9404 - Partnership Liquidation

CPA REVIEW SCHOOL OF THE PHILIPPINES
Manila
ADVANCED FINANCIAL ACCOUNTIN GERMAN/VALIX

PARTNERSHIP LIQUIDATION
Part I: Theory of Accounts
1. It refers to the process of converting the non-cash assets of the partnership and distributing the total
cash to the creditors and the remainder to the partners.
A. Dissolution
B. Termination
C. Liquidation
D. Operation
2. In the liquidation of general partnership, which of the following credits shall be paid first?
A. Those owing to third persons.
B. Those owing to partners other than capital and profits.
C. Those owing to partners for their capital contribution.
D. Those owing to partners for their share in profits.
3. When a partner's capital account shows a debit balance and the said partner has a loan account, this
law permits him to use his loan to make up for his deficiency. What legal doctrine permits this
law?
A. Right to realization
B. Right to termination
C. Right to equalization
D. Right to offset
4. What is the nature of liability of general partners as to partnership debts or obligations?

A. They are liable equally up to the extent of their separate assets after the partnership assets are
exhausted.
B. They are liable pro-rata up to the extent of their separate assets after the partnership assets are
exhausted.
C. They are liable pro-rata up to the extent of their capital contribution only.
D. They are liable solidarily up to the extent of their separate assets after the partnership assets are
exhausted.
5. It is the loss where in the book value of the unrealized non-cash assets and cash withheld for future
liquidation are combined.
A. Loss absorption potential
B. Loss on realization
C. Maximum possible loss
D. Liquidation loss
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Page 2
Part II: Problem Solving
1. On December 31, 2024, the Statement of Financial Position of ABC Partnership with profit or loss
ratio of 6:1:3 of partners A, B and C respectively, revealed the following data:
Cash 1,000,000 Other Liabilities 2,000,000

Receivable from A 500,000 Payable to B 1,000,000
Other noncash assets 2,000,000 Payable to C 100,000
A, Capital 700,000
B, Capital (650,000)
C, Capital 350,000
On January 1, 2025, the partners decided to liquidate the partnership. All partners are legally
declared to be personally solvent. The other noncash assets were sold for P1,500,000. Liquidation
expenses amounting to P100,000 were incurred.
1. How much cash was received by B at the end of partnership liquidation?

A. 250,000
B. 150,000
C. 290,000
D. 270,000
2. How much cash was received by C at the end of partnership liquidation?

A. 270,000
B. 150,000
C. 350,000
D. 220,000
2. On December 31, 2024, the Statement of Financial Position of ABC Partnership with profit or loss
ratio of 5:3:2 of respective partners A, B and C. showed the following information:
Cash 1,600,000 Total Liabilities 2,000,000
Noncash assets 1,400,000 A, Capital 100,000
B, Capital 500,000
C, Capital 400,000
On January 1, 2025, the partners decided to liquidate the partnership in installment.
As of January 31, 2025, the following transactions occurred:

 Noncash assets with a carrying amount P800,000 were sold for P500,000.
 Liquidation expenses for the month of January amounting to P80,000 were paid.
 It is estimated that liquidation expenses amounting to P20,000 will be incurred for the month of
February, 2025.
 30% of the liabilities to third persons were settled.
 Available cash was distributed to the partners.
As of February 28, 2025, the following transactions occurred:
 Remaining noncash assets were sold at a gain of P250,000.
 The final liquidation expenses for the month of February amounted to P40,000.
 The remaining liabilities to third persons were settled.
 Remaining cash was finally distributed to the partners.
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Page 3
1. What is the amount of cash received by partner C on January 31, 2025?

A. 40,000
B. 200,000
C. 20,000
D. 0
2. What is the share of B in the maximum possible loss on January 31, 2025?
A. 186,000
B. 420,000
C. 180,000
D. 435,000
3. What is the amount of total cash withheld on January 31, 2025?

A. 50,000
B. 1,400,000
C. 1,750,000
D. 1,420,000
4. What is the amount of cash received by partner A on February 28, 2025?

A. 0
B. 25,000
C. 15,000
D. 205,000
3. A, B, and C are partners who share profits and losses as follows: A 35%, B 25%, and C 40%. The
Statement of Financial Position of the partnership as of December 31, 2023 is given below:
ABC Company
Statement of Financial Position
As of December 31, 2023
Cash 40,000 Liabilities 90,000

Non-Cash 550,000 Loan from B 10,000
A, Capital 163,500
B, Capital 117,500
________ C, Capital 209,000
Total 590,000 Total 590,000
On January 1, 2024, the partners decided to liquidate. For the month of January, assets with book
value of P101,290 were sold. At the end of January, payment to partners A, B, and C were P750,
P11,250, and P23,000 respectively. Cash withheld for possible liquidation expenses and
unrecognized liabilities amounted to P6,290.
What is the amount of cash realized from the sale of the non-cash assets?
A. 91,290
B. 95,000
C. 141,290
D. 0
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Page 4
4. After a long dispute, A, B, and C decided to liquidate their partnership. Their total interests as of
January 1, 2025 are:
A (25%) 375,000 B (40%) 450,000 C (35%) 280,000
Partnership’s total assets include cash of P125,000, receivable from A amounting to P25,000, and a
non-cash asset. Total liabilities of P340,000 including a loan from C in the amount of P20,000. At
the end of liquidation, B received P75,000.
1. What is the amount of the total book value of the noncash assets?
A. 1,300,000
B. 1,250,000
C. 1,280,000
D. 1,295,000
2. What is the amount realized for sale of the non-cash assets?

A. 405,625
B. 362,500
C. 410,625
D. 312,500
3. What is the amount received by A at the end of liquidation?

A. 152,656
B. 140,625
C. 164,688
D. 375,000
5. ABC Company is entering into liquidation and you are given the following account balances:
Assets Liabilities and Capital

Cash 155,000 Liabilities 220,000
Non-Cash 1,350,000 Loan from C 30,000
A, Capital (20%) 255,000
B, Capital (20%) 325,000
________ C, Capital (60%) 675,000
Total 1,505,000 Total 1,505000
During, September, noncash assets with a book value 375,000 were sold for 320,000. ABC
Company paid 35,000 for the liquidation expenses it incurred and it also paid half of its liabilities
to outside creditors. Creditors whose account balances amount to 30,000 decided to condone ABC
Company’s liabilities. Cash withheld for future liquidation expenses were P10,000.
1. What is the amount of the share of A in the maximum possible loss?

A. 272,000
B. 195,000
C. 197,000
D. 193,000
2. What is the capital balance of C after the first installment?

A. 591,000
B. 573,000
C. 624,000
D. 627,000
END 9404

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CPA REVIEW SCHOOL OF THE PHILIPPINES

ADVANCED FINANCIAL ACCOUNTIN GERMAN/VALIX

Part I: Theory of Accounts

4. What is the nature of liability of general partners as to partnership debts or obligations?

Part II: Problem Solving

Cash 1,000,000 Other Liabilities 2,000,000

1. How much cash was received by B at the end of partnership liquidation?

2. How much cash was received by C at the end of partnership liquidation?

As of January 31, 2025, the following transactions occurred:

1. What is the amount of cash received by partner C on January 31, 2025?

3. What is the amount of total cash withheld on January 31, 2025?

4. What is the amount of cash received by partner A on February 28, 2025?

Cash 40,000 Liabilities 90,000

A (25%) 375,000 B (40%) 450,000 C (35%) 280,000

2. What is the amount realized for sale of the non-cash assets?

3. What is the amount received by A at the end of liquidation?

Assets Liabilities and Capital

1. What is the amount of the share of A in the maximum possible loss?

2. What is the capital balance of C after the first installment?

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