. 0 10. ABC Co. is undergoing liquidation. Information before the Cash start of the liquidation process is as follows: 10,000 Accounts payable 80,000 Accounts receivable 80,000 Payable to B 20,000 Receivable from A 10,000 A, Capital (50%) 250,000 Inventory 150,000 Equipment, net 180,000 B, Capital (30%) Total 320,000 C, Capital (20%) 100,000 600,000 Total Liab. & Equity 600,000 The total cash distributed to the partners after the first and second sales of noncash assets were P12,000 and P30,000, respectively. How much cash did B receive in the second cash distribution?1. On January 1, 2003, the partners of Cobb, Davis, and Eddy, who share profits and losses in the ratio of 5:3:2, respectively, decided to liquidate their partnership. On this date the partnership condensed balance sheet was as follows: Cash 50,000 Liabilities 60,000 Other assets 250,000 Cobb, capital 80,000 Davis, capital 90,000 Eddy, capital 70,000 Total assets 300,000 Total Liab. & Equity 300,000 On January 15, 2003, the first cash sale of other assets with a carrying amount of P150,000 realized P120,000. Safe installment payments to the partners were made the same date. How much cash should be distributed to each partner? Cobb Davis Eddy Cobb Davis Eddy a. 15,000 51,000 44,000 c. 55,000 33,000 22,000 b. 40,000 45,000 35,000 d. 60,000 36,000 24,000 (AICPA) Use the following information for the next five questions: Jack and Beans, who share in profits and losses in the ratio of 3:7, decided to liquidate their Talk Partnership. The partners' capital balances were P300,000 and P190,000, respectively. 2. If all partnership assets and liabilities are realized and settled at their carrying amounts, how much will Beans receive from the liquidation? a. 300,000 c. 120,000 b. 190,000 d. answer not determinableratio of 3:2. They have a desperate need for cash and they agree to admit Andre as a new partner with a 1/3 interest in both capital and profits upon the latter's capital infusion of P30,000. No goodwill is to be recognized. After Andre's admission, the respective capital balances of Ming, Piw and Andre are: a. 50,000, 50,000 & 50,000. c. 68,000, 32,000 & 50,000. b. 66,667, 33,333 & 50,000. d. 80,000, 40,000 & 30,000. (RPCPA - Adapted) 9. Blau and Rubi are partners who share profits and losses in the ratio of 6:4, respectively. On May 1, 2003, their respective capital accounts were as follows: Blau 60,000 Rubi 50,000 On that date, Lind was admitted as a partner with a one-third interest in capital and profits for an investment of P40,000. The new partnership began with a total capital of P150,000. Immediately after Lind's admission, Blau's capital should be a. 50,000. c. 56,667. b. - 54,000. (AICPA) d. 60,000. Use the following information for items 10 and 11: The partners in ABC Co. had the following capital balances and P/L sharing percentages: A (50%) P320,000; B (30%) P192,000; and C (20%) P128,000. 10. A decided to retire and sold his interest to B for P360,000. The entry on A's retirement included a a. debit to B's capital for P24,000. b. debit to C's capital for P16,000. c. credit to B's capital for P360,000. d. credit to B's capital for P320,000.11. A withdrew and the partnership paid him P360,000. How much is the capital balance of C after A's withdrawal? a. 112,000 c. 168,000 b. 116,800 d. 172,000 12. ABC Partnership's net assets were P1,000,000 as of Jan. 1, 20x1. Partner A retires from the partnership on June 30, 20x1. The partnership earned profit of P300,000 for the six months ended June 30, 20x1. Partners A, B and C share profits and losses equally. If Partner A was paid P200,000 for his interest in the partnership, how much is the adjusted net assets of the partnership immediately after Partner A's retirement? (No goodwill is recognized.) a. 800,000 c. 1,100,000 b. 900,000 d. Answer cannot be determined 13. The net assets of ABC Co. on June 30, 20x1 before closing entries consisted of the following: A (20%), P300,000; B (30%), P500,000; and C (50%), P200,000. Profit for the six months ended June 30, 20x1 was P1,800,000. C withdraws on July 1, 20x1 and receives P1,000,000 cash and fully depreciated equipment with fair value of P600,000 from the partnership. What is the capital balance of A right after C's withdrawal? a. 780,000 c. 700,000 b. 1,220,000 d. 1,800,000 Use the following information for items 14 and 15: A, B and C are partners with capital balances of P300,000, P300,000 and P200,000, respectively. The partners share in profits and losses equally. C is to retire and it is agreed that he would take furniture with carrying amount of P65,000 and a note for the balance of his interest. The fair value of the furniture is P50,000; however, a brand-new furniture would cost P80,000. 14. C's acquisition of the furniture would result in a. reduction in capital of P5,000 each for A and B only.Cha b. reduction in capital of P7,500 each for A and B only. c. reduction in capital of P15,000 for C. d. reduction in capital of P55,000 for C. (RPCPA) 15. The amount of the note issued to C is a. 120,000. .c. 145,000. b. 135,000. d. 150,000. (RPCPA)The following adjustments are determined: The recoverable amount of the accounts receivable is P116,400. A P25,000 recovery of a previous write-down on the inventory should be recognized. Prepaid assets of P3,600 and accrued liabilities of P4,000 should be recognized. (AICPA - Adapted) 1. C acquires half of B's interest in the partnership for P100,000. How much is the capital balance of B after the admission of C? a. 47,000 c. 51,200 b. 21,500 d. 182,600 2. C invests P71,250 cash for a 20% interest in the net assets and profits of the partnership. C's capital account is credited for the fair value of the 20% interest he acquired. How much is the capital balance of B after the admission of C? a. 102,400 c. 86,400 b. 94,000 d. 120,400 3. C invests P100,000 cash for a 20% interest in the partnership's net assets and profits. If the bonus method is used, how much is the capital balance of B after the admission of C? a. 165,350 c. 100,000 b. 111,600 d. 77,000 4. If no bonus is allowed, how much should C invest in order to obtain 2/5 interest in the partnership? a. 190,000 c. 285,000 b. 185,000 d. 220,000 5. A, B and C are partners with the following capital balances and interests: A (20%) P50,000; B (30%) P70,000; and C (50%) P130,000. D purchases 10% partnership interest from A and B for P30,000. How much would be credited to D's capital under the following scenarios?Or Use the following information for items 1 to 4: A&B Partnership admits C as a new partner. The statement of financial position before the admission of C is shown below: Cash 26,000 Accounts payable 62,000 Accounts receivable 120,000 A, Capital (60% interest in P/L) 170,000 e Inventory 180,000 B, Capital (40% interest in P/L) 94,000 Total assets 326,000 Total liabilities and equity 326,000