ADVANCED ACCOUNTING PART 1

QUIZZES
QUIZ 1 = Partnership Liquidation Lump sum
Problem A = The partnership of JAMES, WADE and ALLEN decided to liquidate their partnership on
May 31, 2014. Before liquidating and sharing of net income, their capital balances are as follows:
JAMES (30%) P875,000, WADE (30%) P630,000, and ALLEN (40%) P770,000. Net income from
January 1 to May 31 is P420,000. Liabilities of the partnership is amounted to P950,000 and its total
assets include cash amounting to P250,000. Unsettled liabilities are P285,000. JAMES invested
additional cash enough to settle their partnerships indebtedness.
WADE is personally solvent, while ALLEN is personally insolvent, and JAMES becomes insolvent after
investing the cash needed by the partnership.
Payments made to liquidate the partnership:
Legal and accounting fees P50,000
Cost incurred to dispose assets P25,000
General and administrative expenses P40,000
Representation expenses P10,000
Determine the following:
1. How much were the partnerships non-cash sold for?
2. How much will JAMES receive as a result of their liquidation?
Problem B = A balance sheet for the partnership of JAMES, WADE and BOSH, who share profits in the
ratio of 2:1:1, shows the following balances just before liquidation:
Cash
Other assets

120,000
595,000

Liabilities
JAMES, Capital
WADE, Capital
BOSH, Capital

200,000
220,000
155,000
140,000

On the first month of the liquidation, assets with a book value of P380,000 are sold for P345,000.
Liquidation expenses of P10,000 are paid, and additional liquidation expenses are anticipated. Liabilities
are paid amounting P74,000, and sufficient cash is retained to insure the payment to creditors before
making payments to partners. On the first payment to partners, WADE receives P82,500.
Determine the following:
3. The total cash distributed to the partners in the first installment is:
4. The amount of cash withheld for anticipation liquidation expenses and unpaid liabilities is:
5. Continuing Problem B = If the remaining book value of other assets was sold for P175,000 and
payment for unpaid liabilities and liquidation expenses were made. How much liquidation expenses
was paid, if JAMES received P80,000 in the final settlement?
Problem C = Miami Heat Partnership had the following condensed financial position prior to liquidation:
Assets
Liabilities and Capital
Cash
588,000 Liabilities
328,000
Noncash assets
2,880,000 Loan payable to James
180,000
James, Capital (25%)
776,000
Wade, Capital (40%)
1,320,000
Bosh, Capital (35%)
864,000
Total
3,468,000 Total
3,468,000
Assuming non-cash assets with a book value of P1,360,000 were sold for P1,660,000 and that all
available cash was distributed.
6. Which of the following statements is FALSE for Partner James to receive a total of P704,000 cash
after liquidation?
a. The proceeds from the sale of the remaining non-cash assets is amounted to P212,000.
b. The loss on realization on the sale of the remaining non-cash assets amount to P1,308,000.
c. Partner Wade will receive the amount of P84,800 on the final distribution of cash.
d. Partner Bosh will receive a total of P532,000 cash after liquidation.

7. As of the first installment, how much cash received by James as recovery from his capital?
8. How much is the total cash received by partner Wade as recovery of his interest from the
partnership?
9. How much cash received by James in the second and final installment?
Problem D = Assume James, Wade, Bosh and Cole are partners sharing profits 40%; 20%;20%;20%,
respectively. On January 1, 2014, they agreed to liquidate. A balance sheet prepared on this date is
shown as follows:

Additional information:
a. Part of the non-cash assets are receivables from Wade and Bosh amounted to P75,000 and
P50,000, respectively.
b. Part of the liabilities are salaries payable to James and Cole amounted P35,000 and P25,000,
respectively.
The results of liquidation are summarized below:

Requirements:
10. How much is the total cash distributed to partners for the month of January?
11. On month of January, what if the cash withheld for anticipation of liquidating expenses is P25,000,
how much is the total possible loss by end of January?
12. How much is the total payment made to partners for the month of February?
13. How much is the cash received by James for the cash payment made to partners for the month of
March?
14. How much is the cash received by Cole for the cash payment made to partners for the month of
April?
15. How much is the total cash receive by each partner as settlement of their interest under the
agreement that no partner is obliged to make additional investment for possible deficiencies?
16. How much is the total loss on realization?
Problem E = On December 31, 2015, Go Your Own Way partners J, A and C have capital balances of
P252,000, P368,000 and P305,000, respectively. The partnership has P275,000 liabilities and cash of
P200,000. On May 1, 2016, the partnership decided to liquidate. Its net income from January to May 1,
amounted to P348,000. Its profit/loss distribution agreement calls for annual salaries of P134,400,
P158,400, and P115,200 for J, A, and C, respectively. Any remainder will be distributed as follows: 25%
to J, 25% to A, and 50% to C.
Part of partners agreement, salaries given to partners are treated as expenses and salaries are accrue
quarterly. The salaries for the first quarter of 2016 were credited to salaries payable. The partnerships
cash as of this date amounted to P250,000, the non-cash assets includes loans receivable from A
amounted to P20,000 and its total liabilities amounted to P477,000, including salaries payable to
partners.

During June, noncash assets with a book value of P500,000 were sold for a certain amount. The
partnership paid P75,000 of its liabilities to outside creditors. Liquidating expenses amounting to
P35,800 were paid and cash will be withheld for the payment of its remaining liabilities to outsiders and
anticipated future liquidating expenses amounted P25,000.
Determine the following:
17. How much were the noncash assets sold for in order for A to receive the amount priority to her and
an additional P15,000?
18. How much is the total possible loss for the month of June, after sales of noncash assets?
Continuation: During July, noncash assets were sold for P462,000 resulting to a loss of P18,000.
Remaining liabilities to outsider were paid and P462,000 were distributed to the partners. A total of 5,000
were paid for liquidation expenses and cash withheld for future liquidating expenses.
Determine the following:
19. What is Js capital balance after the second cash distribution?
20. What is Cs share in the maximum possible loss after the July sale of noncash assets?

Quiz 2 - Corporate Liquidation

Problem A = The Cant Make It Corporation is undergoing liquidation and has the following condensed
statement of financial position as of January 1, 2016:
Assets
Cash
Receivables (net)
Inventory
Prepaid expenses
Building (net)
Goodwill
Total assets

Liabilities and Stockholders Equity

Salaries payable
P50,000
Accounts payable
108,500
Mortgage payable
400,000
Loan payable
220,000
Note Payable
80,000
Ordinary shares
120,000
Retained earnings deficit
(41,000)
P937,500 Total Liabilities and SHE
P937,500
P114,200
340,800
80,000
2,500
345,000
55,000

The mortgage payable is secured by the building having a realizable value of P360,000. Accounts
payable amounting to P60,000 is secured by the receivables amounting to P85,200 which is collectible in
the amount of P68,160. The balance in the book value of the receivables which has a realizable value of
P235,000 is used to secure the loan payable. The inventory has a realizable value of P53,000. In
addition to the recorded liabilities are accrued interest on mortgage payable amounting to P4,000,
liquidation expenses amounting to P9,500 and taxes amounting to P4,000. (Use two decimal places for
the recovery percentage)
Determine the following:
1. Which of the following statements is wrong?
a. The estimated deficiency to unsecured creditors is P45,640.
b. Payment to partially secured creditors is P392,358.
c. Payment to unsecured creditors without priority is P94,499.
d. Estimated loss on assets realization is P107,140.
2. How much is the total cash received of creditors whose claims are equal to 100%?
3. How much is the total cash received of creditors whose claims are less than 100%?
Problem B = The following information are related to Let Me Go Corporation which is undergoing
liquidation:
a. Bonds payable amounting to P73,600 is secured by Merchandise Inventory with book value of
P123,000 and net realizable value of 2/3 of the recorded amount.
b. Of the P195,600 accounts payable, P55,000 is secured by equipment with a carrying amount of
P76,800 which is 70% realizable.
c. Building with a carrying amount of P129,000 has a net realizable value of P99,000.
d. Other unrecorded liabilities are accrued interest payable on bonds, P3,100; salaries payable,
P17,400; taxes payable, P11,600; and trustees fee, P8,500.
e. Cash available prior to liquidation amounts to P11,900.

f.

Total assets of Let Me Go Corporation presented in the statement of financial position prior to
liquidation amount s to P480,000, except for prepaid expenses and goodwill with recorded
amounts of P7,600 and P22,000, respectively, remaining assets other than those whose
realizable values were mentioned above have a realizable value of 60% of the recorded amount.
g. Total liabilities of Let Me Go Corporation presented in the statement of financial position prior to
liquidation amounts to P380,000.
Required:
4. How much is the estimated deficiency to unsecured liabilities?
Problem C = The following information is taken from the statement of affairs of the Solvent Corporation:
Assets pledged with fully secured creditors (current fair value, P166,000)
208,000
Assets pledged with partially secured creditors (current fair value, P112,000)
144,000
Free assets (current fair value, P104,000)
124,000
Liabilities with priority
26,000
Fully secured creditors
76,000
Partially secured creditors
136,000
Unsecured creditors
276,000
Determine the following:
5. Determine the estimated amount to be paid to fully secured creditors:
6. Determine the estimated amount to be paid to unsecured creditor with priority:
7. Determine the estimated amount to be paid to partially secured creditors:
8. Determine the estimated amount to be paid to unsecured creditors without priority:
Problem D = Alice Company has had severe financial difficulties and is considering the possibility of
liquidation. At this time, the company has the following assets (stated at net realizable value) liabilities.
Assets (pledged against debts of P70,000)
Assets (pledged against debts of P120,000)
Other assets
Liabilities with priority
Unsecured creditors

P116,000
75,000
76,500
42,000
200,000

Required:
9. In liquidation, what percentage of their claims is the partially secured creditor likely to get?
Problem E = I Go Now Corporation is undergoing liquidation. The trusted of I Go Now Corporation
presented the following information: Assets amounting to P125,000 are available to unsecured liabilities
without priority. Assets amounting to P110,000 represents assets originally not pledged to any liabilities.
Unpaid liabilities are as follows: administrative expenses, P21,000; taxes, P18,000 and wages, P32,000.
Accounts payable and notes payable totaled P180,000. No assets were pledged on the said liabilities.
Payment to fully secured creditors and partially secured creditors amounts to P139,000 and P144,000
respectively. The expected recovery percentage is 40%.
Determine the following:
10. How much is the total liabilities?
11. How much is the amount of assets pledged to fully secured creditors?
12. How much is the amount to be paid to all creditors?
Problem F = Lost Company has the following information:
Liabilities:
Accounts payable
240,000
Taxes payable
25,000
Salaries payable
75,000 , including 25,000 advances from stockholders
Notes payable
500,000, of which P250,000 is fully secured
Interest notes payable
25,000, evenly earned by creditors
1,000,000, partially secured (NRV of assets pledge,
Mortgage payable
P512,000)
Interest on Mortgage payable
50,000

Additional information:
a. Total non-cash assets at book value P1,833,800
b. Cash P120,000
c. Estimated liquidating expenses P125,000.
If partially secured creditor received P834,800, determine the following?
13. Loss on realization
14. Total Free Assets
15. Total NRV of Total Assets
Problem G = Zero Na Corporation has been undergoing liquidation since January 1. As of March 31, its
condensed statement of realization and liquidation is presented below:
Assets:
Assets to be realized
1,375,000
Assets acquired
750,000
Assets realized
1,500,000
Assets not realized
1,375,000
Liabilities:
Liabilities liquidated
1,875,000
Liabilities not liquidated
1,700,000
Liabilities to be liquidated
2,350,000
Liabilities assumed
1,625,000
Revenues and Expenses:
Supplementary charges/debits
3,125,000
Supplementary credits
2,800,000
Included in the liabilities liquidated was a creditor condoned the debt favorably for Zero Na Corporation
as showing of gratitude for being a long time customer of the company. The amount of the waived
payable was P175,000.
Determine the following:
16. The net gain (loss) for the three-month period ending March 31 is:
17. Assuming that the common stock and deficits are P1,750,000 and P500,000, respectively, how much
is the cash ending balance?
18. Using the assumptions in no. 12, compute for the cash balance beginning.
Problem H = The Moon Company has the following:
Unsecured creditors
Liabilities with priority
Secured liabilities:
Debt one, P210,000; value of pledged asset
Debt two, P170,000; value of pledged asset
Debt three, P120,000; value of pledged asset

P 230,000
110,000
P 180,000
100,000
140,000

The company also has a number of other assets that are not pledged in any way. The creditors holding
debt two want to receive at least P142,000.
19. For how much do these free assets have to be sold so that debt two would receive exactly
P142,000?
Problem I = No More Corporation has been undergoing liquidation since January 1. As of June 30, its
condensed statement and liquidation is presented below:
Assets realized
Interest in investment
Purchases
Assets acquired
Liabilities assumed
Payment of expenses of trustee
Liabilities liquidated

P525,000
2,625
26,250
87,500
26,250
131,250
612,500

Liabilities to be liquidated
Sales on account
Assets not realized
Liabilities not liquidated
Sales for cash
Assets to be realized

Required:
20.How much is the net gain (loss) on realization and liquidation?

P1,137,500
87,500
735,000
557,375
437,500
1,662,500