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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