Problem 1-1

Recording investment
Land 50,000
Building 20,000
Ghea Capital 70,000
to record Ghea's original investment

Cash 30,000
Inventories 35,000
Fedi Capital 65,000
to record Fedi's original investment

Goodwill approach is used, then, unidentifiable asset contributed by Fedi is measured on the basis of Ghea's 70,000
investment for a 50% interest.
While identifiable assets = 135,000
Ghea's capital implies to = 140,000
So, there is goodwill = 5,000

Goodwill 5,000
Fedi Capital 5,000
to establish equal capital interests of $70,000 by recognizing Fedi's investment of an $5,000 unidentifiavle asset.

Ghea and Fedi

Balance Sheet, 1 Jan 2017
Assets Liabilities & Equities
Cash 30,000 Ghea capital (40%)
Inventories 35,000 Fedi capital (60%)
Land 50,000
Building 20,000
Goodwill 5,000
140,000

So, Ghea capital is 70,000 and Fedi capital is 70,000

Problem 1-2
Statement of Partners' capital
Ghea capital (40%) Fedi capital (60%)
Balance Jan 1, 2017 70,000 70,000
Add: Ghea investment 10,000
Less: Ghea drawings -20,000
Less: Fedi drawings -9,000
Net contributed capital 60,000 61,000
Net income allocation 43,200 64,800
Capital balances Dec 31, 2017 103,200 125,800
Problem 1-3
Required: capital balance after Jessa is admitted assuming Revaluation approach with final shares of 30:30:40 for
Ghea:Fedi:Jessa
Jessa capital = 150,000
recorded capital + Jessa contribution = 379,000
Jessa's admission value from G&F Jessa contribution
perspective = 151,600 exeed cash investment
Total capital of new partnership = 381,667
So, there is goodwill = 2,667

Cash 150,000
Goodwill 2,667
Jessa capital 152,667
To admit Jessa to a 40% interest in capital profits
with capital alignment
Before Investment plus
admission Goodwill Capital transferred
Ghea 103,200 11,300
Fedi 125,800 -11,300
Jessa 152,667
229,000 152,667 -00

Problem 1-4
Ghea retire. Partnership agrees to pay $200,000 to her. It is recorded using bonus method.
Ghea capital 114,500
Fedi capital 36,643
Jessa capital 48,857
Cash 200,000
to record Ghea's retirement
e basis of Ghea's 70,000

unidentifiavle asset.

abilities & Equities

70,000
70,000

140,000

Total
140,000
10,000
-20,000
-9,000
121,000
108,000
229,000
hares of 30:30:40 for

without capital alignment

Before Investment plus Capital after
Capital after transfer admission Goodwill admission
114,500 30% 103,200 103,200
114,500 30% 125,800 125,800
152,667 40% 152,667 152,667
381,667 229,000 152,667 381,667

Ghea retire. Partnership agrees to pay $200,000 to her. It is recorded using bonus meth
Ghea capital 103,200
Fedi capital 41,486
Jessa capital 55,314
Cash 200,000
to record Ghea's retirement
corded using bonus method.
Problem 1-1
Recording investment
Land 50,000
Building 20,000
Ghea Capital 70,000
to record Ghea's original investment

Cash 30,000
Inventories 35,000
Fedi Capital 65,000
to record Fedi's original investment
Goodwill approach is used, then, unidentifieable asset contributed by Fedi is measured on the basis of Ghea's 70,000
investment for a 50% interest.
While identifiable assets = 135,000
Ghea's capital implies to = 140,000
So, there is goodwill = 5,000

Goodwill 5,000
Fedi Capital 5,000
to establish equal capital interests of $70,000 by recognizing Fedi's investment of an $5,000 unidentifiavle asset.

Ghea and Fedi

Balance Sheet, 1 Jan 2017
Assets Liabilities & Equities
Cash 30,000 Ghea capital (40%)
Inventories 35,000 Fedi capital (60%)
Land 50,000
Building 20,000
Goodwill 5,000
140,000

So, Ghea capital is 70,000 and Fedi capital is 70,000

Problem 1-2
Statement of Partners' capital
Ghea capital (40%) Fedi capital (60%)
Balance Jan 1, 2017 70,000 70,000
Add: Ghea investment 10,000
Less: Ghea drawings -40,000
Less: Fedi drawings -9,000
Net contributed capital 40,000 61,000
Net income allocation 43,200 64,800
Capital balances Dec 31, 2017 83,200 125,800

Problem 1-3
Required: capital balance after Jessa is admitted assuming Revaluation approach with final shares of 30:30:40 for
Ghea:Fedi:Jessa
Jessa capital = 150,000
recorded capital + Jessa contribu = 359,000

Jessa's admission value from Jessa contribution

G&F perspective = 143,600 less cash investment

Total capital of new partnership = 375,000

So, there is goodwill = 16,000

Cash 150,000
Jessa capital 150,000
To admit Jessa to a 40% interest in capital profits
Goodwill 16,000
Ghea capital 6,400
Fedi capital 9,600
to revalue the partnership according to Jessa's investment

Before admission Investment by Ghea Revaluation

Ghea 83,200 6,400
Fedi 125,800 9,600
Jessa 150,000
209,000 150,000 16,000

Problem 1-4
Ghea retire. Partnership agrees to pay $200,000 to her. It is recorded using bonus method.
Ghea capital 112,500
Fedi capital 37,500
Jessa capital 50,000
Cash 200,000
to record Ghea's retirement
d on the basis of Ghea's 70,000

5,000 unidentifiavle asset.

Liabilities & Equities

70,000
70,000

140,000

Total
140,000
10,000
-40,000
-9,000
101,000
108,000
209,000
final shares of 30:30:40 for

Capital before transfer Capital after transfer

89,600 112,500 30%
135,400 112,500 30%
150,000 150,000 40%
375,000 375,000
Problem 2-1

HRI Partnership
Income allocation schedule
Net loss (210,000- Hanif (20%) Rama (40%) Iqbal (40%)
300,000) -90,000
Salary allowance for
Partners -30,000 15,000 15,000
Remainder to divide -120,000
Divided 20:40:40 120,000 -24,000 -48,000 -48,000
Net loss allocation -24,000 -33,000 -33,000

Closing entries
Revenue 210,000
Hanif capital 24,000
Rama capital 33,000
Iqbal capital 33,000
Expenses 300,000
to record partnership income allocation

Problem 2-2
Vulnerability rank Rank
Hanif capital =(160,000-24,000)/0.2 = 680,000 3
Rama capital =(220,000-33,000)/0.4 = 467,500 2
Iqbal capital =(200,000-33,000)/0.4 = 417,500 1

Hanif, Rama, Iqbal Schedule of Absorption

Hanif (20%) Rama (40%) Iqbal (40%) Total
Preliquidation equities 136,000 187,000 167,000 490,000
Assumed loss to absorb
Iqbal's capital (allocated
20:40:40) -83,500 -167,000 -167,000 -417,500
Balances 52,500 20,000 -00 72,500
Assumed loss to absorb
Rama capital (allocated
relative 20:40) -10,000 -20,000 -30,000
Balances 42,500 -00 -00 42,500

Hanif, Rama, Iqbal Distribution Plan

Priority Liability Hanif Rama Iqbal
First $110,000 100%
Next 42,500 100%
Next 30,000 33% 67%
Remainder 20% 40% 40%
Promblem 2-3
Hanif, Rama, Iqbal Cash distribution Schedule
January 8, 2018
Cash distributed Priority Liabilities Hanif capital Rama capital
First Installment
Priority creditors 110,000 110,000
Hanif capital 42,500 42,500
Hanif & Rama capital 30,000 10,000 20,000
Hanif & Rama & Iqbal 17,500 3,500 7,000
200,000 110,000 56,000 27,000
Total

30,000

-120,000
-90,000
Iqbal capital

7,000
7,000
 Problem 3

Given
Berwyn Ltd which operated under chapter 11 of bankruptcy act release its balance sheet as follows:
August 1, 2014
Cash and Equivalents $275
Account Receivables 200
Inventories 250
Land 300
Buildings – Net 350
Equipment – Net 300
Total Assets $1,675
Liabilities subject to compromise $1,500
Account Payable 200
Wages Payable 100
Bond Payable 400
Interest Payable 100
Total Liabilities $2,300
Common Stock $900
Deficit -1,525
Total Liabilities and Equities $1,675

Problem 3-1
Summary of proposed capital structure from reorganization plan
Post-petition liabilities 800
Taxes payable 100
12% senior debt bond 150
Senior debt bond - cash 50
Subordinate debts 300
Common stock 650
Reorganization value 2,050

Post petition liabilities 800

Liabilities subject to compromise 1,500
Total of Liabilities prior confirmation 2,300
Reorganization value -2,050
Excess liabilities over reorganization value 250

Problem 3-2
Condition 1 postpetition liabilities+liabilities subject to compromise > reorganizati
Condition 2 old shareholder receives less than 50% new common stock from eme
ompromise > reorganization value =2,300>2,050 V
common stock from emerging company =250/650 = 38% V
Problem 4
Given
Below is the Account Balance in the trustee record during the liquidation process of Dyas Corporation:
Debit Credit
Cash 100,000
Accounts payable 50,000
Utilities payable – new 18,000
Legal and accounting fee payable – new 19,500
Note payable – bank (unsecured) 10,500
Note payable – suppliers 27,000
Estate Equity 25,000
$125,000 $125,000

Problem 4-1
1st rank = secured claim holders
2nd rank = unsecured prioty claims Legal & accounting fee = 19,500

3rd rank = unsecured non-priority claims

Accounts payable = 50,000
Utilities payable – new = 18,000
Note payable – bank (unsecured) = 10,500
Note payable – suppliers = 27,000
105,500
Legal and accounting fee payable – new 19,500
Cash 19,500
to pay prioritized claim of legal & accounting fee

Allocation of remaining cash subject to non-prioritized claims disbursement

remaining cash
Accounts payable
Utilities payable – new
Note payable – bank (unsecured)
Note payable – suppliers
= 80,500
= 38,152
= 13,735
= 8,012
= 20,602

Accounts payable 38,152

Utilities payable – new 13,735
Note payable – bank (unsecured) 8,012
Note payable – suppliers 20,602
Cash 80,500

Problem 4-2
Accounts payable 11,848
Utilities payable – new 4,265
Note payable – bank (unsecured) 2,488
Note payable – suppliers 6,398
Estate Equity 25,000
to wind up the case
[paid 100%]
Problem 5
Assets Liabilities & Equities
Cash 70,000 Accounts payable 42,000
Inventory 60,000 Notes payable 68,000
Loan to Nabila 10,000 Hulk, capital(20%) 30,000
Loan to Falcon 18,000 Thor, capital(20%) 32,000
Plant assets-net 80,000 Falcon, capital(60%) 66,000
Total assets 238,000 Total liab./equity 238,000

Avenger Partnerhip
Statement of Partnership Liquidation
Priority 60%
Cash Noncash Assets Liabilties 20% Hulk 20% Thor Falcon
Balance, 30/11/2014 70,000 168,000 110,000 30,000 32,000 66,000
Offset Loan to Nabila -10,000 -10,000
Offset Loan to Natasha -18,000 -18,000
Selling inventory 70,000 -60,000 2,000 2,000 6,000
Selling plant assets 34,000 -60,000 -5,200 -5,200 -15,600
Predistribution balance 174,000 20,000 110,000 16,800 28,800 38,400
Distribution
Creditors -110,000 -110,000
Partners -64,000 -12,800 -24,800 -26,400
Balance, 1/12/2014 -00 20,000 -00 4,000 4,000 12,000

20% 20% 60%

Safepayments Schedule Nabila Nadhira Natasha
Partners equity 16,800 28,800 38,400
Possible losses of assets 20,000 -4,000 -4,000 -12,000
12,800 24,800 26,400
Phase out schedule of the partnership
Steven (30%) Sheila (40%) Gaby (30%)
Capital Balance 20,000 - 120,000 70,000
Creditor's Recovery 30,000 110
20,000 - 90,000 70,000 50
Partnership recovery from Sheila 20,000
20,000 - 70,000 70,000
Write off Sheila's deficit - 35,000 70,000 - 35,000
- 15,000 - 35,000
Partnership Recovery from Steven 10,000
- 5,000 - 35,000
Write off Steven's deficit 5,000 - 5,000
- - 30,000 Distributed to Gaby