5.11

C, D, and E are partners in a partnership. Their capitals prior to liquidation and their profit and loss ratios are as follows:

Capital P/L Ratio

C P 180,000 50%

D 325,000 30%

E 85,000 20%

Total P 590,000 100%

C has a loan to the partnership amounting to P 20,000. The partnership has a receivable from D for P 25,000. E has a drawing account with a credit balance amounting to P 5,000. There are no more liabilities.

REQUIRED:

a. Prepare a cash priority program.

b. Assume that there is cash available of P 140,000, how will this amount be distributed?

c. Assume that there is cash available of P 180,000, how will this amount be distributed?

d. Assume that there is cash available of P 220,000, how will this amount be distributed?

e. How much is the cash available for distribution if D will get P 177,000?

f. How much will be the share of E if D will get P 190,000 from the cash distribution?

5.12

Ledger accounts of FGH partnership on June 30, 200C prior to

liquidation are shown below:

Cash P 25,000 Accounts Payable P 60,000

Accounts Receivable 120,000 F Loan 5,000

Allow. for Impairment (3,000) G Loan 10,000

Inventories 80,000 H Loan 4,000

Furniture & Fixtures 75,000 F Capital (40%) 200,000

Accum. Dep'n - F & F (5,000) G Capital (10%) 30,000

Office Equipment 50,000 H Capital (50%) 31,000

Accum. Dep'n - O/E (2,000)

P 340,000 P340,000

First liquidation: At the end of May 200D, all the accounts receivable were collected except an account for P 20,000, which was written off. The creditors were paid in full and partial cash settlement among the partners was made.

Second liquidation: In the middle of September 200D, all the inventories were sold for only P 30,000. Partial cash settlement among the partners was again made.

Last liquidation: At the beginning of November 200D, all the noncurrent assets were sold in a lump sum for P 40,000.

Liquidation expenses for P 3,000 were paid. Final cash settlement among the partners was made.

REQUIRED:

a. Prepare a working paper for the Statement of Liquidation with supporting schedules and give all the entries required.

b. Prepare a cash priority program.

c. Using the cash priority program, show how the cash is distributed on each date of cash settlement and reconcile with the schedules in letter a.

d. Prepare a working paper for the Statement of Liquidation using the lump sum method of liquidation and reconcile with the cash settlement made under the installment liquidation method.