SELF-PACED LEARNING MODULE

COLLEGE DEPARTMENT

MODULE 6
Subject:
ACCTG2– FUNDAMENTALS OF ACCOUNTING 2

AISAT COLLEGE – DASMARIÑAS, INC.

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 Unit Partnership Liquidation
Module Partnership Liquidation
FUNDAMENTALS OF ACCOUNTING Page |2
ACCTG2 Units: 6
2

INFORMATION SHEET MD-1.1.1

“Partnership Liquidation”

Learning objectives:

1. Discuss instalment liquidation.

2. Discuss the procedures for liquidation by instalment.
3. Illustrate instalment liquidation.

Installment Liquidation

An existing partnership may admit a new partner with the consent of all the partners.
When a new partner is admitted, the partnership is dissolved and a new partnership is formed. Upon the
admission of a new partner, a new agreement covering partners' interests, profit and loss sharing and
other consideration should be drawn because the dissolution of the original partnership cancels the old
agreement.
Frequently, partnership assets are not realized through an instantaneous sale but in a
piecemeal fashion. In other words, the liquidation of some business may extend over several months.
When this happens the partners may prefer to receive the amounts due to them in a series of
installments rather than wait until all assets have been converted to cash. Installment payments to
partners are proper provided that measures are taken to insure that all creditors are paid in full and that
there is no over distribution to one or more of the partners.
Installment liquidation involves the selling of some assets, paying the liabilities of the
partnership, dividing the available cash to the partners, selling additional assets and making further
payments to partners. This process continues until all the assets have been sold and all cash has been
distributed to the creditors and to the partners.

Procedures for Liquidation by Installment. The following are the accounting procedures
that may be followed in liquidating a partnership by installments.
1. Record the realization of assets and distribute the realized gains or losses among the partners
using the profit and loss ratio.
2. Pay liquidation expenses and unrecorded liabilities, if there are any, and distribute these among
the partners using the profit and loss ratio.
3. Pay the liabilities to outsiders.
4. Distribute cash to the partners after possible future losses have been apportioned to partners or
in accordance with an advance distribution plan.

Note: Eliminate any capital deficiency only before final payments to partners.

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 6th
MIDTERM
6 Meeting MS. EMERITA S.MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Partnership Liquidation
Module Partnership Liquidation
FUNDAMENTALS OF ACCOUNTING Page |3
ACCTG2 Units: 6
2

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 6th
MIDTERM
6 Meeting MS. EMERITA S.MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Partnership Liquidation
Module Partnership Liquidation
FUNDAMENTALS OF ACCOUNTING Page |4
ACCTG2 Units: 6
2

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 6th
MIDTERM
6 Meeting MS. EMERITA S.MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Partnership Liquidation
Module Partnership Liquidation
FUNDAMENTALS OF ACCOUNTING Page |5
ACCTG2 Units: 6
2

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 6th
MIDTERM
6 Meeting MS. EMERITA S.MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Partnership Liquidation
Module Partnership Liquidation
FUNDAMENTALS OF ACCOUNTING Page |6
ACCTG2 Units: 6
2

References:

1. Ballada, W. and Ballada, S. (2010). Partnership and Corporation Accounting. Domdane

Publisher & Made Easy Books, Sampaloc, Manila
2. Discuss and Record Entries for the Dissolution of a Partnership
https://opentextbc.ca/principlesofaccountingv1openstax/chapter/discuss-and-record-entries-
for-the-dissolution-of-a-partnership/
3. Dissolution of Partnership Firm. https://ncert.nic.in/textbook/pdf/leac105.pdf.

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 6th
MIDTERM
6 Meeting MS. EMERITA S.MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Partnership Liquidation
Module Partnership Liquidation
FUNDAMENTALS OF ACCOUNTING Page |7
ACCTG2 Units: 6
2

SELF-CHECK MD-1.1.1
“Partnership Liquidation”
Answer the following questions:

1. After the realization of all noncash assets and the payment of all liabilities, the balance
sheet of the liquidating Pon, Quan & Ron LLP on January 31, 2005, showed Cash,
$15,000; Pon, Capital, ($9,000); Quan, Capital, $8,000; and Ron, Capital, $16,000, with ( )
indicating a capital deficit. The partners share net income and losses equally.

Prepare a journal entry for Pon, Quan & Ron LLP on January 31, 2005, to show the pay-
ment of $15,000 cash in a safe manner to the partners. Show computations in the
explanation for the journal entry.

2. When Hale and Ian, partners of Hale & Ian LLP who shared net income and losses in a 4 :
6 ratio, were incapacitated in an accident, a liquidator was appointed to wind up the
part- nership. The partnership’s balance sheet showed cash, $35,000; other assets,
$110,000; liabilities, $20,000; Hale, capital, $71,000; and Ian, capital, $54,000. Because
of the spe- cialized nature of the noncash assets, the liquidator anticipated that
considerable time would be required to dispose of them. The costs of liquidating the
partnership (advertising, rent, travel, etc.) were estimated at $10,000.

Prepare a working paper to compute the amount of cash (totaling $5,000) that may be
distributed to each partner.

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 6th
MIDTERM
6 Meeting MS. EMERITA S.MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Partnership Liquidation
Module Partnership Liquidation
FUNDAMENTALS OF ACCOUNTING Page |8
ACCTG2 Units: 6
2

SELF-CHECK ANSWER KEY MD-1.1.1

“Partnership Liquidation”

3. Debit Ron, capital, $11,500.

4. Cash to Hale, $5,000.

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 6th
MIDTERM
6 Meeting MS. EMERITA S.MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Partnership Liquidation
Module Partnership Liquidation
FUNDAMENTALS OF ACCOUNTING Page |9
ACCTG2 Units: 6
2

STUDENT NAME: __________________________________ SECTION: __________________

WRITTEN WORK MD-1.1.1

WRITTEN WORK TITLE: Problem solving on Partnership and Corporation

WRITTEN TASK OBJECTIVE: The student on his own and in the long run will be able to
demonstrate understanding and show their knowledge on the
topic and to solve accounting problem in Partnership.

MATERIALS: Pen and paper

TOOLS & EQUIPMENT: Calculator, Computer, Cellphone
ESTIMATED COST: Php20

Let’s Solve

Questions:
1. Answer problems on the last page. Show your
solution.
2. Take screenshot of hand written answer on bondpaper
and upload at Edmodo Apps
3. Your answer must be shown through screenshot along
with the final answer (report) for “ Flexible Distance
Learning” then upload to Edmodo Apps.

PRECAUTIONS: None
ASSESSMENT METHOD: Written work criteria checklist

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 6th
MIDTERM
6 Meeting MS. EMERITA S.MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Partnership Liquidation
Module Partnership Liquidation
FUNDAMENTALS OF ACCOUNTING P a g e | 10
ACCTG2 Units: 6
2

STUDENT NAME: __________________________________ SECTION: __________________

WRITTEN OUTPUT CRITERIA CHECK LIST MD-1.1.1

CRITERIA SCORING
Did I . . .
1 2 3 4 5
1. Focus – The single controlling point made with an awareness of task
about a specific topic.
2. Content – The presentation of ideas developed through facts,
examples, anecdotes, details, opinions, statistics, reasons and/or
opinions
3. Organization – The order developed and sustained within and across
paragraphs using transitional devices and including introduction and
conclusion.
4. Style – The choice, use and arrangement of words and sentence
structures that create tone and voice.
5. Conventions – Grammar, mechanics, spelling, usage and sentence
formation.
TEACHER’S REMARKS:  QUIZ  RECITATION  PROJECT

GRADE:

5 - Excellently Performed
4 - Very Satisfactorily Performed
3 - Satisfactorily Performed
2 - Fairly Performed
1 - Poorly Performed

MRS. EMERITA S. MERCADAL

Instructor

Date: __________________

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 6th
MIDTERM
6 Meeting MS. EMERITA S.MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director
 Unit Partnership Liquidation
Module Partnership Liquidation
FUNDAMENTALS OF ACCOUNTING P a g e | 11
ACCTG2 Units: 6
2

1. Archer and Bender, partners of Archer & Bender LLP, who share net income and losses in a 60 : 40 ratio,
respectively, decided to liquidate the partnership. A portion of the noncash assets had been realized,
but assets with a carrying amount of $42,000 were yet to be realized. All liabilities had been paid, and
cash of $20,000 was available for distribution to partners. The partners’ capital account credit balances
were $40,000 for Archer and $22,000 for Bender.

Prepare a working paper to compute the amount of cash (totaling $20,000) to be distributed to each
partner.

2. Carlo and Dodge started Carlo & Dodge LLP some years ago and managed to operate profitably for
several years. Recently, however, they lost a lawsuit requiring payment of large damages because of
Carlo’s negligence and incurred unexpected losses on trade accounts receivable and inventories. As a
result, they decided to liquidate the partnership. After all noncash assets were realized, only $18,000
was available to pay liabilities, which amounted to $33,000. The partners’ capital account balances
before the start of liquidation and their income-sharing percentages are shown below:

Capital Account Balances Income-Sharing Percentages

Carlo $23,000 55%
Dodge 13,500 45%

a. Prepare a working paper to compute the total loss incurred on the liquidation of the Carlo & Dodge LLP.
b. Prepare a journal entry to record Carlo’s payment of $15,000 to partnership creditors and to close the
partners’ capital accounts. Carlo was barely solvent after paying the partnership creditors, but Dodge
had net assets, exclusive of partnership interest, in ex- cess of $100,000.

SUBJECT TEACHER: APPROVED FOR IMPLEMENTATION:

MODULE 6th
MIDTERM
6 Meeting MS. EMERITA S.MERCADAL MR. WILBERT A. MAÑUSCA
Subject Teacher School Director