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Lecture 6

1. The SMN Partnership liquidated its assets, realizing a loss on merchandise inventory but a gain on other assets. 2. The partnership distributed the loss to partners in proportion to their shares, then paid liabilities and distributed the remaining cash and gains. 3. After liquidating assets and distributing cash, the partners' capital accounts were Sophie $581,088, Mia $456,288, and Natalie $384,144.

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21 views

Lecture 6

1. The SMN Partnership liquidated its assets, realizing a loss on merchandise inventory but a gain on other assets. 2. The partnership distributed the loss to partners in proportion to their shares, then paid liabilities and distributed the remaining cash and gains. 3. After liquidating assets and distributing cash, the partners' capital accounts were Sophie $581,088, Mia $456,288, and Natalie $384,144.

Uploaded by

paullawrencepizzarramarasigan
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Problem 1: Lump-Sum Liquidation with Gain on Realization

Toni Anne Marie Partnership


Statement of Partnership Liquidation
June 30, 2023

Non-Cash
Cash Payables Toni, Capital Anne, Capital Marie, Capital
asset
Bal. before liquidation 50,000 2,350,000 400,000 900,000 500,000 600,000
Sale of non cash asset 2,650,000 -2,350,000 0 100,000 100,000 100,000
Balances 2,700,000 0 400,000 1,000,000 600,000 700,000
Payment of liability 400,000 -400,000
Balances 2,300,000 0 0 1,000,000 600,000 700,000

Problem 2 – Lump-Sum Liquidation with Loss on Realization

Toni Anne Marie Partnership


Statement of Partnership Liquidation
June 30, 2023

Cash Non-Cash Payables Toni, Capital Anne, Capital Marie, Capital


Bal. before liquidation 50,000 2,350,000 400,000 900,000 500,000 600,000
Sale of non cash asset 2,000,000 -2,350,000 0 -116,666.67 -116,666.67 -116,666.67
Balances 2,050,000 0 400,000 783,333.33 383,333.33 483,333.33
Payment of liability 400,000 -400,000
Balances 1,650,000 0 0 783,333.33 383,333.33 483,333.33
Problem 3 - Lump-Sum Liquidation

Date Description Debit Credit


6/30/2023 Cash 582,800
Loss on realization of merchandise 29,500
Merchandise inventory 612,300
to record realization of
6/30/2023 Sophie, Capital 11,800
Mia, Capital 11,800
Natalie, Capital 5,900
Loss on realization of merchandise 29,500
to record distribution of loss on
6/30/2023 Cash 550,900
Other assets 472,680
Gain on realization of other assets 78,220
to record realization of other
6/30/2023 Gain on realization of other assets 78,220
Sophie, Capital 31,288
Mia, Capital
31,288
Natalie, Capital 15,644
to record distribution of gain on
6/30/2023 Payable 131,350
Cash 131,350
to record payment of liabilities
6/30/2023 Sophie, Capital 581,088
Mia, Capital 456,288
Natalie, Capital 384,144
Cash 1,421,520
Problem 1 : Lump-Sum Liquidation with Gain on Realization

! Sale of non cash asset

Cash 2,650,000
Non cash assets 2,350,000
Gain on realization 300,000

2. Distribution of gain on realization to the partners.

Gains on realization 300,000


Toni, capital 100,000
Anne, capital 100,000
Marie, capital 100,000

3. Payment of the liabilities.

Liabilities 400,000
Cash 400,000

4. Distribution of cash to the partners.

Toni, capital 1,000,000


Anne, capital 600,000
Marie, capital 700,000
Cash 2,300,000

Problem 1: Lump-Sum Liquidation with Gain on Realization

Toni Anne Marie Partnership


Statement of Partnership Liquidation
June 30, 2023

Non-Cash
Cash Payables Toni, Capital Anne, Capital Marie, Capital
asset
Bal. before liquidation 50,000 2,350,000 400,000 900,000 500,000 600,000
Sale of non cash asset 2,650,000 -2,350,000 0 100,000 100,000 100,000
Balances 2,700,000 0 400,000 1,000,000 600,000 700,000
Payment of liability 400,000 -400,000
Balances 2,300,000 0 0 1,000,000 600,000 700,000

Problem 2 – Lump-Sum Liquidation with Loss on Realization

Toni Anne Marie Partnership


Statement of Partnership Liquidation

June 30, 2023

Cash Non-Cash Payables Toni, Capital Anne, Capital Marie, Capital


Bal. before liquidation 50,000 2,350,000 400,000 900,000 500,000 600,000
Sale of non cash asset 2,000,000 -2,350,000 0 -116,666.67 -116,666.67 -116,666.67
Balances 2,050,000 0 400,000 783,333.33 383,333.33 483,333.33
Payment of liability 400,000 -400,000
Balances 1,650,000 0 0 783,333.33 383,333.33 483,333.33
Problem 3 - Lump-Sum Liquidation
SMN Partnership
Statement of Partnership Liquidation
June 30, 2023

Merchandise Sophie, Capital Mia, Capital Natalie, Capital


Cash Other Assets Payables
Inventory 40% 40% 20%
Bal. before liquidation 419,170 612,300 472,680 131,350 561,600 436,800 374,400
Sale of of merchandise inventory 582,800 -612,300 -11,800 -11,800 -5,900
Sale of other assets 550,900 -472,680 31,288 31,288 15,644
Balances 1,552,870 0 0 131,350 581,088 456,288 384,144
Payment of liability 131,350 -131,350
Balances 1,421,520 0 0 0 581,088 456,288 384,144

Date Description Debit Credit


6/30/2023 Cash 582,800
Loss on realization of merchandise 29,500
Merchandise inventory 612,300
to record realization of
merchandise inventory
6/30/2023 Sophie, Capital 11,800
Mia, Capital 11,800
Natalie, Capital 5,900
Loss on realization of merchandise 29,500
to record distribution of loss on
realization of merchandise
6/30/2023 Cash inventory 550,900
Other assets 472,680
Gain on realization of other assets 78,220
to record realization of other assets

6/30/2023 Gain on realization of other assets 78,220


Sophie, Capital 31,288
Mia, Capital 31,288
Natalie, Capital 15,644
to record distribution of gain on
realization of other assets
6/30/2023 Payable 131,350
Cash 131,350
to record payment of liabilities
6/30/2023 Sophie, Capital 581,088
Mia, Capital 456,288
Natalie, Capital 384,144
Cash 1,421,520
to record final payment to partners
Problem 4. Installment Liquidation – Schedule of Safe Payments

Mia and Gia Partnership


Statement of Liquidation (Installment)
June to August
Mia, capital Gia, capital
Activities Cash Other asset Liabilities
60% 40%
Balances before realization 50,000 550,000 200,000 225,000 175,000
June realization of asset and distribution of
losses 180,000 (220,000) (24,000) (16,000)
Balance 230,000 330,000 200,000 201,000 159,000
Payment of liabilities (200,000) (200,000)
Balances 30,000 330,000 201,000 159,000
Payment to partners (20,000) (12,000) (8,000)
Balances 10,000 330,000 189,000 151,000
July realization of asset and distribution of
gains 120,000 (100,000) 12,000 8,000
Payment of liquidation expenses (5,000) (3,000) (2,000)
Balances 125,000 230,000 198,000 157,000
Payment to partners (125,000) (75,000) (50,000)
Balances 0 123,000 107,000
August realization of asset and
distribution of losses 225,000 (230,000) (3,000) (2,000)
Balances 225,000 120,000 105,000

1. How much cash should Mia receive in June?


Mia should receive P 12,000 cash in June.

2. How much cash should Gia receive in July?


Gia should receive P8,000 cash in July

3. How much cash should Mia and Gia receive in August?


Mia should receive P120,000 cash in August
Gia should receive P 105,000 cash in August

Cash Priority Cash priority


Sophie Natalie
Sophie Natalie
Capital Balances 60,000 20,000
Add: Loan Balances 10,000
Partner's Total Interests 60,000 30,000
divide by PL ratio 40% 60%
Loss Absorbtion Balances 150,000 50,000
Priority 1: To Sophie (100,000) 40,000
Balances 50,000 50,000 40,000 0
priority 2; in excess of 40,000 base on PL ratio 40% 60%
2023
Jun-01 Cash 60,000
Sophie, capital 4,000
Natalie, Capital 6,000
Other assets 70,000
Accounts payable-Trade 15,000
Cash 15,000
Sophie, capital 43,600
Natalie, Capital 5,400
Cash 49,000

Jul-01 Cash 18,000


Sophie, capital 4,800
Natalie, Capital 7,200
Other assets 30,000
Natalie, Loan payable 10,000
Sophie, capital 7,600
Natalie, Capital 1,400
Cash 19,000

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