Problem # 1

Lump-Sum Liquidation with Gain on Realization

After several years of operations, the partnership of Arenas, Dulay and Laurente is to be Liquidated.

After making the closing entries on June 30, 2015, the following accounts remained open:

Account balance

Account Title

DebitCreditCashP50,000Non-cash Assets

2,350,000LiabilitiesP400,000Arenas, Capital

900,000Dulay, Capital

500,000Laurente, Capital

600,000The non-cash assets are sold for P2,650,000. Profits and losses are shared equally.

Required:

• statement of partnership liquidation
• the entries to record the following:

1. Sale of all non-cash assets.

2. Distribution of gain on realization to the partners.

3. Payment of the liabilities.

4. Distribution of cash to the partners.