Question
PARTNERSHIP LIQUIDATION CASE 1 (22 points: 4 problem solving; 1 journal entry) On May 1, 20x1, the statement of financial position of Juan and Pablo
PARTNERSHIP LIQUIDATION
CASE 1 (22 points: 4 problem solving; 1 journal entry)
On May 1, 20x1, the statement of financial position of Juan and Pablo appear below:
Juan Pablo
Cash 22,000 44,708
Accounts receivable 469,072 1,135,780
Inventories 240,07 520,204
Land 1,206,000
Building 856,534
Furniture and fixtures 100,690 69,578
Other assets 4,000 7,200
Total assets 2,041,832 2,634,004
Accounts payable 357,880 487,300
Notes payable 400,000 690,000
Juan, Capital 1,283,952
Pablo, Capital 1,456,704
Total liabilities and equity 2,041,832 2,634,004
Juan and Pablo agreed to form a partnership contributing their respective assets and equities subject to the following adjustments:
a.Accounts receivable of P40,000 in Juan's books and P70,000 in Pablo's books are uncollectible.
b.Inventories of P11,000 and P13,400 are worthless in Juan's and Pablo's respective books.
c.Other assets of P4,000 and P7,200 in Juan's and Pablo's respective books are to be written off.
REQUIRED:
1.What are the adjusted capital balances of the partners after formation? (2 items x 5 points)
2.Pedro offered to join for a 20% interest in the firm. How much should cash should Pedro contribute?
3.Prepare journal entry to record Pedro's admission. (1 item x 2 points)
4.During the first year of operations, the partnership earned P650,000. After Peter's admission, the profit and loss sharing ratio is 40:40:20 for Juan, Pablo, and Pedro, respectively, based on capital credits. Drawings were made in these amounts: Juan, P100,000; Pablo, P130,000; Pedro - P56,000. What is the capital balance of Pedro after the first year?
CASE 2:
Cyril and James formed a partnership on January 1, 20x1 by contributing P1,600,000 and P2,400,000, respectively. As of January 1, 20x2, their partnership capital was P1,800,000, and P2,200,000 respectively.
Situations:
A.No profit-sharing agreement
B.No loss-sharing agreement
C.Profit is divided equally
D.Loss is divided 30:70, respectively
Required: Compute the share of Cyril and James assuming:
P800,000 profit P800,000 loss
Situational Cases Cyril James Cyril James
- A and B 1._________ _________ 5. __________ ______________
- B and C 2. _________ _________ 6. __________ ___________
- A and D 3. __________ __________ 7. __________ ______________
- C and D 4. _________ ___________ 8. __________ ____________
CASE 3: PARTNERSHIP DISSOLUTION (9 items x 2 points)
Rachel and Patrick Co. sells inventory through their partnership. They expand their business and decide to admit Sonny to the partnership. Before the admission of Sonny, the statement of financial position of Rachel and Patrick is as follows:
Cash P80,000 Accounts payable P140,000
Accounts receivable 120,000 Loan from Patrick 100,000
Merchandise inventory 280,000 Rachel, Capital (60%) 600,000
Fixed assets, net 720,000 Patrick, Capital (40%) 480,000
Loan to Rachel 120,000
Total assets P1,320,000 Total liabilities and equity P1,320,000
Required: Record the admission of Sonny (and asset revaluation, if any) for each of the following independent situation:
1.Sonny invests P279,000 for half of Patrick's capital. The money goes to Patrick.
2.Sonny directly purchases a one-fourth (1/4) interest from Rachel and Patrick by paying Rachel, P192,000, and Patrick, P216,000. The equipment account is undervalued before Sonny's admission.
3.Sonny invests the amount needed to give him one-third (1/3) interest in the capital of the partnership. No goodwill or bonus is recorded.
4.Sonny invests P312,000 for a one-fourth (1/4) interest. Rachel and Patrick agree that some of the inventory is obsolete before Sonny's admission.
5.Sonny invests P360,000 one a one-fifth (1/5) interest. Profits and loss are to be shared by Rachel, Patrick, and Sonny 45:30:25. Goodwill is not recorded.
6.Sonny invests P600,000 for a one-third (1/3) interest. Profits and losses are to be shared by Rachel, Patrick, and Sonny equally. Capital of the partnership after Sonny's admission is to be P1,800,000.
CASE 4: PARTNERSHIP LIQUIDATION (4 items x 5 points)
On December 31, the accounting records of Tito, Vic and Joey Partnership included the following information:
Tito, drawings (debit balance) (P48,000)
Joey, drawings (debit balance) (18,000)
Vic, loan 60,000
Tito, Capital 246,000
Vic, Capital 201,000
Joey, Capital 216,000
Total assets amounted to P957,000, including P105,000 cash and liabilities totaled P300,000. The partnership was liquidated on December 31 and Joey received P166,500 cash pursuant to the liquidation. Tito, Vic, and Joey share net income and losses in a 5:3:2 ratio, respectively.
Required: Compute the following:
1.Loss on realization
2.The cash balance after payment of liabilities
3.The amount realized from sale of noncash assets
4.Cash distributed to Tito
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