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Partnership Liquidation Question#7

The partnership was considering liquidation with one partner solvent and others insolvent. Upon liquidation: 1) The assets were sold for $228,000, less than their reported value, creating a $132,000 loss shared 4:2:2:2. 2) Ding's creditors filed a $25,000 claim against partnership assets. 3) After distributing losses and settling accounts, Ding would only have $2,500 available to pay creditors, so the minimum they could receive is $2,500.

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2K views1 page

Partnership Liquidation Question#7

The partnership was considering liquidation with one partner solvent and others insolvent. Upon liquidation: 1) The assets were sold for $228,000, less than their reported value, creating a $132,000 loss shared 4:2:2:2. 2) Ding's creditors filed a $25,000 claim against partnership assets. 3) After distributing losses and settling accounts, Ding would only have $2,500 available to pay creditors, so the minimum they could receive is $2,500.

Uploaded by

Ivy Bautista
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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PARTNERSHIP LIQUIDATION

Q1. A local partnership was considering the possibility of liquidation since one of the
partners is solvent (Tillman) and the others are insolvent. Capital balances at that time
were as follows. Profits and losses were divided on a 4:2:2:2 basis, respectively.

Ding, capital P 60,000


Laurel, capital 67,000
Ezzard, capital 17,000
Tillman, capital 96,000

Ding's creditors filed a P25,000 claim against the partnership's assets. At that time, the
partnership held assets reported at P360,000 and liabilities of P 120,000. If the assets
could be sold for P228,000, what is the minimum amount that Ding's creditors would
have received?

a. P 0 c. P36,000

b. P2,500 d. P38,720

Answer: (b)

Ding Laurel Ezzard Tillman Total


Balances before liquidation P60,000 P67,000 P17,000 P96,000 P240,000

Loss on realization 4:2:2:2


(P228,000 –P360,000) (52,800) (26,400) (26,400) (13,200) (132,000)

Balances P7,200 P40,600 P(9,400) P69,600 P108,000


Loss on possible insolvency
(4:2:2) (4,700) (2,350) 9,400 (2,350) -0-

Balances P2,500 P38,250 -0- P67,250 P108,000

Cash P 10,000 Liabilities P 130,000


Non-cash assets 300,000 Keaton, capital 60,000
Lewis, capital 40,000
Meador,capital 80,000
P 300,000 P 310,000

Partnership Liquidation | ©jipb162021

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