Name: __________________________________

Date:____________________________________
Last name First name M.I.
Program: ______________ Yr. level: _______________ Section: _______________

Quiz 4: Partnership Liquidation

Instruction: Write the letter of the correct answer in the answer sheet below:

Answer Sheet:
Part 1 Theories (1 point) Part 2 Problems (2 points)
1. 6. 1. 6.
2. 7. 2. 7.
3. 8. 3. 8.
4. 9. 4. 9.
5. 10. 5. 10.

Part 1 Theories:
1: Method of partnership liquidation where assets are sold off gradually rather than all at once, and the available
cash is distributed to creditors and partners step by step.
a. Lump sum method
b. Schedule of safe payments
c. Installment Liquidation
d. Bonus method

2: Arrange the following steps in partnership liquidation in chronological order.

I. Settlement of Liabilities
II. Distribution to partners
III. Realization of Non-cash Assets
a. I, II, III
b. III, II, I
c. III, I, II
d. II, III, I

3. In partnership liquidation who shall be paid first?

a. Liquidation expense
b. Salaries
c. Taxes
d. Creditors

4. Who shall be the priority with regards to the personal assets of the partners?
a. Partnership creditor
b. Co-partners with regards to their contribution
c. Personal creditors
d. Salaries of the partnership employees

5. A simple partnership liquidation requires

a. Periodic payments to creditors and partners determined by a safe payments schedule
b. Partnership assets to be converted into cash with full payment made to all outside creditors before remaining
cash is distributed to partners in a lump sum payment
c. Only creditors to be paid in an orderly manner
d. Periodic payments to partners as cash becomes available

6. The following is the priority sequence in which liquidation proceeds will be distributed for a partnership a.
Partnership drawings, partnership liabilities, partnership loans, partnership capital balances
b. Partnership liabilities, partnership loans, partnership capital balances
c. Partnership liabilities, partnership loans, partnership drawings, partnership capital balances
d. Partnership liabilities, partnership capital balances, partnership loans

7. 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

8. X and Y are partners of XY Partnership which is undergoing liquidation. After XY Partnership's assets were
realized and its liabilities settled, X's capital account has a negative balance. Which of the following statements is
correct?
a. Y shall absorb X's capital deficiency if X is solvent
b. X shall make an additional contribution if X is insolvent
C. X and Y shall make pro rata contributions to eliminate X's capital deficiency
d. Y shall absorb X's capital deficiency if X is insolvent
10. If a partner with a debit capital balance during liquidation is personally solvent, the
a. Partner must invest additional assets in the partnership
b. Partner's debit balance will be allocated to the other partners
c. Other partners will give the partner enough cash to absorb the debit balance
d. Partnership will loan the partner enough cash to absorb the debit balance

Part 2: Problems

Use the following information for questions 1- 4

X and Y, who share in profits and losses in the ratio of 3:7, decided to liquidate their XY Partnership. The partner's
capital balances were P300,000 and P190,000, respectively.

[Link] all partnership assets and liabilities are realized and settled at their carrying amounts, how much will Y receive
from the liquidation?
a.P300,000 b. P190,000
c. P120,000 d. PO

2. Refer to question 1: The partnership has total liabilities of P200,000. If all partnership assets are realized for
P500,000, how much will X receive from the liquidation?
a. P243,000 b. P57,000
c. P300,000 d. P133,000

3. If after all partnership assets are realized and all liabilities are settled the partnership has remaining cash of
P120,000, how much will Y receive from the liquidation?
a. P189,000 b. P120,000
c. P69,000 d. PO

4. If on the final settlement of the partners' claims Y received P99,000, how much did X receive?
a. P261,000 b. P234,000
c. P89,000 d. PO

5. The balance sheet for the X, Y and Z Partnership is as follows. Figures shown parenthetically reflect agreed profit
and loss sharing percentages.

If the firm, as shown on the balance sheet, is dissolved and liquidated by selling assets in installments and if the first
sale of noncash assets having a book value of P90,000 realizes P50,000 and all cash available after settlement with
creditors is distributed, the respective partners would receive (to the nearest peso):
X Y Z
A 8,000 8,000 4,000
B 6,667 6,667 6,667
C 0 13,333 6,667
D 0 3,000 17,000

6. W, X, and Y are partners sharing profits and losses in the ratio of [Link], respectively. The condensed balance
sheet of Heidi Partnership as of December 31, 20x5 is:
Cash........... P 50,000
Other assets...... 130,000
Total assets..... P180.000

Liabilities......... P 40,000
W, capital........... 60.000
X, capital 40.000
Y, capital 40.000
Total liabilities and capital P180.000

Assume instead that the Heidi Partnership is dissolved and liquidated by installments, and the first realization of
P40,000 cash is on the sale of other assets with book value of P80,000. After the payment of liabilities, the available
cash shall be distributed to W, X, and Y, respectively, as follows:
a. P36,000: P27,000; and, P27,000
b. P44,000: P28,000; and, P28,000
c. P16,000; P12,000; and, P12,000
d. P24,000; P13,000; and, P13.000
7. The partners of the M&N Partnership started liquidating their business on July 1, 20x5, at which time the partners
were sharing profits and losses 40% to M and 60% to N. The balance sheet of the partnership appeared as follows:
Assets
Cash.......................................P 8,800
Receivable...............................22,400
Inventory……………………….39,400
Equipment……………….......P65,200
Accumulated depreciation….(30,800)
Total....................................P105,000

Liabilities & Equity

Accounts payable................................ P 32,400
M, capital.............................................. P31,000
M, drawing…………………………………(5,400)
N, capital...............................................P33,200
N, drawing..................................................(200)
Total.....................................................P105,000

During the month of July, the partners collected P600 of the receivables with no loss. The partners also sold during
the month the entire inventory on which they realized a total of P32,400. How much of the cash was paid to M's
capital on July 31, 20x5?
a. P25,600 b. 5,400
c. P320 d. 0

8. Larry, Marsha, and Natalie are partners in a company that is being liquidated. They share profits and losses 55
percent, 20 percent, and 25 percent, respectively. When the liquidation begins they have capital account balances
of P108,000, P62,000, and P56,000, respectively. The partnership just sold equipment with a historical cost and
accumulated depreciation of P25,000 and P18,000, respectively for P10,000. What is the balance in Marsha's
capital account after the transaction is completed?
a. P62,000
b. P61,400
c. P62,600
d. P65,000

9. Donald, Marion, and Jeff are liquidating their partnership. At the date the liquidation begins Donald, Marion, and
Jeff have capital account balances of P147,000, P260,000, and P285,000, respectively and the partners share
profits and losses 35%, 25%, and 40%, respectively. In addition, the partnership has a P28,000 Notes Payable to
Donald and a P15,000 Notes Receivable from Jeff. When the liquidation begins, what is the loss absorption power
with respect to Donald?
a. P 80,000 b. P340,000
c. P420,000 d. P500,000

10. Silverio. Domingo, Reyes, and Pastor are partners, sharing earnings in the ratio of 3/21, 4/21,6/21 and 8/21,
respectively. The balances of their capital accounts on December 31, 20x5 are as follows:
Silverio...............................P 1,000
Domingo............................. 25,000
Reyes………………………. 25,000
Pastor…………………………9,000
P60,000
The partners decide to liquidate, and they accordingly convert the non- cash assets into P23,200 of cash. After
paying the liabilities amounting to P3,000, they have P22,200 to divide. Assume that a debit balance in any partner's
capital is uncollectible. After the P22,200 was divided, the capita! balance of Domingo was:
a.P3,200
b. 3,920
c. P 4,500
d.17,800