Accounting Mm2
Accounting Mm2
Use the following Information for the next six independent cases:
Fact pattern
The partners of ABC Co. decided to liquidate their partnership. ABC Co.'s
statement of Financial position is shown below:
Requirement: Determine the amount of cash distributed to the partners in the final settlement
of their interests.
2. Use the fact pattern above but assume that the partnership will be liquidated over a prolonged
period of time. Distributions to the partners will be made as cash becomes available. Information on
the conversion of noncash assets is as follows;
> 80% of the account receivable was collected for only P60,000
> 90% of the inventory was sold for P40,000
> Equipment with carrying amount of P600,000 was sold for 220,000
> Actual Liquidation expenses of P2,000 were paid
> Estimated future liquidation expenses totaled P3,000
> P10,000 cash was retained in the business for potential unrecorded
liabilities and anticipated expenses.
Requirement: Determine the amount of cash distributed to the partners from the partial realization
of partnership assets.
3. Use the fact pattern above . All partners are solvent. Information on the conversion
of non-cash assets is as follows:
> 80% of the account receivable was collected for only P40,000
> 75% of the inventory was sold for P70,000
> Equipment with carrying amount of P500,000 was sold for 130,000
> Actual Liquidation expenses of P2,000 were paid
> Estimated future liquidation expenses totaled P3,000
> P10,000 cash was retained in the business for potential unrecorded
liabilities and anticipated expenses.
Requirement: Determine the amount of cash distributed to the partners from the partial realization
of partnership assets.
4. Use the fact pattern above . All partners are Insolvent. Information on the conversion
of non-cash assets is as follows:
> 80% of the account receivable was collected for only P40,000
> 75% of the inventory was sold for P70,000
> Equipment with carrying amount of P500,000 was sold for 130,000
> Actual Liquidation expenses of P2,000 were paid
> Estimated future liquidation expenses totaled P3,000
> P10,000 cash was retained in the business for potential unrecorded
liabilities and anticipated expenses.
Requirement: Determine the amount of cash distributed to the partners from the partial realization
of partnership assets.
5. Requirement: prepare a cash priority program prior to the sale of any non cash assets
to determine which partners will be paid first before the others, and the amounts of those payments.
Requirement: Determine the amount of cash distributed to the partners using the cash priority
program in # item#5 above.
CASH
40,000.00
40,000
130,000
200,000
590,000
-5,000
-100,000
855,000
( 855,000 )
50%
A Capital
Capital Balance 600,000
Partners Loan 50,000
Total Partners Interest 650,000
Loss on Collection of A/R -50,000
Loss on sale of Inventory -115,000
Loss on sale of Equipment -190,000
Payment of Liquidation expense -1,000
Restricted Interest: Possible loss on remaining A/R -20,000
Restricted Interest: Possible loss on remaining Inventory -15,000
Restricted Interest: Possible loss on remaining Equipment -100,000
Cash set aside for future liquidation expense -1,500
Cash set aside for potential unrecorded liabilities and anticipated expenses -5,000
Amount safe for payment to partners 152,000
50%
A Capital
Capital Balance 600,000
Partners Loan 50,000
Total Partners Interest 650,000
Loss on Collection of A/R -60,000
Loss on sale of Inventory -77,000
Loss on sale of Equipment -185,000
Payment of Liquidation expense -1,000
Restricted Interest: Possible loss on remaining A/R -20,000
Restricted Interest: Possible loss on remaining Inventory -37,000
Restricted Interest: Possible loss on remaining Equipment -150,000
Cash set aside for future liquidation expense -1,500
Cash set aside for potential unrecorded liabilities and anticipated expenses -5,000
Net Balances 112,000
50%
A Capital
Capital Balance 600,000
Partners Loan 50,000
Total Partners Interest 650,000
Loss on Collection of A/R -60,000
Loss on sale of Inventory -77,000
Loss on sale of Equipment -185,000
Payment of Liquidation expense -1,000
Restricted Interest: Possible loss on remaining A/R -20,000
Restricted Interest: Possible loss on remaining Inventory -37,000
Restricted Interest: Possible loss on remaining Equipment -150,000
Cash set aside for future liquidation expense -1,500
Cash set aside for potential unrecorded liabilities and anticipated expenses -5,000
Net Balances 112,000
Additional restriction for possible deficiency of B ( insolvent ) -8,333.33
104,166.67
Cash Available
Cash Balance 40,000
From Collection of A/R 60,000
From sale of Inventory 40,000
From sale of Equipment 220,000
Payment of Liquidation expense -2,000
Payment of Accounts Payable -100,000
Cash set aside for future liquidation expense -3,000
Cash set aside for potential unrecorded liabilities and anticipated expenses -10,000
Net Cash Available for distribution to partners 245,000
50%
A
Priority 1: to C ( First 40,000 )
Priority 2: to A and C at 80:20 ratio, capped at 125,000 and 25,000 respectively 125,000
Priority 3: Amount in Excess of 190,000 based on P/L ratio 27,500
Cash Distributed to partners 152,500
50%
A/R Inventory Equipment Account Payable A Capital
200,000.00 300,000.00 800,000.00 100,000 600,000
50,000
457,500 ( 457,500 )
40% 10%
B Capital B Capital
420,000 170,000
420,000 170,000
-40,000 -10,000
-92,000 -23,000
-152,000 -38,000
-800 -200
-16,000 -4,000
-12,000 -3,000
-80,000 -30,000
-1,200 -300
-4,000 -1,000
22,000 70,500
22,000 70,500
PS JBV
160,000 40,000
270,000 30,000
600,000 200,000
40% 10%
B Capital B Capital
420,000 170,000
420,000 170,000
-48,000 -12,000
-62,000 -15,000
-148,000 -37,000
-800 -200
-16,000 -4,000
-30,000 -7,500
-120,000 -30,000
-1,200 -300
-4,000 -1,000
10,000 62,000
62,500
PS JBV
160,000 40,000
225,000 75,000
500,000 300,000
40% 10%
B Capital B Capital
420,000 170,000
420,000 170,000
-48,000 -12,000
-62,000 -15,000
-148,000 -37,000
-800 -200
-16,000 -4,000
-30,000 -7,500
-120,000 -30,000
-1,200 -300
-4,000 -1,000
10,000 62,000
10,000.00 -1,666.67
60,833.33
60,833.33
PS JBV
160,000 40,000
225,000 75,000
500,000 300,000
40% 10%
B Capital B Capital A B C
420,000 170,000
420,000 170,000
40% 10%
1,050,000 1,700,000
-400,000 40,000
1,050,000 1,300,000
-250,000 125,000 25,000
1,050,000 1,050,000
40% 10%
B C
40,000
25,000
40%
40% 10%
B C
40,000
25,000
22,000 5,500
22,000 70,500 245,000
40% 10%
B Capital C Capital
420,000 170,000
420,000 170,000
-28,000 -7,000
-40,000 -10,000
-84,000 -21,000
-2,000 -500
40,000
150,000
190,000