IMUS INSTITUTE

SY 2015- 2016

ADVANCE ACCOUNTING I PARTNERSHIP – CHANGES IN OWNERSHIP INTEREST

PROBLEM 1

Bankrupt company agree to liquidate their partnership on July 01, 2015 because the company is having financial difficulties. The partner’s capital, loan account balances and profit and loss ratio before liquidation are:

Capital Loan P&L ratio

K 36,000 cr 14,000 cr 20%

Y 28,000 cr 4,000 dr 20%

L 12,000 cr 4,000 cr 50%

N 30,000 cr 10%0

Required: Prepare Cash Distribution Program

On July 01, 2015, The Company’s asset and liabilities are:

Cash 6,000Non Cash Assets 244,000Liabilities 130,000

Partners expect that the realization of non-cash assets (net cash proceeds) will be as follows:

July 144,000

August 20,000

September 20,000

Also, they are planning to set aside P10, 000 cash at the end of July and P4, 000 at the end of August as a reserve for future unrecorded liabilities. By the end of September, they are expecting that all liquidation expenses and unrecorded liabilities will be known so that the final distribution plan can be made.

Required: Prepare Projected Schedule of Payments

The following events took place during the three month liquidation of the company:

Month Cash realized net

of Liquidation expense

Book Values of Assets Realized

Unrecorded Liabilities

July 136,000 180,000 -

August 22,000 18,000 8,000

September 20,000 46,000 -

During the month of August, L contributed P5,000 to the partnership to partially cover his capital deficiency. He was unable to make any further contribution.

Required: Prepare Statement of Partnership Liquidation.

ADVAC 1 – ATEST 03 1