Review Questions for Adv 1 Midterms: AA, BB amp; CC are partners in ABC Partnership and share profits and losses 50%, 30% and 20%, respectively.

Review Questions for Adv 1 Midterms:

1. AA, BB & CC are partners in ABC Partnership and share profits and losses 50%, 30% and 20%, respectively. The partners have agreed to liquidate the partnership and some liquidation expenses are to be incurred. Prior to the liquidation the partnership balance sheet reflects the ff. book values:

Cash

25,200

Non-cash assets

297,600

Notes payable to CC

38,400

Other Liabilities

184,800

AA, Capital

72,000

BB, Capital Deficit

(12,000)

CC, Capital

39,600

Assuming that the actual liquidation expenses are P16,800 and that the non-cash assets with a book value of 240,000 are sold for 216,000, HOW MUCH CASH SHOULD CC RECEIVE?

2. When Mikki and Mylene , partners who share earnings equally, were incapacitated in an airplane accident, a liquidator was appointed to wind up their business. The accounts showed cash, P35,000; other assets P110,000; Liabilities, P20,000; Mikki, Capital P71,000; and Mylene, Capital P54,000. 

Because of highly specialized nature of of the noncash assets, the liquidator anticipated that considerable time would be required to dispose them. The expenses of liquidating the business (advertising, rent, travel etc.) are estimated at P10,000.

How much cash can be distributed safely to each partner at this point?

3. Lucky Co. has filed for liquidation. The following data is available:

Free assets at net realizable value100,000

Liabilities per books (unsecured)160,000

Unrecorded Liabilities:

  Liquidation expenses 6,000

  Unpaid wages with priority claim10,000

What percentage of their claims should the unsecured creditors receive in liquidation?

4. The trustee of Lugi Corp. provided the following data about the company's financial position:

Account

Book Value

Est. Realizable Value

Cash

20,000

20,000

Accounts receivable - net

100,000

75,000

Inventories

150,000

70,000

Plant assets - net

250,000

260,000

Total

520,000

Preferred creditors70,000

Accounts payable - unsecured150,000

Notes Payable - secured by AR100,000

Mortgage payable - secured by all 

Plant Assets200,000

Total520,000

In the event of liquidation,

What is the estimated amount available to unsecured creditors without priority?

What is the estimated deficiency in the payment of creditors?

5. The Near Miss Company has a loan payable with Currency Bank that has an outstanding balance of P240,000 and accrued interest payable of P15,000. Near Miss finds itself nearing bankruptcy and negotiates with Currency Bank to restructure its debt. Currency agrees to accept from Near Miss a storage building having a book value of P200,000 and a fair value of P210,000, which will fully settle the debt. 

How should Near Miss to record the settlement in an entry?