CHAP 3

PROBLEM 4: MULTIPLE CHOICE-COMPUTATIONAL

1 C.
CARRYING AMOUNT
CASH 26,000.00
ACCOUNTS RECEIVABLE 120,000.00
INVENTORY 180,000.00
PREPAID ASSETS -
ACCOUNTS PAYABLE (62,000.00)
ACCRUED LIABILITIES -
NET ASSETS 264,000.00

UNADJUSTED
A. CAPITAL (60%) 170,000.00
B. CAPITAL (40%) 94,000.00
264,000.00

B. CAPITAL (102400*1/2) 51,200.00

C. CAPITAL

2A

ADJUSTED NET ASSETS 285,000.00

DIVIDED BY: INTEREST OF OLD PARTNERS (100-20) 80%
GROSSED UP FAIR VALUE 356,250.00
MULTIPLY INTEREST OF C 20%
FAIR VALUE OF C INTEREST 71,250.00

BEFORE ADMISSION
A CAPITAL 182,600.00
B. CAPITAL 102,400.00
C. CAPITAL -
285,000.00

3B

NET ASSET BEFORE ADMISSION 285,000.00

INVESTMENT OF C 100,000.00
 NET ASSETS AFTER ADMISSION 385,000.00
C'S INTEREST IN NET ASSETS 20%
C'S CAPITAL CREDIT 77,000.00
INVESTMENT OF C 100,000.00
BONUS TO OLD PARTNERS (23,000.00)

CASH 100,000.00
C, CAPITAL (385K*20%)
A, CAPITAL (23K*60%)
B, CAPITAL (23K*40%)

A
CAPITAL BEFORE ADMISSION 182,600.00
INVESTMENT OF C
BONUS TO OLD PARTNERS 13,800.00
196,400.00

4A

ADJUSTED NET ASSETS 285,000.00

DIVIDED BY: EXISTING PARTNER INTEREST 3/5
TOTAL NET ASSETS AFTER INVESTMENT OF C 475,000.00
MULTIPY BY: C INTEREST 2/5
AMOUNT OF CONTRIBUTION BY C 190,000.00

5A

LIST A
A CAPITAL (50K*10%) 5,000.00
B CAPITAL (70K*10%) 7,000.00
D. CAPITAL 12,000.00

PAYMENT OF D 30,000.00
CAP CREDIT (250K*10%) 25,000.00
COMBINE 5,000.00

LIST B
A CAPITAL (25K*2/5) 10,000.00
B. CAPITAL (25*3/5) 15,000.00
 D CAPITAL 25,000.00

6B

CAPITAL CREDIT 75,000.00

INVESTMENT 18,000.00
BONUS TO NEW 57,000.00

7B

PAYMENT OF D 132,000.00
CAPITAL CREDIT 88,800.00
COMBINE GAIN A&B 43,200.00

8C

NET ASSETS BEFORE ADMISSION 120,000.00

INVESTMENT OF ANDRE 30,000.00
NET ASSETS AFTER ADMISSION 150,000.00
MULTIPLY INTEREST 1/3
CAPITAL CREDIT 50,000.00
INVESTMENT OF ANDRE 30,000.00
BONUS TO NEW PARTNER 20,000.00

M
UNADJUSTED CAPITAL 80,000.00
INVESTMENT
BONUS TO NEW PARTNER (12,000.00)
68,000.00

9B

TOTAL CAPITAL 150,000.00

MULTIPLY INTEREST 1/3
CAPITAL CREDIT 50,000.00
CONTRIBUTION LIND 40,000.00
BONUS TO NEW 10,000.00

B
UNADJUSTED CAPITAL 60,000.00
INVESTMENT
BONUS TO NEW (6,000.00)
54,000.00
10 A

PAYMENT TO A 360,000.00
CAPITAL BALANCE 320,000.00
40,000.00

B
CAPITAL BALANCE BEFORE RETIREMENT 192,000.00
SHARE IN EXCESS OF PAYMENT A (40K*3/5;2/5) (24,000.00)
168,000.00

A CAPITAL 320,000.00
B CAPITAL (40K*3/5) 24,000.00
C CAPITAL (40K*2/5) 16,000.00
CASH

11 A
B
CAPITAL BALANCE BEFORE RETIREMENT 192,000.00
SHARE IN EXCESS OF PAYMENT A (40K*3/5;2/5) (24,000.00)
168,000.00

12 C

UNADJUSTED CAPITAL 1,000,000.00

PROFIT 300,000.00
ADJUSTED 1,300,000.00
RETIREMENT (200,000.00)
1,100,000.00

13 C
A
UNADJUSTED CAPITAL 300,000.00
SHARE IN PROFIT (1800M *20%;30%;50%) 360,000.00
SHARE IN REVALUATION
(1M+600K-1.4M*20%/50%;30%/50%) 120,000.00
ADJUSTED CAPITAL BALANCE 780,000.00
PAYMENT OF INTEREST (80,000.00)
BALANCE 700,000.00

14 D

CARRYING AMOUNT 65,000.00

FAIR VALUE 50,000.00
LOSS (15,000.00)
 DIVIDE EQUALLY 3
SHARES TO PARTNERS (5,000.00)

FV OF THE FURNITURE 50,000.00

SHARE OF C 5,000.00
TOTAL DEDUCTION OF C CAPITAL 55,000.00

15 C

C INTEREST 200,000.00
DEDUCTION OF CAPITAL 55,000.00
NOTE BALANCE 145,000.00
 PROBLEM 6: FOR CLASSROOM

1 CASE 1

FAIR VALUES INCREASED (DECREASED)

26,000.00 -
116,400.00 (3,600.00)
205,000.00 25,000.00
3,600.00 3,600.00
(62,000.00) -
(4,000.00) (4,000.00)
285,000.00 21,000.00

SHARE IN ADJ ADJUSTED

(21K*60%) 182,600.00
(21K*40%) 102,400.00
285,000.00

51,200.00

CASE 2
ADMISSION OF C AFTER ADMISSION
182,600.00
102,400.00
71,250.00 71,250.00
71,250.00 356,250.00

CASE 3
 77,000.00
13,800.00
9,200.00

CASE 4
B C TOTAL
102,400.00 - 285,000.00
100,000.00 100,000.00
9,200.00 (23,000.00) -
111,600.00 77,000.00 385,000.00

CASE 5
 2 CASE 1

P A CASE 2
40,000.00 -
30,000.00
(8,000.00) 20,000.00
32,000.00 50,000.00

R L
50,000.00 -
40,000.00
(4,000.00) 10,000.00
46,000.00 50,000.00
 CASE 3

C
128,000.00
(16,000.00)
112,000.00

3
360,000.00

C
128,000.00
(16,000.00)
112,000.00

B C
500,000.00 200,000.00
540,000.00 900,000.00

180,000.00 300,000.00
1,220,000.00 1,400,000.00
(120,000.00) (1,400,000.00)
1,100,000.00 -
PROBLEM 6: FOR CLASSROOM DISCUSSION

CARRYING AMOUNTS FV
CASH 30,000.00 30,000.00
ACCOUNTS RECEIVABLE 140,000.00 120,000.00
INVENTORY 200,000.00 160,000.00
EQUIPMENT 500,000.00 450,000.00
ACCOUNTS PAYABLE (80,000.00) (80,000.00)
ACCRUED LIABILITIES (20,000.00)
NET ASSETS 790,000.00 660,000.00

UNADJUSTED ADJUSTMENT
APPLE CAPITAL 515,000.00 (130K*60%)
BANANA CAPITAL 275,000.00 (130K*40%)
790,000.00

BANANA CAPITAL (223K*1/2) 111,500.00

CARROT CAPITAL 111,500.00

BEFORE ADMISSION ADMISSION

APPLE CAPITAL 437,000.00
BANANA CAPITAL 223,000.00 (111,500.00)
CARROT CAPITAL - 111,500.00
660,000.00

BEFORE ADMISSION ADMISSION

APPLE CAPITAL 437,000.00 (87,400.00)
BANANA CAPITAL 223,000.00 (44,600.00)
660,000.00

APPLE CAPITAL 87,400.00

BANANA CAPITAL 44,600.00
CARROT CAPITAL 132,000.00
ADJUSTED NET ASSETS 660,000.00
DIVIDE BY INTEREST (100-20) 80%
TOTAL NET ASSETS AFTER INVESTMENT 825,000.00
MULTIPLY BY: INTEREST 20%
AMOUNT OF CONTRIBUTION 165,000.00

BEFORE ADMISSION ADMISSION

APPLE 60% (100-20%)*60%
BANANA 40% (100-20%)*40%
CARROT - 20%
100%

ADJUSTED NET ASSETS 660,000.00

DIVIDE BY INTEREST (100-20) 80%
TOTAL NET ASSETS AFTER INVESTMENT 825,000.00
MULTIPLY BY: INTEREST 20%
AMOUNT OF CONTRIBUTION 165,000.00

CASH 100,000.00
APPLE CAPITAL (165K-100K*60%) 39,000.00
BANANA CAPITAL (165K-100K*40%) 26,000.00
CARROT CAPITAL 165,000.00

BEFORE ADMISSION ADMISSION

APPLE CAPITAL 437,000.00 (39,000.00)
BANANA CAPITAL 223,000.00 (26,000.00)
CARROT CAPITAL - 165,000.00
660,000.00 100,000.00

CASH 180,000.00
CARROT CAPITAL 165,000.00
APPLE CAPITAL (165K-180K)*60% 9,000.00
BANANA CAPITAL (165K-180K)*40% 6,000.00

BEFORE ADMISSION ADMISSION

APPLE CAPITAL 437,000.00 9,000.00
BANANA CAPITAL 223,000.00 6,000.00
CARROT CAPITAL - -
660,000.00 15,000.00
 A B
BEG CAPITAL 320,000.00 192,000.00
SHARE IN PROFIT (800K*50%;30%;20%) 400,000.00 240,000.00
DRAWINGS (40,000.00) (60,000.00)
END CAPITAL 680,000.00 372,000.00

A CAPITAL 680,000.00
B CAPITAL (680K*30%/50%) 408,000.00
C CAPITAL (680K*20%/50%) 272,000.00

BEFORE RETIREMENT RETIREMENT OF A

A. CAPITAL 50% (50%)
B. CAPITAL 30% 30%/30%+20%
C. CAPITAL 20% 30%/30%+20%
100%

BEFORE ADMISSION ADMISSION

A CAPITAL 680,000.00 (680,000.00)
B CAPITAL 372,000.00 408,000.00
C CAPITAL 258,000.00 272,000.00
1,310,000.00 -

A CAPITAL 680,000.00
B CAPITAL (700K-680K*30%/50%) 12,000.00
C CAPITAL (700K-680K*20%/50%) 8,000.00
CASH 700,000.00

BEFORE RETIREMENT RETIREMENT OF A

A. CAPITAL 50% (50%)
B. CAPITAL 30% 30%/30%+20%
C. CAPITAL 20% 30%/30%+20%
100%

BEFORE ADMISSION ADMISSION

A CAPITAL 680,000.00 (680,000.00)
B CAPITAL 372,000.00 (12,000.00)
C CAPITAL 258,000.00 (8,000.00)
1,310,000.00 (700,000.00)
A CAPITAL 680,000.00
CASH 650,000.00
B CAPITAL (680K-650K*30%/50%) 18,000.00
C CAPITAL (680K-650K*20%/50%) 12,000.00

BEFORE ADMISSION ADMISSION

A CAPITAL 680,000.00 (680,000.00)
B CAPITAL 372,000.00 18,000.00
C CAPITAL 258,000.00 12,000.00
1,310,000.00 (650,000.00)

A B
BEG CAPITAL 320,000.00 192,000.00
SHARE IN PROFIT (800K*50%;30%;20%) 400,000.00 240,000.00
DRAWINGS (40,000.00) (60,000.00)
ADJUSTED CAPITAL 680,000.00 372,000.00
DIVIDED BY: PAR VALUE 50.00 50.00
NUMBER OF SHARES ISSUED 13,600 7,440
 CHAP 4
PROBLEM 4: MULTIPLE CHOICE-COMPUTATIONAL

1
INCREASE(DECREASED)
-
(20,000.00)
(40,000.00)
(50,000.00)
-
(20,000.00)
(130,000.00)

ADJSUTED
437,000.00
223,000.00 2
660,000.00

AFTER ADMISSION
437,000.00 4
111,500.00
111,500.00
660,000.00

AFTER ADMISSION
349,600.00
178,400.00
528,000.00

5
AFTER ADMISSION
48%
32% 6
20%
100%

AFTER ADMISSION
398,000.00
197,000.00
165,000.00
760,000.00

8
AFTER ADMISSION 9
446,000.00
229,000.00
165,000.00
840,000.00
 C
128,000.00
160,000.00
(30,000.00)
258,000.00

AFTER RETIREMENT
-
60%
40% 10
100%

AFTER ADMISSION
-
780,000.00
530,000.00
1,310,000.00

AFTER RETIREMENT
-
60%
40%
100%

AFTER ADMISSION
-
360,000.00
250,000.00
610,000.00
AFTER ADMISSION
-
390,000.00
270,000.00
660,000.00

C
128,000.00
160,000.00
(30,000.00)
258,000.00
50.00
5,160
PROBLEM 4: MULTIPLE CHOICE-COMPUTATIONAL

SALE OF OTHER ASSETS 120,000.00

CARRYING AMOUNT OF ALL OTHER ASSETS (250,000.00)
TOTAL LOSS ON SALE (130,000.00)

COBB
CAPITAL BALANCES 80,000.00
ALLOCATION OF LOSS
(130K*50%;30%;20%) (65,000.00)
15,000.00

B
EQUAL TO THE CARRYING AMOUNT OF PARTNER'S CLAIM 190,000.00

A
JACK
UNADJUSTED CAPITAL BALANCES 300,000.00
ALLOCATION OF LOSS (190K*30%;70%) (57,000.00)
TOTAL 243,000.00

TOTAL CAPITAL BALANCE 490,000.00

LOSS (SQUEEZE) (370,000.00)
ADJUSTED BALANCE 120,000.00

JACK
UNADJUSTED CAPITAL BALANCES 300,000.00
ALLOCATION OF LOSS (370K*30%;70%) (111,000.00)
TOTAL 189,000.00

A
BEANS
CAPITAL BALANCE UNADJUSTED 190,000.00
LOSS (SQUEEZE) (91,000.00)
TOTAL 99,000.00
TOTAL LOSS (91K+30%) 130,000.00

JACK
CAPITAL BALANCE UNDAJUSTED 300,000.00
ALLOCATION OF LOSS (130K*30%) (39,000.00)
TOTAL 261,000.00

AMOUNT RECEIVED BY JACK 261,000.00

AMOUNT RECEIVED BY BEANS 99,000.00
SETTLEMENT OF LIABILITIES 200,000.00
NET PROCEEDS FROM SALE 560,000.00

NET PROCEEDS 70,000.00

CASH 20,000.00
LIABILITIES (30,000.00)
LIQUIDATION EXPENSE (8,000.00)
TOTAL 52,000.00

A
UNADJUSTED CAPITAL 100,000.00
DIVIDE BY:P/L RATIO 20%
MAX LOSS ABSORPTION CAPACITY 500,000.00
RANK OF PAYMENT 2ND

A
TOTAL CASH TO BE DITRIBUTED
(52K-20K)
REMAINING TO BE DISTRIBUTED 12,800.00
CASH GIVEN TO PARTNERS 12,800.00

B
A

GIVEN INFORMATION 570,000.00

LOSS (SQUEEZE) (600,000.00)
ADJUSTED BALANCES (30,000.00)

A
UNADJUSTED CAPITAL BALANCES 210,000.00
ALLOCATION OF LOSS
(600K*30%;20%;50%) (180,000.00)
30,000.00
ALLOCATION OF DEFICIENCY
(90K*3/5;2/5) (54,000.00)
(24,000.00)
ADDITIONAL CONTRIBUTIONS 24,000.00
TOTAL BALANCES -

ALLOCATION OF LOSS (180,000.00)

ALLOCATION OF DEFICIENCY (54,000.00)
DECREASE IN A CAPITAL BALANCE (234,000.00)

B
A
PAYABLE TO (RECEIVABLE FROM) (10,000.00)
UNADJUSTED CAPITAL 250,000.00
ADJUSTED CAPITAL 240,000.00
DIVIDE BY: P/L RATIO 50%
MAX ABSORPTION CAPACITY 480,000.00
RANK OF PAYMENT 3RD

NET PROCEEDS 30,000.00

CASH 10,000.00
LIABILITIES (80,000.00)
TOTAL (40,000.00)
 PROBLEM 6: FOR CLASSR

CASE 1

DAVIS EDDY
90,000.00 70,000.00

(39,000.00) (26,000.00)
51,000.00 44,000.00

BEANS
190,000.00
(133,000.00)
57,000.00

CASE 2

BEANS
190,000.00
(259,000.00)
(69,000.00)
 CASE 3

CASE 4

B C
170,000.00 200,000.00
30% 50%
566,666.67 400,000.00
1ST 3RD

B CASE 5

20,000.00
19,200.00
39,200.00

REQ A

CASE 6
B C
 150,000.00 210,000.00 CASE 7

(120,000.00) (300,000.00)
30,000.00 (90,000.00)

(36,000.00) 90,000.00
(6,000.00) -
6,000.00 -
- -

B C
20,000.00 -
150,000.00 100,000.00
170,000.00 100,000.00
30% 20%
566,666.67 500,000.00
1ST 2ND
PROBLEM 6: FOR CLASSROOM DISCUSSION

COLLECTION FROM ACCOUNTS RECEIVABLE (60K*70%)

SALE OF INVENTORY
SALE OF EQUIPMENT
LIQUIDATION EXPENSE
NET PROCEEDS
CARRYING AMOUNT OF ALL NON CASH ASSETS
EXCEPT RECEIVABLE OF A (60K+120K+290K)
LOSS

CAPITAL BALANCE BEFORE LIQUIDATION

PAYABLE TO (RECEIVABLE FROM) PARTNERS
TOTAL
ALLOCATION OF LOSS (110K*60%;40%)
AMOUNT RECEIVED BY PARTNERS

BEG BALANCE OF CASH

NET PROCEEDS FROM SALE OF NCA
LESS: PAYMENT TO AP
CASH AVAILABLE FOR DISTRIBUTION TO PARTNERS

COLLECTION ON AR (60K*1/2)
SALE OF INVENTORY (120K*75%)
SALE OF EQUIPMENT
LIQUIDATION EXPENSES
ESTIMATED LIQUIDATION EXPENSE
NET CASH PROCEEDS
CARRYING AMOUNT OF NON-CASH ASSETS
LOSS

BEG BALANCE OF CASH

NET PROCEEDS FROM SALE OF NCA
LESS: PAYMENT TO AP
CASH AVAILABLE FOR DISTRIBUTION TO PARTNERS

CAPITAL BALANCE BEFORE LIQUIDATION

PAYABLE TO (RECEIVABLE FROM) PARTNERS
TOTAL
ALLOCATION OF LOSS (182K*60%;40%)
AMOUNT RECEIVED BY PARTNERS

SALES OF CERTAIN OF NON-CASH ASSETS

ACTUAL LIQUIDATION EXPENSE

CASH
PROCEEDS
PAYMENT FOR LIABILITIES
ADDITIONAL CONT. TO SETTLE LIAB

NET PROCEEDS
CARRYING AMOUNT OF NON CASH ASSETS (60K+120K+290K)
TOTAL LOSS

PERSONAL ASSETS
PERSONAL LIABILITIES
AVAILABLE TO PARTNERSHIP CREDITORS

CAPITAL BALANCE
ALLOCATION OF LOSS (SQUUEZE)
AMOUNTS RECEIVED

TOTAL LOSS ON SALE (60K/40%)

SHARE OF A
CASH AVAILABLE
NET PROCEEDS OF NON CASH (60K+120K+290k)
PAYABLE TO (RECEIVABLE FROM)
UNADJUSTED CAPITAL
ADJUSTED CAPITAL
DIVIDE BY: P/L RATIO
MAX ABSORPTION CAPACITY
RANK OF PAYMENT

BEG BALANCE OF CASH

NET PROCEEDS FROM SALE OF NCA
LESS: PAYMENT TO AP
CASH AVAILABLE FOR DISTRIBUTION TO PARTNERS

MAX ABOSRPOTION CAPACITY

DIFFERENCE BETWEEN 1ST AND 2ND

RANK OF PAYMENT
1ST PRIORITY (150k*40%)
CASH GIVEN TO PARTNERS

RANK OF PAYMENT
1ST PRIORITY (150k*40%)
DISTRIBUTION (278K-60K)
CASH GIVEN TO PARTNERS
 42,000.00
20,000.00
310,000.00
(12,000.00)
360,000.00

(470,000.00)
(110,000.00)

A B
250,000.00 200,000.00
(10,000.00) 20,000.00
240,000.00 220,000.00
(66,000.00) (44,000.00)
174,000.00 176,000.00

20,000.00
360,000.00
(30,000.00)
350,000.00

30,000.00
90,000.00
185,000.00
(12,000.00)
(5,000.00)
288,000.00
470,000.00
(182,000.00)

20,000.00
288,000.00
(30,000.00)
 278,000.00

A B
250,000.00 200,000.00
(10,000.00) 20,000.00
240,000.00 220,000.00
(109,200.00) (72,800.00)
130,800.00 147,200.00

250,000.00
24,000.00

20,000.00
65,000.00
(30,000.00)
55,000.00

65,000.00
(470,000.00)
(405,000.00)

A B
200,000.00 380,000.00
(440,000.00) (240,000.00)
(240,000.00) 140,000.00

A B
240,000.00 200,000.00
(90,000.00) (60,000.00)
150,000.00 140,000.00

150,000.00
150,000.00
300,000.00
470,000.00
A B
(10,000.00) 20,000.00
250,000.00 200,000.00
240,000.00 220,000.00
60% 40%
400,000.00 550,000.00
2ND 1ST

20,000.00
288,000.00
(30,000.00)
278,000.00

400,000.00 550,000.00
(150,000.00)
400,000.00 400,000.00

A B
2ND 1ST
60,000.00
- 60,000.00

A B
2ND 1ST
60,000.00
130,800.00 87,200.00
130,800.00 147,200.00