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TitleAdvance Accounting Dayag Chapter 5
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Table of Contents
                            Note that the computation of safe payments on February 27, 20x4, resulted in no payments to partners. This is due to the large book value of Other Assets still unrealized and the reservation of the $6,000 cash on hand for possible future liquidation expenses.

Problem III: Cash Distribution Plan
                        
Document Text Contents
Page 12

Capital per unit of income sharing P15,000 P40,000 P23,000
Reduce Beard's capital to next highest capital for Craig ______ (17,000) ______
Capital per unit of income sharing P15,000 P23,000 P23,000
Reduce Beard's and Craig's capital to Ames's capital ______ (8,000) (8,000)
Capital per unit of income sharing P15,000 P15,000 P15,000

Problem VIII

Cash 60,000
Quanto, Capital 5,000
Rollo, Capital 3,000
Simms, Capital 2,000

Assets 70,000
To record realization of assets at a loss of $10,000, divided
amount Quanto, Rollo, and Simms in 5:3:2 ratio, respectively.

Liabilities 30,000
Cash 30,000

To record payment to creditors.

Loan Payable to Quanto 9,500
Rollo, Capital 10,500
Simms, Capital 5,000

Cash 25,000
To record payment to partners, computed as follows:

Quanto Rollo Simms
Capital (including Quanto's
loan of P10,000)
before liquidation P42,000 P30,000 P18,000
Loss on realization of assets (5,000) (3,000) (2,000)
Balances P37,000 P27,000 P16,000
Maximum potential
additional
loss (P5,000 +
P50,000 = P55,000)
divided in 5:3:2 ratio (27,500) (16,500) (11,000)
Cash payments P 9,500 P10,500 P 5,000

Multiple Choice Problems
1. c

JJ CC TT Total

Profit ratio 40% 50% 10% 100%

Prior capital (160,000
)

(45,000)


(55,000)


(260,000)


Loss on sale
of inventory 24,000


30,000


6,000


60,000


(136,000
)

(15,000)


(49,000)


(200,000)


2. a
Peter Paul Mary Total

Page 13

Capital balances 300,000 350,00
0

400,000


1,050,00
0

Loss on sale of assets
(475,000 – 600,000) –
4:4:2


( 50,000
)

(50,000
)

(25,000
)

(125,000)


250,000 300,00
0

375,000


925,000

Possible loss for unrealized
assets
P1,000,000 – P600,000 =
400,000

160,000 160,00
0

80,000


400,000


(90,000 140,00
0

295,000


525,000

3. d

4. d AA BB CC
Capital balances

37,000

65,000


48,000

Divided by: Profit and loss
ratio


40%

40%
20%

Loss absorption power
92,500


162,500


240,000

Loss to reduce CC to BB:
(77,500 x .20 = 15,500)


77,500

Balances
92,500


162,500


162,500

Loss to reduce BB & CC to
AA:
(B:70,000 x .40 = 28,000) 70,000
(C:70,000 x .20 = 14,000) 70,000
Balances

92,500
92,500

92,500

Cash of P20,000 after settlement of liabilities: CC receives first
P15,500; remaining P4,500 split 2/3 to BB and 1/3 to CC

5. d Cash of P17,000: CC receives first P15,500; remaining P1,500 split
2/3 to BB and 1/3 to CC.

6. a If all partners received cash after the second sale, then the remaining
12,000 is distributed in the loss ratio.

7. b
A B C

Total
Capital before realization

37,000
65,000

48,000

150,00
0

Loss on sale (2:2:1); [90 – 50]
(16,000)


( 16,000)

( 8,000) (40,000
)


21,000


49,000

40,000 110,00
0

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