Exercise 3 - 8

Rama, Sison and Toledo

Cash Priority Program
PAYMENTS
Rama Sison Toledo Rama Sison Toledo Capital balances P30,000
P70,000 P40,000
Add Loan balances
20,000
20,000
30,000
Total partners interest P50,000 P90,000 P70,000
Profit and
loss ratio
40%
40%
20%
Loss absorption balance
P125,000 P225,000 P350,000
Allocation I Cash to Toledo
reducing LAB to an amount
reported for Sison
(P125,000 x 20%)
(125,000)
P25,000 Balances P125,000 P225,000 P225,000
Allocation II Cash to
Sison & Toledo reducing LAB to an amount
reported for Rama
P100,000 x 40%
(100,000)
P40,000
P100,000 x 20%
(100,000)
20,000 Balances P125,000 P125,000 P125,000 P40,000 P45,000
Allocation III - Further cash
distribution may be made in the
P & L ratio
Exercise 3-9
1.
Cash Priority Program
January 1, 2008

Julian, Lagman and Magno

PAYMENTS
Julian Lagman Magno Julian Lagman Magno Capital
balances before liquidation P 36,000 P 54,000 P18,000
Add
Note payable to Magno
14,000
Total partners interest P
36,000 P 54,000 P 32,000
Profit and loss ratio 3/10 3/10 4/10
Loss absorption balances P120,000 P180,000
(60,000) P80,000
Allocation I Cash to Lagman reducing LAB
to an amount reported for Julian (P60,000 x 3/10)
P18,000
Balances P120,000 P120,000 P80,000
Allocation II
Cash to Julian & Lagman reducing LAB to an amount reported for
Magno (P40,000 x 3/10)
( 40,000)
(40,000)
P12,000

12,000
Balances P80,000 P80,000 P80,000 P12,000 P20,000 Allocation III Further cash distributions may be made in the P
& L ratio

2.
Statement of Liquidation
January to March, 2008

Julian, Lagman and Magno

Other NP to PAYMENTS
Cash Assets Liabilities Magno Julian
Lagman Magno Balances before liquidation P12,000 P146,000
P36,000 P14,000 P36,000 P54,000 P18,000 January:
Sale of assets and dist. Of loss
30,000
( 38,000)
( 2,400)
( 2,400)
( 3,200)
Payment of liquidation expenses
(
3,600)
( 1,080) (1,080
(1,440)
Payment of liabilities ( 36,000) (36,000)
Distribution of cash to partners (sch. 1)
( 2,400)
(2,400)
Balances P108,000 P14,000 P32,520 P48,120 P13,360
February:
Sale of assets and distribution of gain
44,000
(35,000)
2,700
2,700
3,600
Payment of liquidation expenses
(8,400)
(2,520)
(2,520)
(3,360)
Distribution of cash to partners (sch. 2)
(35,600)
(10,000)
(25,600)
Balances P73,000 P14,000 P22,700 P22,700 P13,600
March:
Sale of assets and distribution of loss
36,000
(73,000)
(11,100)
(11,100)
(14,800)
Balances P36,000
P14,000 P11,600 P11,600 P(1,200)
Offset of loan against deficiency
(
1,200)
1,200 Final payment to partners (P36,000)
(P12,800) (P11,600)
(P11,600)
Schedule 1
Installment Liquidation

January 31, 2008

Amount Julian Lagman Mango
Cash available P2,400
Allocation I Payable to Lagman P2,400 P2,400
Schedule 2
Installment Liquidation
February 29, 2008
Amount Julian Lagman Mango
Allocation I Balance
Payable to Lagman
P2,400

Cash available P2,400

P20,000
P10,000
P2,400
10,000
Allocation II Payable to Julian and Lagman
P10,000 P25,600 3. Journal entries
January Cash 30,000
Julian, Capital
2,400
Lagman, Capital 2,400
Magno, Capital 3,200
Other Asset 38,000
Julian, Capital 1,080
Lagman,
Capital 1,080
Magno, Capital 1,440
Cash 3,600
Liabilities 36,000
Cash
36,000
Lagman, Capital
2,400
Cash
2,400
February Cash 44,000
Other assets 35,000
Julian, Capital 2,700
Lagman,
Capital 2,700
Magno, Capital 3,600
Julian, Capital
2,520
Lagman, Capital 2,520
Magno, Capital 3,360
Cash 8,400
Julian. Capital 10,000
Lagman, Capital
25,600
Cash 35,600
March Cash 36,000
Julian,
Capital 11,100
Lagman, Capital 11,100
Magno, Capital 14,800
Other assets 73,000
Note Payable to Magno 1,200
Magno, Capital 1,200
Note Payable to Magno 12,800
Julian, Capital 11,600
Lagman, Capital 11,600
Cash
36,000
Exercise 3 - 10
U, V and W Co.
Cash Priority Program
PAYMENTS
Urbe Villa Waldo Urbe Villa Waldo Capital balances P 11,200
P13,000 P 5,800
Profit and loss ratio
4/7
2/7
1/7
Loss absorption balance P 19,600 P 45,500 P 40,600
Allocation I - Cash to Villa reducing
LAB to an amount reported for
Waldo (P4,900 x 2/7)
(

4,900)

P 1,400
Balances P 19,600 P
II - Cash to Villa & Waldo

40,600 P

40,600

Allocation

reducing LAB to an amount

reported for Urbe
P21,000 x 2/7
( 21,000)
6,000
P21,000 x 1/7
(21,000)
P 3,000 Balances P 19,600 P 19,600 P 19,600 P 7,400 P 3,000
Allocation III - Further cash distribution
may be made in the P & L ratio
2. Book value of assets P 30,000
Loss on realization:
Capital balance of Urbe prior to realization P 11,200
Cash to be received by Urbe
10,000
Share of Urbe in
the loss on realization P
1,200
Fractional share of
Urbe
4/7_
2,100
Cash to be realized of the sale of
assets P 27,900
3. Allocation III - P3,200 ( 4/7 = P5,600
x 1/7 P
800
Allocation II
3,000
Total cash
received by Waldo P 3,800
4. Book value of assets P
30,000
Total cash available
Allocation I
P
1,400
Allocation II - P1,800 - P1,400 = P400 ( 2/3
600
2,000
Loss on liquidation P 28,000