The partners operating the LIBRA Company have been sharing profits and losses in the ratio of...
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The partners operating the LIBRA Company have been sharing profits and losses in the ratio of their capital balances. At the end of the previous calendar year, the partnership balance sheet appeared as follows: Cash LIBRA COMPANY STATEMENT OF FINANCIAL POSITION Receivables Merchandise Inventory Building & Equipment (net) 31-Dec-19 26,000 15,000 14,000 25,000 80,000 Accounts Payable Lizares, Capital Braganza, Capital Donesa, Capital 30,000 12,000 22,000 16,000 80,000 On this date, Donesa decided to withdraw from the partnership. Below is a list of the possible situations involving the withdrawal of Donesa. Under each case, compute the following a) amount of cash that Donesa will receive upon his withdrawal. b) adjusted Capital Balances of Lizares and Braganza just after the withdwaral of Donesa. 1. The interest of Donesa will be paid from partnership funds after an examination has revealed that no overvaluation nor undervaluation of balance sheet accounts exists as of this date. 2. The partners agreed that merchandise inventory should be restated at P15,000 and building and equipment should be recognized at a current replacement value of P29,000, whereas receivables should be valued at P13,000. Donesa's interest is to be paid in cash to the extent of 50% and a note is to be issued for the balance. 3. Lizares buys 75% of Donesa's interest for P12,000 and Braganzabuys the remainder also at book value. 4. With the consent of the other partners, Donesa sold his total interest to Dominguez. 5. The partners agreed that the balance sheet values of assets are fair and reasonable but decided to pay Donesa P18,000 for his interest in the firm. The remaining partners agreed to absorb the bonus of P2,000. 6. Donesa is paid the full amount of his interest after adjustment arising from the overvaluation of merchandise inventory by P1,500. 7. Lizares buys Donesa's interest in full for P17,000. 8. Donesa's son, Mario took over Donesa's interest in the partnership with the consent of the remaining partners. Financial reverses suffered by the Montreal Trading prompted the decision of the partners Montero, Reyes and Albano to close up and start liquidating the business. The bookkeeper was asked to close the books and prepare a statement of financial position as of April 30, 2020. The balance sheet shown below reveals the financial condition of the business immediately before liquidation. MONTREAL TRADING STATEMENT OF FINANCIAL POSITION as of APRIL 30, 2020 Cash Noncash assets 8,000 Liabilities Montero, Loan 48,000 56,000 Montero, Capital Reyes, Capital Reyes, Drawing Albano, Capital 16,500 2,000 10,000 11,000 -1,500 18,000 56,000 The partners have shared annual operating profits in the following proportion: 35% to Montero, 40% to Reyes and 25% to Albano. Assume when necessary that Montero and Reyes are both personally insolvent while Albao is personally solvent. All of them are general partners. Required: How much will be the amount of Cash that will be given to Montero, Reyes and Albano in the final distribution. Support answer by preparing the statement of liquidation for each of the following independent situations: 1. The noncash assets were sold for P50,000 2. Only P44,000 was realized from the sale of the noncash assets 3. The noncash assets were sold for P22,000. 4. Cash received from the sale of noncash assets amounted to P43,500 out of which liquidation expenses of P1,000 have to be paid. The partners operating the LIBRA Company have been sharing profits and losses in the ratio of their capital balances. At the end of the previous calendar year, the partnership balance sheet appeared as follows: Cash LIBRA COMPANY STATEMENT OF FINANCIAL POSITION Receivables Merchandise Inventory Building & Equipment (net) 31-Dec-19 26,000 15,000 14,000 25,000 80,000 Accounts Payable Lizares, Capital Braganza, Capital Donesa, Capital 30,000 12,000 22,000 16,000 80,000 On this date, Donesa decided to withdraw from the partnership. Below is a list of the possible situations involving the withdrawal of Donesa. Under each case, compute the following a) amount of cash that Donesa will receive upon his withdrawal. b) adjusted Capital Balances of Lizares and Braganza just after the withdwaral of Donesa. 1. The interest of Donesa will be paid from partnership funds after an examination has revealed that no overvaluation nor undervaluation of balance sheet accounts exists as of this date. 2. The partners agreed that merchandise inventory should be restated at P15,000 and building and equipment should be recognized at a current replacement value of P29,000, whereas receivables should be valued at P13,000. Donesa's interest is to be paid in cash to the extent of 50% and a note is to be issued for the balance. 3. Lizares buys 75% of Donesa's interest for P12,000 and Braganzabuys the remainder also at book value. 4. With the consent of the other partners, Donesa sold his total interest to Dominguez. 5. The partners agreed that the balance sheet values of assets are fair and reasonable but decided to pay Donesa P18,000 for his interest in the firm. The remaining partners agreed to absorb the bonus of P2,000. 6. Donesa is paid the full amount of his interest after adjustment arising from the overvaluation of merchandise inventory by P1,500. 7. Lizares buys Donesa's interest in full for P17,000. 8. Donesa's son, Mario took over Donesa's interest in the partnership with the consent of the remaining partners. Financial reverses suffered by the Montreal Trading prompted the decision of the partners Montero, Reyes and Albano to close up and start liquidating the business. The bookkeeper was asked to close the books and prepare a statement of financial position as of April 30, 2020. The balance sheet shown below reveals the financial condition of the business immediately before liquidation. MONTREAL TRADING STATEMENT OF FINANCIAL POSITION as of APRIL 30, 2020 Cash Noncash assets 8,000 Liabilities Montero, Loan 48,000 56,000 Montero, Capital Reyes, Capital Reyes, Drawing Albano, Capital 16,500 2,000 10,000 11,000 -1,500 18,000 56,000 The partners have shared annual operating profits in the following proportion: 35% to Montero, 40% to Reyes and 25% to Albano. Assume when necessary that Montero and Reyes are both personally insolvent while Albao is personally solvent. All of them are general partners. Required: How much will be the amount of Cash that will be given to Montero, Reyes and Albano in the final distribution. Support answer by preparing the statement of liquidation for each of the following independent situations: 1. The noncash assets were sold for P50,000 2. Only P44,000 was realized from the sale of the noncash assets 3. The noncash assets were sold for P22,000. 4. Cash received from the sale of noncash assets amounted to P43,500 out of which liquidation expenses of P1,000 have to be paid.
Expert Answer:
Answer rating: 100% (QA)
To compute the amount of cash that each partner will receive in a liquidation we follow these steps 1 Sell the noncash assets and add the proceeds to ... View the full answer
Related Book For
Advanced Accounting
ISBN: 978-0538480284
11th edition
Authors: Paul M. Fischer, William J. Tayler, Rita H. Cheng
Posted Date:
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