Question

The balance sheet of the Alba, Blick, and Calvo partnership onJanuary 1, 2006 (the date of partnership dissolution) was as follows:CashP2,000LiabilitiesP4,010Other assets13,000Loan from Alba500Loan to Calvo1,000Alba, capital (20%)990Blick, capital(40%)4,500Calvo, capital(40%)6,000Total assetsP16,000Total liab./equityP16,000In January, other assets with a book value of P8,000 were sold forP5,000 in cash.Required:Determine how the available cash on January 31, 2006 will bedistributed

Answer 1

For information purpose:

Cash P2,000    Liabilities P4,010

Other assets 13,000 Loan from Alba 500

Loan to Calvo 1,000

Alba, capital (20%) 990

Blick, capital(40%) 4,500

Calvo, capital(40%) 6,000

Total assetsP16,000 Total liab./equity P16,000

Since the assets of book value P8,000 have been sold and cash of P5000 is recovered, therefore total cash balance shall be equal to P2000 + P5000 = P7000

First of all, the outside liabilities shall be paid = P4,010

Remaining cash balance = P7,000 - P4,010 = P2,990

Now the loan from Alba shall be paid = P500

Remaining balance shall be distributed among the partners but before that loan to Calvo shall be realised = P1,000

Hence the balance = P2990 + P1000 - P500 = P3490 should be distributed to partners.

Alba, capital (20% * 3490) = 698

Blick, capital(40% * 3490) = 1396

Calvo, capital(40% * 3490) = 1396