Reference no: EM132805635
Dulay, Sandoval and Ramel are partners in a law firm. They share profits and losses in a 5:3:2 ratio. The partnership agreement provided for annual salaries of P400,000, P350,000 and P300,000, respectively, interest of 12% on their Jan. 1 capital balances and any balance to be divided in the profit and loss ratio of P400,000,
- The partners' capital balances as of Jan. 1, 2016 were Dulay, P1,200,000; Sandoval P750,000 and Ramel, P500,000. No additional investments were made during the year. Profit for 2016 was P1,600,000. Partners' withdrawals for the year were as follows: Dulay, P500,000; Sandoval, P400,000 and Ramel, P350,000.
- On Mar. 4, 2017, the partners decided to liquidate their law firm. On that date, the firm has a cash balance of P460,000, non-cash assets of P2,740,000 and liabilities of P400,000. No additional investments or withdrawals have been made in 2017. Between Mar. 5 and Mar. 31, the non-cash assets are sold for P2,900,000, the gain is divided in the profit and loss ratio. The liabilities are paid and the remaining cash is then distributed to the partners.
Required:
Problem 1: Prepare a statement for the year ended Dec. 31, 2016, showing the manner of allocation of the profit.
Problem 2: Prepare the statement of changes in partners' equity for the year ended December 31, 2016.
Problem 3: Prepare a statement of liquidation for the period Mar. 5 to Mar. 31, 2017.
Problem 4: Prepare the journal entries as at Mar. 31, 2017 necessary to liquidate the partnership.
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