Chapter 14 - Partnership Liquidation

Assignment

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:

Cash 40,000

A/R 200,000

Inventory 300,000

Equipment 800,000

Total Assets 1,340,000

A/P 100,000

Payable to A 50,000

A, Capital (50%) 600,000

B, Capital (40%) 420,000

C, Capital (10%) 170,000

Total 1,340,000

1. Information on the conversion of non-cash assets is as follows:

> P130,000 was collected on the account receivable; the balance is uncollectible

> P200,000 was received for the entire inventory

> the equipment was sold for P590,000

>P5,000 liquidation expenses were paid

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 conversionof 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.

6. information on the conversion of noncash assets is as follows:

a. 80% of the account receivable was collected for only P60,000

b. 90% of the inventory was sold for P40,000

c. Equipment with carrying amount of P600,000 was sold for P220,000

d. Actual Liquidation expenses of P2,000 were paid

E. Estimated future liquidation expenses totaled P3,000

f. 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 using the cash priority program in # item#5 above.