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ADVANCED ACCOUNTING PART 1QUIZZES

QUIZ 1 = Partnership Liquidation – Lump sum

Problem A = The partnership of JAMES, WADE and ALLEN decided to liquidate their partnership onMay 3, !"#$ %efore liquidatin& and sharin& of net inco'e, their capital (alances are as follo)s*

JAMES +3"- ./01,""", WADE +3"- .23",""", and ALLEN +#"- .00","""$ Net inco'e fro'January to May 3 is .#!","""$ Lia(ilities of the partnership is a'ounted to .1",""" and its totalassets include cash a'ountin& to .!1","""$ 4nsettled lia(ilities are .!/1,"""$ JAMES in5estedadditional cash enou&h to settle their partnership6s inde(tedness$WADE is personally sol5ent, )hile ALLEN is personally insol5ent, and JAMES (eco'es insol5ent after in5estin& the cash needed (y the partnership$

.ay'ents 'ade to liquidate the partnership*

• Le&al and accountin& fees .1","""

• 7ost incurred to dispose assets .!1,"""

• 8eneral and ad'inistrati5e e9penses .#","""

• :epresentation e9penses .","""

Determine the following:$ ;o) 'uch )ere the partnership6s non

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0$ As of the first install'ent, ho) 'uch cash recei5ed (y Ja'es as reco5ery fro' his capital/$ ;o) 'uch is the total cash recei5ed (y partner Wade as reco5ery of his interest fro' the

partnership$ ;o) 'uch cash recei5ed (y Ja'es in the second and final install'ent

Problem D = Assu'e Ja'es, Wade, %osh and 7ole are partners sharin& profits #"C !"C!"C!",respecti5ely$ >n January , !"#, they a&reed to liquidate$ A (alance sheet prepared on this date issho)n as follo)s*

 Additional infor'ation*

a$ .art of the nonn 'onth of January, )hat if the cash )ithheld for anticipation of liquidatin& e9penses is .!1,""",

ho) 'uch is the total possi(le loss (y end of January!$ ;o) 'uch is the total pay'ent 'ade to partners for the 'onth of e(ruary 3$ ;o) 'uch is the cash recei5ed (y Ja'es for the cash pay'ent 'ade to partners for the 'onth of

March#$ ;o) 'uch is the cash recei5ed (y 7ole for the cash pay'ent 'ade to partners for the 'onth of

 April 1$ ;o) 'uch is the total cash recei5e (y each partner as settle'ent of their interest under the

a&ree'ent that no partner is o(li&ed to 'a@e additional in5est'ent for possi(le deficiencies2$ ;o) 'uch is the total loss on realiBation

Problem   = >n Dece'(er 3, !"1, 8o our >)n Way partners J, A and 7 ha5e capital (alances of.!1!,""", .32/,""" and .3"1,""", respecti5ely$ The partnership has .!01,""" lia(ilities and cash of.!"","""$ >n May , !"2, the partnership decided to liquidate$ t6s net inco'e fro' January to May ,a'ounted to .3#/,"""$ t6s profitFloss distri(ution a&ree'ent calls for annual salaries of .3#,#"",

.1/,#"", and .1,!"" for J, A, and 7, respecti5ely$ Any re'ainder )ill (e distri(uted as follo)s* !1to J, !1 to A, and 1" to 7$

.art of partners6 a&ree'ent, salaries &i5en to partners are treated as e9penses and salaries are accruequarterly$ The salaries for the first quarter of !"2 )ere credited to salaries paya(le$ The partnership6scash as of this date a'ounted to .!1",""", the non

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Durin& June, noncash assets )ith a (oo@ 5alue of .1"",""" )ere sold for a certain a'ount$ Thepartnership paid .01,""" of its lia(ilities to outside creditors$ Liquidatin& e9penses a'ountin& to.31,/"" )ere paid and cash )ill (e )ithheld for the pay'ent of its re'ainin& lia(ilities to outsiders andanticipated future liquidatin& e9penses a'ounted .!1,"""$

Determine the following:1-. ;o) 'uch )ere the noncash assets sold for in order for A to recei5e the a'ount priority to her and

an additional .1,"""/$ ;o) 'uch is the total possi(le loss for the 'onth of June, after sales of noncash assets

Continuation!  Durin& July, noncash assets )ere sold for .#2!,""" resultin& to a loss of ./,"""$:e'ainin& lia(ilities to outsider )ere paid and .#2!,""" )ere distri(uted to the partners$ A total of 1,""")ere paid for liquidation e9penses and cash )ithheld for future liquidatin& e9penses$

Determine the following:$ What is J6s capital (alance after the second cash distri(ution!"$ What is 76s share in the 'a9i'u' possi(le loss after the July sale of noncash assets

Qui" # $ Corporate Liquidation

Problem A = The 7an6t Ma@e t 7orporation is under&oin& liquidation and has the follo)in& condensedstate'ent of financial position as of January , !"2*

 Assets Lia(ilities and Stoc@holders6 Equity

7ash .#,!"" Salaries paya(le .1",""":ecei5a(les +net- 3#",/"" Accounts paya(le "/,1""

n5entory /",""" Mort&a&e paya(le #"",""".repaid e9penses !,1"" Loan paya(le !!","""

%uildin& +net- 3#1,""" Note .aya(le /","""

8ood)ill 11,""" >rdinary shares !",""":etained earnin&s G deficit +#,"""-

Tot"l "et P/&-'0++ Tot"l !i"#ilitie "n$ SE P/&-'0++

The 'ort&a&e paya(le is secured (y the (uildin& ha5in& a realiBa(le 5alue of .32","""$ Accountspaya(le a'ountin& to .2",""" is secured (y the recei5a(les a'ountin& to ./1,!"" )hich is collecti(le inthe a'ount of .2/,2"$ The (alance in the (oo@ 5alue of the recei5a(les )hich has a realiBa(le 5alue of .!31,""" is used to secure the loan paya(le$ The in5entory has a realiBa(le 5alue of .13,"""$ naddition to the recorded lia(ilities are accrued interest on 'ort&a&e paya(le a'ountin& to .#,""",liquidation e9penses a'ountin& to .,1"" and ta9es a'ountin& to .#,"""$ +4se t)o deci'al places forthe reco5ery percenta&e-

Determine the following:$ Which of the follo)in& state'ents is )ron&a$ The esti'ated deficiency to unsecured creditors is .#1,2#"$($ .ay'ent to partially secured creditors is .3!,31/$c$ .ay'ent to unsecured creditors )ithout priority is .#,#$d$ Esti'ated loss on assets realiBation is ."0,#"$

!$ ;o) 'uch is the total cash recei5ed of creditors )hose clai's are equal to ""3$ ;o) 'uch is the total cash recei5ed of creditors )hose clai's are less than ""

Problem B = The follo)in& infor'ation are related to Let Me 8o 7orporation )hich is under&oin&liquidation*

a$ %onds paya(le a'ountin& to .03,2"" is secured (y Merchandise n5entory )ith (oo@ 5alue of.!3,""" and net realiBa(le 5alue of !F3 of the recorded a'ount$($ >f the .1,2"" accounts paya(le, .11,""" is secured (y equip'ent )ith a carryin& a'ount of

.02,/"" )hich is 0" realiBa(le$c$ %uildin& )ith a carryin& a'ount of .!,""" has a net realiBa(le 5alue of .,"""$d$ >ther unrecorded lia(ilities are accrued interest paya(le on (onds, .3,""C salaries paya(le,

.0,#""C ta9es paya(le, .,2""C and trustee6s fee, ./,1""$e$ 7ash a5aila(le prior to liquidation a'ounts to .,""$

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f$ Total assets of Let Me 8o 7orporation presented in the state'ent of financial position prior toliquidation a'ount s to .#/",""", e9cept for prepaid e9penses and &ood)ill )ith recordeda'ounts of .0,2"" and .!!,""", respecti5ely, re'ainin& assets other than those )hoserealiBa(le 5alues )ere 'entioned a(o5e ha5e a realiBa(le 5alue of 2" of the recorded a'ount$

&$ Total lia(ilities of Let Me 8o 7orporation presented in the state'ent of financial position prior toliquidation a'ounts to .3/","""$

Re23ire$:#$ ;o) 'uch is the esti'ated deficiency to unsecured lia(ilities

Problem C  = The follo)in& infor'ation is ta@en fro' the state'ent of affairs of the Sol5ent 7orporation* Assets pled&ed )ith fully secured creditors +current fair 5alue, .22,"""- !"/,"""

 Assets pled&ed )ith partially secured creditors +current fair 5alue, .!,"""- ##,"""

ree assets +current fair 5alue, ."#,"""- !#,"""

Lia(ilities )ith priority !2,"""

ully secured creditors 02,"""

.artially secured creditors 32,"""

4nsecured creditors !02,"""

Determine the following:1$ Deter'ine the esti'ated a'ount to (e paid to fully secured creditors* 2$ Deter'ine the esti'ated a'ount to (e paid to unsecured creditor )ith priority* 0$ Deter'ine the esti'ated a'ount to (e paid to partially secured creditors*/$ Deter'ine the esti'ated a'ount to (e paid to unsecured creditors )ithout priority* 

Problem D 4 Alice 7o'pany has had se5ere financial difficulties and is considerin& the possi(ility ofliquidation$ At this ti'e, the co'pany has the follo)in& assets +stated at net realiBa(le 5alue- lia(ilities$

 Assets +pled&ed a&ainst de(ts of .0","""- .2,"""

 Assets +pled&ed a&ainst de(ts of .!","""- 01,""">ther assets 02,1""Lia(ilities )ith priority #!,"""4nsecured creditors !"","""

Re23ire$:$ n liquidation, )hat percenta&e of their clai's is the partially secured creditor li@ely to &et

Problem   4 8o No) 7orporation is under&oin& liquidation$ The trusted of 8o No) 7orporationpresented the follo)in& infor'ation* Assets a'ountin& to .!1,""" are a5aila(le to unsecured lia(ilities)ithout priority$ Assets a'ountin& to .",""" represents assets ori&inally not pled&ed to any lia(ilities$4npaid lia(ilities are as follo)s* ad'inistrati5e e9penses, .!,"""C ta9es, ./,""" and )a&es, .3!,"""$

 Accounts paya(le and notes paya(le totaled ./","""$ No assets )ere pled&ed on the said lia(ilities$.ay'ent to fully secured creditors and partially secured creditors a'ounts to .3,""" and .##,"""respecti5ely$ The e9pected reco5ery percenta&e is #"$

Determine the following:"$ ;o) 'uch is the total lia(ilities$ ;o) 'uch is the a'ount of assets pled&ed to fully secured creditors!$ ;o) 'uch is the a'ount to (e paid to all creditors

Problem % = Lost 7o'pany has the follo)in& infor'ation*Lia(ilities*

 Accounts paya(le !#","""

Ta9es paya(le !1,"""Salaries paya(le 01,""" , includin& !1,""" ad5ances fro' stoc@holders

Notes paya(le 1"",""", of )hich .!1",""" is fully secured

nterest notes paya(le !1,""", evenly earned by creditors

Mort&a&e paya(le,""",""", partially secured +N:H of assets pled&e,.1!,"""-

nterest on Mort&a&e paya(le 1","""

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 Additional infor'ation*a$ Total non