Solution to Chapter 16 Sample Quiz

Solution to Chapter 16 Sample Quiz - Indiana University of...

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Indiana University of Pennsylvania Department of Accounting ACCT 401/501: Advanced Accounting Solution to Sample Quiz for Chapter on Partnership Liquidation Part I. SOLUTIONS Multiple Choice Questions 1. b ($70,000 Ritz capital + $50,000 Sally capital + $30,000 Tracy capital + $25,000 Loan from Sally - $30,000 Loan to Ritz) 2. a ($20,000 beginning balance + $15,000 cash collected + $20,000 for inventory sold - $35,000 of accounts payable - $10,000 for expenses) 3. d Ritz Sally Tracy Total Equities,Jun 30 $ 40,000 $ 75,000 $ 30,000 $ 145,000 Inventory loss ( 10,000 ) ( 15,000 ) ( 25,000 ) ( 50,000 ) Contingency fund ( 2,000 ) ( 3,000 ) ( 5,000 ) ( 10,000 ) Subtotals 28,000 57,000 0 85,000 Possible losses on remaining assets ( 15,000 ) ( 22,500 ) ( 37,500 ) ( 75,000 ) Subtotals $ 13,000 $ 34,500 $( 37,500 ) $ 10,000 Eliminate Tracy’s Deficit ( 15,000 ) ( 22,500 ) 37,500 Subtotals ( 2,000 ) 12,000 0 10,000 Eliminate Ritz’s Deficit 2,000 ( 2,000 ) Cash distribution $ 0 $ 10,000 $ 0 $ 10,000 4. c
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5. c Vulnerability ranks: Bane equity ($70,000 - $40,000)/.25 = $120,000 = 1 Hill equity ($80,000 + $50,0000/.25 = $520,000 = 3 Ross equity ($150,000/.5) = $300,000 = 2 Assumed loss absorption: 25% Bane 25% Hill 50% Ross Total Equities $ 30,000 $ 130,000 $ 150,000 $ 310,000 Loss to eliminate Bane ( 30,000 ) ( 30,000 ) ( 60,000 ) ( 120,000 ) Subtotals 0 $ 100,000 $ 90,000 $ 190,000 Loss to eliminate Ross ( 45,000 ) ( 90,000 ) ( 135,000 ) Subtotals $ 55,000 $ 0 $ 55,000 6. b Losses 40% Abe 30% Barr 30% Cane Equities $ 135,000 $ 216,000 $ 49,000 Possible loss on remaining assets $ 200,000 ( 80,000 ) ( 60,000 ) ( 60,000 )
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