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Assignment Answer

The 3T Partnership is liquidating and distributing assets and capital to partners Tik, Tak, and Toe in a 4:4:2 ratio. Upon liquidating other assets for $700,000, distributing cash and paying liabilities, there is a deficiency in Tik and Tak's capital accounts of $90,000 and $160,000 respectively. Tik and Tak contribute additional cash of $250,000 total which is used to clear their deficiencies and make a second distribution of cash to the partners.

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394 views2 pages

Assignment Answer

The 3T Partnership is liquidating and distributing assets and capital to partners Tik, Tak, and Toe in a 4:4:2 ratio. Upon liquidating other assets for $700,000, distributing cash and paying liabilities, there is a deficiency in Tik and Tak's capital accounts of $90,000 and $160,000 respectively. Tik and Tak contribute additional cash of $250,000 total which is used to clear their deficiencies and make a second distribution of cash to the partners.

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Mims Chiii
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A.

Tik, Tak and Toe, who share profits and losses in the ratio of 4:4:2, respectively, decide to
liquidate their partnership on December 31, 2019. The condensed statement of financial position
is presented below just prior to liquidation.

3T Partnership
Statement of Financial Position
December 31, 2019
ASSETS LIABILITIES AND EQUITY
Cash P 40,000 Liabilities P 224,000
Other Assets 680,000 Tak, Loan 10,000
Toe, Loan 16,000
Tik, Capital 190,000
Tak, Capital 120,000
Toe, Capital 160,000

Total Assets P 720,000 Total Liabilities and Equity P 720,000

Instruction: Prepare a statement of Liquidation and the required journal entries for each of the following cases and supporting schedule of cash distribution, if
necessary assuming cash is immediately distributed to the proper parties. Assume also that the deficient partner/s will invest cash which is then distributed as
second payment to the proper parties.

Case A P 700,000 Case C P 370,000 Case E P 250,000


Case B 500,000 Case D 340,000 Case F 180,000
CASE A: The other assets were sold for P 700,000. Additional cash investment of deficient partner is considered as second cash
distribution to partners requiring a schedule to accompany the statement of liquidation to determine amounts paid to proper parties.

Tik, Tak and Toe


Statement of Liquidation
December 31, 2019

Other Loan Capital


Cash Assets Liabilities Tak Toe Tik Tak Toe
Profit and loss ratio 4 4 2
Balances before liquidation 40,000 680,000 224,000 10,000 16,000 190,000 120,000 160,000
Realization and distribution of loss 700,000 (680,000) (280,000) (280,000) (140,000)
Balances 740,000 224,000 10,000 16,000 (90,000) (160,000) 20,000
Payment of liabilities (224,000) (224,000)
Balances 516,000 10,000 16,000 (90,000) (160,000) 20,000
Payment to partners (see schedule) (516,000) (16,000) (20,000)
Balances - (90,000) (160,000)
Additional investment of Tik & Tak 250,000 90,000 160,000 (250,000)
Balances 250,000
Payment to partners 250,000 (1,600) (800)

King, Jolly and Donald


Schedule To Accompany Statement of Liquidation
October 1-31, 2019

Tik Tak Toe


Capital balances (P 90,000) (P 160,000) P 20,000
Add: loan balances 16,000
Total partners’ Interest (P 90,000) (P 160,000) P 36,000
Restricted interests – possible loss to P 2,400 to King and
Donald in the ratio of 4:2 if Jolly fails to pay his deficiency (P 90,000) (P 160,000) (800)
Free interest – amount to be paid to partner P 20,000 P 42,400

Payment to apply on:


Loan P 6,400
Capital P 20,000 36,000
Cash settlement P 20,000 P 42,400

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