Dayag Chapter 4

7/23/2019 Dayag Chapter 4

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Chapter 4

Problem I1: Gain on Realization Fully Allocated to Partner’s Capital Balances

QRS PartnershipStatement of Realization and Liquidation

November 1 – 30, 0!"

Non$#ash%ssets

Liabilities Q, Loan

Q,#apital30&'

R,#apital()0&'

S,#apital(0&'

*alan+es beforeliquidation ",000 ",000 1,000 ,"00 -,.00 ",000 3.,000Realization anddistribution

of /ain -.,000(",000

3,.00 .,000 ,"00*alan+es after realization 10,000 1,000 ,"00 13,00 )",000 3,"00

Pament of liabilities (1,000'(1,000

*alan+es after pament of liabilities 10,000 ,"00 13,00 )",000 3,"00Pament to partners $loan (,"00' (,"00' *alan+es after pamentof

partners2 loans 10),.00 13,00 )",000 3,"00Pament to partners $

+apital(10),.00

'(13,00

'()",000

'(3,"0

!: "oss on Realization Creates a #e$cit Balance in Partner’s Capital AccountRe%uirin& 'rans(er (rom Partner’s "oan Account )Ri&ht o( *+set ,-ercised.

Non$#ash

%ssetsLiabilities Q, Loan

Q,+apital(30&'

R,#apital()0&'

S,#apital(0&'

of loss ",000(",000

(10,00

'(1,000

' (,00'*alan+es after realization ,000 1,000 ,"00 (1,00' 30,000 ,00

'*alan+es after pament of liabilities .0,000 ,"00 (1,00' 30,000 ,00

45set de6+it versus loans (1,00' 1,00

*alan+es after o5settin/ .0,000 1,0

0 30,000 ,00Pament to partners –loan (1,00'

(1,00'

*alan+es after pament of partners2 loans ),00 30,000 ,00Pament to partners $

+apital (),00'(30,000

/: "oss on Realization Creates a #e$cit Balance in Partner’s Capital AccountRe%uirin& 'rans(er (rom Partner’s "oan Account )Ri&ht o( *+set ,-ercised andAdditional Capital In0estment is Re%uired and ade.

Non$#ash

%ssetsLiabilitie

s Q, Loan

Q,+apital(30&'

R,#apital()0&'

S,#apital(0&'

of loss 3.,000

(",000

(1","00

(",000

' (-,.00'

*alan+es after realization .0,000 1,000 ,"00( ",00

' ",000 .,"00

' *alan+es after pament of liabilities ",000 ,"00 ( ",00' ",000 .,"00

45set loan versus de6+it – (,"00' ,"0

0 *alan+es after o5settin/

partner2s loan ",000 (,"00' ",000 .,"00%dditional investment bQ ,"00 ,"00

*alan+es after additional7nvestment )0,"00 ",000

Pament to partners $+apital ()0,"00' (",000' (.,"00'

4: "oss on Realization Creates a #e$cit Balance in *ne Partner’s Capital AccountRe%uirin& 'rans(er Partner’s "oan Account )Ri&ht o( *+set Is ,-ercised. andAdditional In0estment is Re%uired but not ade )Personally Insol0ent.

Non$#ash

%ssetsLiabilities Q, Loan

Q,+apital(30&'

R,#apital()0&'

S,#apital(0&'

of /ain ",000(",000

' (1,.00

'(1,000

' (,"00'

*alan+es after realization ..,000 1,000 ,"00( 3,000

' ,000 ,.00

' *alan+es after pament of liabilities )",000 ,"00 (3,000' ,000 ,.0045set loan versus de6+it (,"00' ,"00 *alan+es after o5settin/ )",000 ( .00' ,000 ,.00%dditional loss due to

insolven+ of Q .00 ( "-' ( 11'*alan+es after additional , Loss )",000 .,)1 ,"-Pament to partners $

+apital ()",000'

2: "oss on Realization Creates a #e$cit Balance in *ne Partner’s Capital AccountRe%uirin& 'rans(er Partner’s "oan Account )Ri&ht o( *+set Is ,-ercised. andAdditional In0estment is Re%uired but not ade )Personally Insol0ent.

#ash Non$ Liabilitie Q, Loan Q, R, S,

#ash%ssets s

+apital(30&'

#apital()0&'

#apital(0&'

of /ain ",000(",000

' (1,000

' (30,00

0'(1,00

*alan+es after realization ",000 1,000 ,"00

( ,"00

' 1,000 ",000

' *alan+es after pament of liabilities 3.,000 ,"00 ( ,"00' 1,000 ",000

45set loan versus de6+it (,"00

' ,"00

*alan+es after o5settin/ 3.,000 (.,000'

, 1,000 ",000%dditional investment bQ 3,.00 3,.00 *alan+es after additional

investment 3-,.00 (,"00

' 1,000 ",000%dditional loss due to

insolven+ of Q ,"00 (1,1"' ( ..'*alan+es after additional

Loss 3-,.00 1.,. 3,31"Pament to partners $+apital (3-,.00'

(1.,.'

(3,31"'

3: "oss on Realization Creates a #e$cit Balance in Partner’s Capital AccountRe%uirin& 'rans(er Partner’s "oan Account )Ri&ht o( *+set Is ,-ercised. and AllPartners are Personally ol0ent

Non$#ash

%ssetsLiabilitie

s Q, Loan

Q,+apital(30&'

R,#apital()0&'

S,#apital(0&'

*alan+es before

liquidation ",000 ",000 1,000 ,"00 -,.00 ",000 3.,000Pament of liquidation

e!penses (1","00' (",30' (,00' (,0'

*alan+es after pament of liquidation e!penses

-,.00 ",000

1,000 ,"00 ),0 "0,00 33,108rite$o5 /ood9ill and

prepaid e!penses (,000

' (1,.00

'(3.,000

'(1","0

*alan+es after 9rite$o5s -,.0

0 1,000 1,000

(1.,30'

",00 1,0

Realization anddistribution

of loss 1,00(1,000

' ( 3,"0

'( ),"00

'( ,1.0

*alan+es after realization 10,00 1,000 ,"00( 1-,).0

'( .00

' 1.,).0

Pament of liabilities (10,00' (10,00

*alan+es after pament of Liabilities $0$

1,00 ,"00(1-,).0

' ( .00' 1.,).0

45set loan versus de6+it (,"00' ,"00

*alan+es after o5settin/ $0$

1,00(1,1.0

' ( .00' 1.,).0%dditional investment bQ

and R 1,.

0 1,1.0 .00

*alan+es after additional7nvestment

1,00 1.,).0

Pament of liabilities (1,00'

(1,00' *alan+es after pament of Liabilities

1.,).0 1.,).0

Pament to partners $

#apital (1.,).0'

(1.,).

5: "oss on Realization Creates a #e$cit Balance in Partner’s Capital AccountRe%uirin& 'rans(er Partner’s "oan Account )Ri&ht o( *+set Is ,-ercised. 6ithRe0aluation o( Assets

Non$#ash

%ssetsLiabilitie

s Q, Loan

Q,+apital(30&'

R,#apital()0&'

S,#apital(0&'

*alan+es beforeliquidation ",000 ",000 1,000 ,"00 -,.00 ",000 3.,0007n+rease in equipment 1,00 3.0 .00 "0

:e+rease in furniture (.00' (10' (300' (10'*alan+es after revaluation ",000 ",.00 1,000 ,"00 -,0 ",300 3.,10Refund of prepaid

e!penses .,-.0 (,"00' ("3' (0' ('*alan+es after refunds 30,-.0 .,00 1,000 ,"00 -,3" ",)0 3),3

Re+eived non+ash assets (10,00

' (,00' (3,000'

*alan+es after re+eiptof non+ash assets

30,-.0 ..,000

1,000 ,"00

-,3" "0,30 3,3

Realization anddistribution

of loss 3,"00(..,000

' ( 10,0

0'( 1.,00

'( ,0."

*alan+es after realization .3,3.0 1,000 ,"00( 3

' 3,)0 .,11

Pament of liabilities (1,000' (1,000' *alan+es after pament of liabilities )1,3.0 ,"00

( 3' 3,)0 .,11

45set loan versus de6+it ( 3' 3

*alan+es after o5settin/ )1,3.0 1,.. 3,)0 .,11

Pament to partners $loan (1,..'

(1,..'

*alan+es after pamentof loans "-,.- 3,)0

Pament to partners$ +apitals ("-,.-'

(3,)0'

(.,11'

Problem II:7S#4;N< P%R<N=RS>7P

S+hedule of Partnership Liquidation ?anuar 1", 0!"

#apital *alan+es

=!planation #ash 4ther%ssets

Liabilities :a9son

@eene >ardin

*alan+es before realization P),000 P10,000 P("0,000 P(31,000 P(.),000

P(-,000'

Sales of non+ash assets .0,000

(10,000'

",000 1,000

*alan+es ),000 0 ("0,000' (13,000' ("1,000' -,000

Pament of liabilities ("0,000 ' "0,000 *alan+es "),000 0 0 (13,000' ("1,000' -,000%llo+ation of >ardinAs debit

balan+e 3,) ),1"3(-,000'

*alan+es "),000 0

0 (-,1"3' (3),)' 0

:istribution of +ash to partners ("),000 ' -,1"3 3),) *alan+es P 0 P

0 P 0 P 0 P 0 P 0

Problem III1B#:C PartnershipStatement of Realization and LiquidationLump$sum Liquidation on :e+ember 10, 0D.

#apital *alan+esNon+ash #arlos :an Cail

#ash %ssets Liabilities

0& "0& "0&

Preliquidation balan+es ),000 "),000 (0,000'

(10,000'

()0,000' (.0,000'

Sale of assets anddistribution of P1),000 loss .0,000 ("),000

"3,000

.,000 .,000

),000 $0$ (0,000'

(,000' 3.,000 .,000

#ash +ontributed b Cail to e!tent of positive net9orth

),000 (),000'

310,000 $0$ (0,000'

(,000' 3.,000 1,000

:istribution of de6+it of insolvent partnerE (1,000' 0F.0(P1,000' 333

"0F.0(P1,000' ..

310,000 $0$ (0,000'

(.,..' 3.,.. $0$

#ontribution b :an toremed de6+it

3.,.. (3.,..'

3".,.. $0$ (0,000'

(.,..' $0$ $0$

Pament to +reditors (0,000'

0,000.,.. $0$ $0$ (.,..' $0$ $0$

Pament to partner (.,..'

Post$liquidation balan+es $0$ $0$ $0$

$0$ $0$ $0$

B#:C PartnershipNet 8orth of Partners

:e+ember 10, 0D. #arlos :an Cail

Personal assets, e!+ludin/ partnership +apital interests )0,000 300,000 3)0,000Personal liabilities (30,000' ("0,000' (3),000'Personal net 9orth, e!+ludin/ partnership +apital interests, :e+B 1, 0D. 0,000 .0,000 ),000#ontribution to partnership (3.,..' (),000'

Liquidatin/ distribution from partnership .,.. $0$ $0$Net 9orth, :e+ember 10, 0D. -.,.. 3,333 $0$

<his +omputation assumes that no other events o++urred in the 10$da period that +han/edan of the partners2 personal assets and personal liabilitiesB 7n pra+ti+e, the a++ountantmust be sure that a +omputation of net 9orth is +urrent and timelB

<he table sho9s the e5e+ts of the transa+tions bet9een the partnership and ea+h partnerB %presumption of this table is that the personal +reditors of :an or Cail 9ould not seeG +ourta+tion to blo+G the settlement transa+tions 9ith the partnershipB ;pon 9indin/ up andliquidation, the partnership does not have an priorit to the partner2s personal assetsB

<hus, the personal +reditors ma seeG to blo+G the transa+tions 9ith the partnership in orderto provide more resour+es from 9hi+h the +an be paidB % partner 9ho fails to remed his orher de6+it +an be sued b the other partners 9ho had to maGe additional +ontributions oreven b a partnership +reditor if the failed partner is liable to the partnership +reditorB *utthose +laims are not superior to the other +laims to the partner2s individual assetsB

8hen a++ountants provide professional servi+es to partnerships and to its partners, thea++ountant should e!pe+t, at some time, le/al suits involvin/ the partnership andForindividual partnersB % stron/ and thorou/h understandin/ of the le/al and a++ountin/foundations of partnerships 9ill be ver important to that a++ountantB

Problem I7

Non+ash #apital and Loan *alan+es

#ash %ssets Liabilitie Herz :e+hter @lo9ers

*e/innin/ balan+es P

P00,00

P1.),00

P30,000 P(10,00

Liquidation e!pense (0,000' (,000' (,000' (",000'Sale of non$+ash assets 1.0,000 (00,00 (1.,000 (1.,000 (,000'Pament of liabilities (1.),00 (1.),00

#ontribution b @lo9ers 10,00

10,000%llo+ation of @lo9erAs (.,000' (.,000' 1,000:istribution to partners (10,000' (10,000 0 0=ndin/ balan+es 0 0 0 0 0 0

Problem 7

#ash Liabilities %ble *o9er #ramer

*e/innin/E P0,000 P(30,000' P(10,000' P),000 P1),000

Pament of liabilities (0,000' 0,000

P 0 P(10,000' P(10,000' P),000 P1),000#ramerF*o9er pa in

from personal 9orth to +over

de6+it balan+esE 1,000 (,000' (10,000'P1,000 P(10,000' P(10,000' P3,000 P ),000Pament of liabilities (10,000' 10,000

P ,000 P 0 P(10,000' P3,000 P ),000%llo+ation of de6+it balan+esE ,000 (3,000' (),000'

P ,000 P 0 P (,000' P 0 P 0%ble paidE (,000' ,000

P 0 P 0 P 0 P 0 P 0

Problem 7I%ns9erE#ash 0,000

%rthur, #apital .,000*aGer, #apital 1),000#ase, #apital -,000

4ther %ssets 100,000 <o re+ord realization of assets at a loss of I30,000, dividedamon/ %rthur, *aGer, and #ase in E)E3 ratio, respe+tivelB

<rade %++ounts Paable .),000#ash .),000

<o re+ord pament of liabilitiesB

%rthur, #apital 0,000Loan Re+eivable from %rthur 0,000

<o o5set %rthurAs loan a++ount a/ainst %rthurAs +apitala++ountB

%rthur, #apital 1",000Loan Paable to *aGer 0,000#ase, #apital 1,000

#ash 3),000 <o re+ord paments to partners, +omputed as follo9sE

Arthur Ba8er Casey#apital a++ount balan+es P0,000 P0,000 P)),000%ddE Loan paable to *aGer 30,000LessE Loan re+eivable from %rthur (0,000'

Loss on realization of assets, P30,000 (.,000' (1),000' (-,000'

*alan+es P"",000 P-),000 P".,000Ha!imum potential additional lossof P1)0,000 (P)0,000 – P100,000 JP1)0,000' divided in E)E3 ratio (30,000' (),000' ("),000'

#ash paments P1",000 P0,000 P 1,000

ultiple Choice Problems

1B b $ (P"0,000 K P10,000 – P,000 – P",000 J P"",000'B d – P0,000 – (P1)0,000 – P)0,00' ! )0& J P30,0003B +"B a $ Phil (P3),000 K P10,000' >arr P,000 *ill (P,000 $ P),000')B + $ Ri+G P".,000 Har (P3-,000 $ P1),000' @ran (P-,000 K P10,000'.B d $ P)0,000 $ (P1),000 $ P-,)00'(B)'

B b $ P"),000 $ (P1),000 $ P-,)00'(B30'B a $ P10,000 K MP10,000 $ (P),000 $ P1,000'(B))'-B + $ P.,000 K MP10,000 $ (P),000 $ P1,000'(B0'10B b11B +1B d13B + Oulnerabilit ranGsE Lan/ equit (P0,000 $ P"0,000'FB) J P10,000 J 1 Haas equit (P0,000 K P)0,0000FB) J P)0,000 J 3

Neal equit (P1)0,000FB)' J P300,000 J

%ssumed loss absorptionE )&

Lan/)&Haas

)0&Neal <otal

=quities P 30,000 P 130,000 P 1)0,000 P 310,000 Loss to eliminate Lan/ ( 30,000 ' ( 30,000 ' ( .0,000 ' ( 10,000 '

0 P 100,000 P -0,000 P 1-0,000

Loss to eliminate Neal ( "),000 ' ( -0,000 ' ( 13),000 '

P )),000 P 0 P )),000

+ ?? ## << <otal

Pro6t ratio "0& )0& 10& 100&

Prior +apital (1.0,000' ("),000' ()),000' (.0,000'

Loss on sale of inventor ",000 30,000 .,000 .0,000

(13.,000' (1),000' ("-,000' (00,000'

1)B a Prior +apital (1.0,000' ("),000' ()),000' (.0,000'

Loss on sale

of inventor ,000 -0,000 1,000 10,000(,000' "),000 (3,000' (0,000'

%llo+ate #harlesA +apital de6+itE ("),000'

?? J B"0FB)0 3.,000 << J B10FB)0

-,000(),000' $0$ (,000' (0,000'

1.B + – (P3",000 – P"3",000' ! 0& J P"0,0001B b

< : >#apital before realization "0,000

10,000 1),000Loss on sale (),000 –

33,000'

(.,000'

(1),.00'

(10,"00' 1",000

( ),.00' ",.00

%dditional loss ()E' (",000' ),.00 ( 1,.00' 10,000 3,000

1B a < : >

#apital before realization "0,00010,000 1),000

Loss on sale (),000 –1,100'

(31,-)0'(1-,10'

( -,10' ,0

%dditional loss ()E' (.,))0' -,10 (,.0'1,)00 ( "00'

%dditional loss ( "00' "001,100

1-B b L H

#apital beforerealization

.0,000 "0,000 0,000

Liquidation e!penses(,000'

( ",000'

Loss on sale (300 $ 10' (",000'(",000'

( ",000'

3",000

(1,000'

%dditional loss (E"' ( ",000' 1,000 ( ,000' 30,000 0,000

0B d > 7 ? <otal

0,000 110,000 1"0,000 330,000

Loss on sale (E"E"' (.1,000'

(1,000'

(30),00

1-,000

(1,000' 1,000

%dditional loss (E"' ( ",000' 1,000 ( ,000' 1),000 10,000

1B d – M(P"0,000 – P-.,000' F30& J P"0,000

B a#apital before realization – # 130,000

Liquidation e!penses (1,000 ! )0&'(.,000'

Share on loss on realization (13,00

0'#apital balan+e after realization ( ,000'

<otal loss on realizationE P13,000F)0& (.",000' Non$+ash assets "3",000 Pro+eeds 10,000 3B b

:in/ Laurel =zzard <illman <otal

.0,000

.,0001,000 -.,000

0Loss on sale ("EEE'

(),00' ( .,"00'

(.,"00'

(13,000'

,00 "0,.00( -,"00'

.-,.00

10,000

Possible insolven+ loss ("EE' ( ",00' ( ,3)0' ( -,"00' ( ,3)0'$0$

Safe paments ,)00 3,)0 0 .,)010,000

"B e – refer to NoB 3

)B b Conda >erron Horse <otal

#apital before realization.0,000

0,000"0,000 10,00

0Loss on sale (30E")E)' M00 –1)0

(1),000'

( ,)00'

(1,)00'

()0,000'

"),000 ",)00,)00

10,000

.B + S : @

<otal#apital

"0,0001),000 ),000

.0,000Loan

),000 ),000

<otal interests"0,000

1),000

10,000

.),000

Loss on sale ()E3E' $ M-0,000 –.,000

(3,000'

( 1-,00'

(1,00'

(.",000'

,000( ",00'

( ,00'

Possible insolven+ ()E3'(1,)0'

( 1,0)0'

.,)0 ( ),)0' 1,000 %dditional investment ),)0 ),)0

.,)0 .,)0 B bB a – Sin+e the partnership +urrentl has total +apital of P3)0,000, the P1)0,000 that is

available 9ould indi+ate ma!imum potential losses of P00,000 that is hpotheti+allsplit amon/ the partnersB

8hite Sands LuGe <otal#apital before realization

)0,000100,000

00,000 3)0,000

Loss on sale (30E0E)0' M3)0 –

(.0,000'

( "0,000'

(100,000'

(00,00

(10,000'

.0,000 100,000 1)0,000

Possible insolven+ (E)' 10,000(,)' (,1"3'

Safe paments ),1"3 -,)1)0,000

-B b $ (P13,000 – P1,000 share of /ain J P1,000, refer to entries belo9'Revaluation entry:

Accumulated depreciation 3,000Gym, capital 1,000Hob, capital 1,000Ing, capital 1,000

Withdrawal o e!uipment: Accumulated depreciation "#,000 $ 3,000% &,000Hob, capital 13,000

'!uipment 1#,000

30B b –%++umulated depre+iation 0,000, +apital (P1)0,000 K P10,000 K P10,000 – P0,000' 100,000

Ha+hiner, at +ost 1)0,000Ri+e MP110,000 – (P1)0,000 – P0,000' ! 1F3 10,000Lon/ MP110,000 – (P1)0,000 – P0,000' ! 1F3 10,000

31B + D <otal

-0,000 .0,000 30,000 10,000

Loss on sale(3)&E3)&E30&'

(",000'(",000'

(3.,000'

(10,000'

1,000' ( .,000'

.0,000

(balancing )gure $ total reduction in capital

9uiz I7 1B eroFnil

* P L S#apital before

realization

110,000 100,000 .),000

Loss on sale (3EE1E"'' ("),000'( 30,000'

(1),000'

(.0,000'

(0,000'

0,000 ),000

%dditional loss (E1E"' (0,000' ( ),1"' ( ,)'(11,"-'

",. ,1"3 ( .,"-' %dditional loss (E1' ( ",.' ( ,1"3' .,"-

0,000 0,000 B eroFnil – refer to NoB 1 3B Pa/e, P0,000 and Larr, P0,000 – refer to NoB 1 "B P3-,)) J P",000 $ (P1),000 $ P-,)00'(B")'

)B P).,)0 J P).,000 K MP10,000 $ (P),000 $ P1,000'(B)' .B P(1,000' J P0,000 $ MP30,000 K (P)0,000 $ P-0,000'(B30' B P(1,)00' J P30,000 $ MP30,000 K (P)0,000 $ P-0,000'(B")' B P(,)00' J P1),000 $ MP30,000 K (P)0,000 $ P-0,000'(B)' -B P3"0,000 J (P1",000 K P,000'FB3)10B P1,0"0,000 J (P.0,000 F B)'11B %brams and #rei/hton

% * ##apital beforerealization

0,000 -0,000 130,000

Liquidation e!penses(3,.00'

(,"00'

(.,000'

Loss on sale (13" $ "3"' (-0,000'

(.0,000'

(300,000

'(13,.00'

,.00(1.,000'

1B <om, P30,000 :i+G, P",000 and harr, P11,000 < : >

#apital before realization "0,00010,000 1),000

Loss on sale (),000 –.),000'

(10,000' (.,000' (",000'

30,000 ",000 11,000

13B P3",000 L H

.0,000 "0,000 0,000

Liquidation e!penses(,000'

( ",000'

Loss on sale (300 $ 10' (",000'(",000'

( ",000'

3",000

(1,000'

%dditional investment 1,000 3",000 ,000

1"B P),000

#ash, be/innin/ P-0,000Pament of liquidation e!penses ( ),000'Pament of liabilities ( .0,000'Pament to partners P),000

1)B P1),000* P L S

110,000 100,000 .),000

Loss on sale ("EE1E3' (.0,000'( 30,000'

(1),000'

("),000'

(3),000'

0,000 ),000

%dditional loss (E1E3' (3),000' (11,..' ( ),33'(1,)00'

1),000 .,333 -,1. ,)001.B P,)00 $ refer to NoB 1)1B Pa/e, P.,3333 and Larr, P-,1. – refer to NoB1)

1B *ondE P),000 >ammE P11),000 ellE P –0–

*ond2s +apital balan+eBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB P300,000

LessE *ond2s share of P1"0,000 loss in liquidation

(P1"0,000 T )0&' BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB (0,000'

P30,000

LessE *ond2s share of ell2s +apital de6+ien+ of

P,000 ()F of P,000'BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB ( ),000'

P),0001-B %le!aE P),000 *ellE P),000 CrahamE P–0–

0B ?od, P),00 ane, P.",00 LarG, P10,000

%ssets :ebts30& ?od

")&ane

)&LarG

*alan+e, Ha 1 )0,000 ,000 3,000 -0,000 "0,000Plant sold 10,000 3,000 ",)00 ,)007nventor sold ( .,000' ( 1,00 ' ( ,00 ' ( 1,)00 '*alan+es before

distribution )",000 ,000 33,00 -1,00 "1,00045set loans ( .,000' ( 10,000 ' ( 1.,000 'Pa +reditors ( ,000' ( ,000 '

Partner equit 1"0,000 3,00 -1,00 ),000

Possible lossE Plant assets ( .0,000' ( 1,000' ( ,000' ( 1),000 '

:istribution 0,000 ),00 .",00 10,000

(#ash :istributionE P)",000 K P)",000 K P.0,000 $ P,000 J P0,000'Ha 1 7nventor Plant #reditors Ha 30

1B 4aG, P0 Nebe, P0 and Pan/, P11,000

#ashNon$#ash%ssets

@irstRanG:ebt

30&4aG=quit

0&Nebe=quit

)0&Pan/=quit

?an 1 *alan+e 3,000 33,000 -,000

,000 ",000 1,000

Sale of assets 1,000 ( 1),000 ' .00 "00 1,000

Subtotal 0,000 1,000 -,000

,.00 ","00 ,000

Safe Paments S+hedule4aG

=quitPartners2 pre$distribution balan+es ,.00 ","00 ,000Possible losses on non$+ash assets ( ),"00 ' ( 3,.00 ' ( -,000 '

( ,00 ' 00 13,0008rite o5 4aG F and )F ,00 ( 00 ' ( ,000 '

#ash distribution to partners 0 0 11,000

#ash distribution plan on 4+tober 31E @irst P-,000 /oes to priorit +reditors, and then Pan/ re+eives P11,000B

B 7de, P0 >anl, P0 ?en, P-,000

#ash7de#apital

>anl#apital

?en#apital <otal

*alan+e, %u/B 1 )0,000 ( .0,000 ' ",000 10.,000 )0,0007de2s personal+ontribution "0,000 "0,000 "0,000

-0,000 ( 0,000 ' ",000 10.,000 -0,0008rite$o5 7de 0,000 ( ,)00 ' ( 1,)00 '

-0,000 0 ( 3,)00 ' -3,)00 -0,000>anl2s personal+ontribution ,000 ,000 ,000

-,000 ( 1,)00 ' -3,)00 -,0008rite$o5 >anl 1,)00 ( 1,)00 '

-,000 0 -,000 -,000

:istribute +ash ( -,000 ' ( -,000 ' ( -,000 '0 0 0

'heories

Completion tatements1B aB partnership +reditors other than partners

bB partners2 loansUif subordinated+B partners2 +apital

B statement of realization and liquidation3B s+hedule of safe paments"B marshallin/ of assets

)B rule of seto5 .B le/al re+ourse a/ainstB brin/in/ the +apital balan+es into the pro6t and loss ratio

'rue or False

B <rue 13B

<rue 1B

@alse 3B

@alse B

<rue 33B

-B @alse 1"B

@alse 1-B

<rue "B

<rue -B

@alse 3"B

@alse 1)

@alse 0

<rue )

@alse 30

@alse 3)

@alse 1.B

<rue 1B

@alse .B

<rue 31B

<rue 1B

<rue B

<rue 3B

Note for the following numbers:9. The accountant is liable if he/she fails to meet the duciary responsibility of

protecting the creditors’ interest during the liquidation process.1. The amount of cash distributed to each partner is a function of the capital balances

and the prot and loss ratios. !t is unli"ely that partners will recei#e the sameamount of cash.

11. $artnership creditors ha#e priority claims against partnership assets and partnercreditors ha#e priority claims against partner assets.

1%. $artner creditors ha#e claims rst against partner assets. They can also ha#e aclaim against partnership assets to the e&tent of the partner’s equity in the partnership.

1'. The accountant has a duciary responsibility to the partnership’s creditors toensure that su(cient assets e&ist to pay the creditors. !t does not mean thatcreditors must be fully paid before any partner distributions occur.

1). *ains and losses reali+ed during the liquidation process are generally allocatedusing the residual prot and loss ratio. ,ther prot and loss allocation componentsare not considered because these items are generally rele#ant to the partnership’soperation and the current issue is the partnership’s liquidation.

-1. This is called an installment liquidation-. This document is called a tatement of 0eali+ation and iquidation.-'. The tatement of 0eali+ation and iquidation does not include income statement

accounts. 2ll income statement amounts are allocated directly to partnershipequity.

ultiple Choice 'heories

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