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:
Notes payable to CC
BB, Capital Deficit
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
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:
Est. Realizable Value
Accounts receivable – net
Plant assets – net
Accounts payable – unsecured150,000
Notes Payable – secured by AR100,000
Mortgage payable – secured by all
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?
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