Solutions For Midterm Exam Part 2 Selected Rroblems [PDF]

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CC admits DD for partnership interest in his business. The balance sheet accounts of CC on November 30,20x4 prior to the adm Debits Credits Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . P ? Accounts receivable . . . . . . . . . . . . . . . . . . 96,000 Merchandise inventory . . . . . . . . . . . . . . . . 144,000 Accounts payable . . . . . . . . . . . . . . . . . . . . P 49,600 CC, capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ? It is agreed that for purposes of establishing CC's interest, the following adjustments should be made: 1 An allowance for doubtful accounts of 4% of accounts receivable is to be established. 2 The merchandise inventory is to be valued at P160,000. 3 Prepaid expenses of P5,200 and accrued expenses of P3,200 are to be recognized. DD is to invest cash of P113,640 to give him a one-third (1/3) interest in the firm. 4 The balance of the capital of CC before the adjustments is: 5 The total assets of the partnership after the formation is: SOLUTION UNADJUSTED CAPITAL OF CC ADJ: ALLOW FOR B/D MERCHANDISE INVENTORY PREPAID EXPENSES ACCRUED EXPENSES ADJUSTED CAPITAL OF CC



-3840 16000 5200 -3200 227,280



ADJUSTED CAPITAL CC CAPITAL DD CAPITAL TOTAL CAPITAL 113640/1/3



227,280 113,640 340,920



213,120 ANS. NO.4



ANS. NO.5



TOTAL ASSETS A=L+C ASSETS LIABILITIES 393,720 52,800



NOS. 15 AND 16 Tom, Dick, and Harry are partners in an equipment leasing business that has not been able to generate the type of revenue expected by the partners. They share profits and losses in a ratio of 5:3:2. They have decided to liquidate the business and have sold all the assets except for one piece of heavy machinery. All partnership liabilities have been settled and all the partners are personally insolvent. The machinery has a book value of P85,000, and the partners have c Tom, capital . . . . . . . . . . . . . . . . . . . . . . . . . 50,000 Dick, capital . . . . . . . . . . . . . . . . . . . . . . . . . 20,000 Harry, capital . . . . . . . . . . . . . . . . . . . . . . . . 15,000



15 What amount of cash will each partner receive as a liquidating distribution if the mach 16 What amount of cash will each partner receive as a liquidating distribution if the mach



CAPITA BALANCES TOTAL LOSS CASH AVAILABLE FOR DISTRIBUTION



TOM DICK HARRY TOTAL 50,000 20,000 15,000 85,000 - 9,000.0 5,400 3,600.0 - 18,000 41,000 14,600 11,400 67,000 ANSWER FOR NO.15



FOR NOS. 18 AND 19



The partners of the M & N Partnership started liquidating their business on July 1, 202 M and 60% to N. The balance sheet of the partnership appeared as follows: M & N Partnership Balance Sheet - July 1, 2021 Assets Cash Receivable Inventory Equipment P65, 200 Accumulated Depreciation (30, 800) Total



Liabilities & Equity 8, 800 Accounts payable 32, 400 22, 400 M, capital P31, 000 39, 400 M, drawing ( 5, 400) 25,600 N, capital P33, 200 N, drawing 200 33,000 34, 400 N, loan 14, 000 P105, 000 Total P105, 000



During the month of July, the partners collected of the receivables with no loss. The partners also sold during the month the e 18. How much of the cash was paid to M's capital on July 31, 2021? 19. How much of the cash was paid to N's capital on July 31, 2021? SOLUTION COMPUTATION OF CASH AVAILABLE FOR DISTRIBUTION CASH BEGINNING 8,800 REALIZATION: RECEIVABLES 22,400 INVENTORY 33,400 TOTAL CASH 64,600 LESS: LIABILITIES - 32,400 CASH AVAILABLE FOR DISTRIBUTION 32,200



18 19



9,440 22,760



CAPITA BALANCES LOAN TOTAL PARTNERS INTEREST TOTAL LOSS CASH AVAILABLE FOR DISTRIBUTION



FOR NOS. 20 AND 21 RR, SS and TT decided to dissolve the partnership on November 30, 2011. their capital balances and profit ratio on this date, fo



RR SS TT



Capital Bal Profit Ratio P50, 000 40% 60, 000 30% 20, 000 30%



The net income from January 1, to November 30, 2011 is P45, 000. also, on this date, cash and liabilities are P40, 000 and P90,



20 How much must be realized from the sale of the firm's non-cash assets? 21 How much cash receive by SS and TT upon liquidation? 40 30 30 RR SS TT TOTAL CAPITA BALANCES 50,000 60,000 20,000 130,000 NET INCOME 18,000 13,500 13,500 45,000 CAPITAL BALANCES AFTER NI 68,000 73,500 33,500 175,000 TOTAL LOSS - 13,000 9,750 9,750 - 32,500 CASH AVAILABLE FOR DISTRIBUTION 55,000 63,750 23,750 142,500 ANS. NO.21



Ding, capital Laurel, capital Ezzard, capital Tillman, capital



23 A local partnership was considering the possibility of liquidation since one of the partn Capital balances at that time were as follows. Profits and losses were divided on a 4:2: 60, 000 67, 000 17, 000 96, 000



Ding's creditors filed a P25, 000 claim against the partnership's assets. At that time, the partnership held assets reported at P3 if the assets could be sold for P230, 000, what is the minimum amount that Ding's creditors would have received? DING LAUREL EZZARD TILLMAN TOTAL CAPITA BALANCES 60,000 67,000 17,000 96,000 240,000 TOTAL LOSS - 52,000 26,000 26,000 - 26,000 130,000 CASH AVAILABLE FOR DISTRIBUTION 8,000 41,000 9,000 70,000 110,000 ABSORPTION -4500 2250 9000 2250 CASH PAYMENT TO PARTNERS 3,500 43,250 72,250 110,000 ANS



NO. 25 Cash Non-cash assets



P 90, 000 Liabilities 300, 000 Perry, capital Quincy, capitalP170, 000 _______ Renquist, capit70, 000 P390, 000 50, 000 100, 000 Perry, Quincy and Renquist had shared profits and losses in a rat P390, 000 Any amount in excess of ________



PERRY QUINCY 70, 000 50, 000 20% 40% RENQUIST



PERRY



QUINCY



350000 100,000 250000 125000



125000 100, 000 40% 250,000 20,000 250000 125000



Cash Non-cash assets Notes payable to Cc Other liabilities AA, capital BB, capital deficit CC, capital



25,000



26 AA, BB, and Cc are partners in ABC partnership and share profits and losses 50%, 30% The partners have agreed to liquidate the partnership and some liquidation expenses the partnership balance sheet reflects the following book values: P 25, 200 297, 600 38, 400 184, 800 72, 000 ( 12, 000) 39, 600



Assuming that the actual liquidation expenses are P16, 800 and that the non-cash assets with a book value of P250, 000 are so SOLUTION



50 AA



CAPITA BALANCES ADD: LOAN TOTAL PARTNERS INTEREST TOTAL LOSS CASH AVAILABLE FOR DISTRIBUTION ABSORPTION PAYMENT TO PARTNERS ABSORPTION PAYMENT TO PARTNER



30 BB



72,000 72,000 - 49,200 22,800 - 29,657 -6,857 6,857 0



20 CC



-12000 -12,000 29,520 -41,520 41520 0 0



TOTAL 39600 99,600 38400 38,400 78,000 138,000 19,680 - 98,400 58,320 39,600 11,863 46,457 -6,857 39,600 ANS



vember 30,20x4 prior to the admission of DD are as follows:



receivable is to be established.



3,200 are to be recognized.



CAPITAL 340,920



generate the type e decided to liquidate hip liabilities have 85,000, and the partners have capital account balances as follows:



uidating distribution if the machinery is sold for P67,000? uidating distribution if the machinery is sold for P20,100?



15 TOM, 41,000 / DICK, 14,600 / HARRY 16 TOM, 17,550 / DICK, 530 / HARRY, 2



TOM DICK HARRY TOTAL CAPITA BALA 50,000 20,000 15,000 85,000 TOTAL LOSS 32,450 19,470 - 12,980 64,900 CASH AVAILAB 17,550 530 2,020 20,100 ANSWER FOR NO.16



SWER FOR NO.15



ting their business on July 1, 2021, at which time the partners were sharing profits and losses 40% to appeared as follows:



lso sold during the month the entire inventory on which they realized a total of P33, 400. ANS ANS



M



N 25,600



33,000 14,000 25,600 47,000 16,160 24,240 9,440 22,760 ANS.NO.18 ANS. NO.19



TOTAL 58,600 14,000 72,600 40,400 32,200



s and profit ratio on this date, follow:



liabilities are P40, 000 and P90, 000 respectively. For RR to receive P55, 000 in full settlement of his interest in the firm,



non-cash assets?



20 192,500 21 SS, 63,750/ TT, 23,750



ANS ANS



SOLUTION FOR NO. 20 A= L+C ASSETS LIABILITIES CAPITAL 265,000 90,000 175,000 CASH NCA TOTAL ASSETS



40,000 225,000 265,000



NCA PROCEED FROM SALE OF NCA LOSS ON SALE



225,000 192,500 ANS. NO,20 - 32,500



quidation since one of the partners is solvent (Tillman) and the others are insolvent. nd losses were divided on a 4:2:2:2 basis, respectively.



rship held assets reported at P360, 000 and liabilities of P120, 000.     3,500 ould have received? ANS COMPUTATION OF CASH AVAILABLE FOR DISTRIBUTION CASH PROCEED FROM REALIZATION OF NCA LESS: LIABILITIES CASH AVAILABLE FOR DISTRIBUTION



RENQUIST



170,000



-



230,000 120,000 110,000



185,000



50,000



10,000 20,000 25,000 50,000 275,000 CASH 90,000 PROCEED NCA 185,000



are profits and losses 50%, 30% and 20%, respectively. and some liquidation expenses to be incurred. Prior to the liquidation,



a book value of P250, 000 are sold for P216, 000.



How much cash should CC receive?



COMPUTATION OF CASH AVAILABLE FOR DISTRIBUTION BEGINNING CASH 25,200 REALIZATION 216,000 LESS: LIABILITIES - 184,800 LIQUIDATION EXPENSE 16,800 CASH AVAILABLE FOR DISTRIBUTION 39,600



     39,600



000 / DICK, 14,600 / HARRY, 11.400 550 / DICK, 530 / HARRY, 2,020



ANS