QUIZ 2

1. On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership on installment basis.
Distributions to partners shall be made as cash becomes available. The following information was made
available:
Dr. Cr.
Cash 80,000
Accounts receivable 240,000
Receivable from C 40,000
Inventory 480,000
Equipment 1,200,000
Accounts payable 120,000
Payable to B 80,000
A, Capital (20%) 400,000
A, Drawing 80,000
B, Capital (30%) 600,000
C, Capital (50%) 800,000
C, Drawings 120,000
Totals 2,120,000 2,120,000

During January, non-cash assets with carrying amount of ₱520,000 was sold for ₱240,000. Cost of disposing the
assets amounted to ₱80,000. All of the partners are personally insolvent. How much did B receive in the partial
settlement of his capital account? ___________

2. X & Y partnership’s balance sheet at December 31, 2021, reported the following:
Total assets 100,000
Total liabilities 20,000
X, capital 40,000
Y, capital 40,000

On January 2, 2022, X and Y dissolved their partnership and transferred all the assets and liabilities to a newly
formed corporation. At the date of incorporation, the fair value of the net assets was ₱12,000 more than the
carrying amount on the partnership’s books. X and Y were each issued 5,000 shares of the corporation’s ₱1 par
value common stock. Immediately following incorporation, additional paid-in capital in excess of par (share
premium) should be credited for? ______________

3. Partner Z decided to retire when the partners’ capital balances were: X, capital, ₱600,000; Y, capital, ₱600,000;
and Z, capital, ₱400,000. It was agreed that Partner Z is to take the partnership’s fully depreciated equipment
with a fair value of ₱24,000 and a note for the balance of his interest. The historical cost of the equipment is
₱36,000. The partners share in profits and losses equally. What is the capital balance of X after the retirement?
_________________

4. On January 1, 20x1, the partners of ABC Co. decided to liquidate their partnership. The following information was
made available:
Cash 80,000
Accounts receivable 240,000
Inventory 480,000
Equipment 1,200,000
Total 2,000,000

Accounts payable 120,000

Payable to B 80,000
A, Capital (20%) 400,000
B, Capital (30%) 600,000
C, Capital (50%) 800,000
Total 2,000,000

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

• ₱40,000 was collected on accounts receivable; the balance is uncollectible.
• ₱20,000 was received for the entire inventory.

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• The equipment was sold for ₱200,000.
• ₱8,000 liquidation expenses were paid.
• ₱108,000 was paid to outside creditors, after offset of a ₱12,000 credit memorandum received on
January 2, 20x1.
• C is personally insolvent.

How much did B receive from the settlement of his interest in the partnership? ___________

Use the following information for the next three questions:

On January 1, 20x1, A and B decided to liquidate their partnership. As of this date, their capital balances were
₱400,000 and ₱800,000, respectively. The partners share in profits and losses on a 60:40 ratio. Before liquidation,
the partnership had ₱80,000 cash and ₱120,000 liabilities. The partnership incurred loss of ₱480,000 on the sale of
non-cash assets. A is solvent but B is insolvent.

5. How much was the carrying amount of the non-cash assets? __________
6. How much was the net proceeds from the sale of non-cash assets? __________
7. How much did A receive from the settlement of his capital balance? ___________

8. X, Y and Z are partners with capital balances of ₱300,000, ₱200,000 and ₱100,000, respectively, on December
31, 20x1. Profits are shared equally. Z wishes to withdraw and it is agreed that she is to take certain furniture and
fixtures with second hand value of ₱50,000 and a note for the balance of her interest. The furniture and fixtures
are carried in the books at ₱65,000. Brand new, the furniture and fixtures may cost ₱80,000. By how much
would Z’s acquisition of the second-hand furniture affect each partner’s capital? ______________

Fact pattern for the next two independent questions:

Partners X and Y had the following profit-sharing percentages and capital balances: X (40%) ₱300,000 and Y (60%)
₱500,000.

9. Z was admitted to the partnership when he purchased 20% of X’s and Y’s capital interests for ₱200,000. If the
book value method was used to record Z’s admission, how much would be the capital balance of X after Z’s
admission? ____________

10. X was admitted to the partnership when he invested ₱150,000 cash for a 20% interest in the partnership. The
partnership’s net assets are fairly valued on Z’s admission date. The partners used the bonus method to record
Z’s admission. How much is the capital balance of Y after the admission of Z? ___________

11. ABC Co. is undergoing liquidation. Information before the start of the liquidation process is as follows:
Cash 10,000 Accounts payable 80,000
Accounts receivable 80,000 Payable to B 20,000
Receivable from A 10,000 A, Capital (50%) 250,000
Inventory 180,000 B, Capital (30%) 150,000
Equipment, net 320,000 C, Capital (20%) 100,000
Total 600,000 Total Liab. & Equity 600,000

The total cash distributed to the partners after the first and second sales of noncash assets were ₱12,000 and
₱30,000, respectively. How much cash did A receive in the second cash distribution? ______ (3 pts)

12. Z was admitted to the partnership when he invested ₱250,000 cash for a 20% interest in the partnership.
Immediately prior to Z’s admission, the carrying amounts and fair values of the assets and liabilities of the
partnership are as follows:
Carrying amount Fair value
Cash 100,000 100,000
Equipment 750,000 870,000
Accounts payable 50,000 50,000
Provision for pending litigation - 20,000
X, Capital (40%) 300,000 N/A
Y, Capital (60%) 500,000 N/A

How much is the capital balance of Y after the admission of Z? _____________

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