SlideShare a Scribd company logo
to accompany
Advanced Accounting, 11th edition
by Beams, Anthony, Bettinghaus, and Smith
Chapter 17
Partnership Liquidation
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-1
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-2
Partnership Liquidation: Objectives
1. Understand the legal aspects of
partnership liquidation.
2. Apply simple partnership liquidation
computations and accounting.
3. Perform safe payment computations.
4. Understand installment liquidations.
5. Learn about cash distribution plans for
installment liquidations.
6. Comprehend liquidations when either the
partnership or the partners are insolvent.
1: LEGAL ASPECTS OF
LIQUIDATION
Partnership Liquidation
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-3
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-4
Process of Liquidation
1. Convert noncash assets to cash
2. Recognize gains or losses and expenses
3. Settle all liabilities
4. Distribute cash to partners according to
balances in capital accounts
Assumes
 Business is solvent
 Partners have equity in net assets
 No partner loans
 Assets are converted to cash before cash is
distributed to partners
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-5
Order of Payment
The Uniform Partnership Act provides the
following rank ordering for payments in
partnership liquidations:
1. Amounts owed to creditors other than
partners and amounts owed to partners
other than for capital and profits
2. Amounts due to partners liquidating their
capital balance upon conclusion of the
liquidation of partnership assets and
liabilities
2: SIMPLE LIQUIDATION
Partnership Liquidation
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-6
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-7
Simple Liquidation
Convert all assets to cash, and then make a
single distribution to partners in final
settlement.
Gains and losses on conversion of assets are
distributed to partners.
 Use established profit and loss ratios
 Ignore salary, bonus, interest allowances
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-8
Debit Capital in Solvent Firm
If one or more (not all) partners has a debit
balance in capital AND the firm has sufficient
cash and other assets of value to pay all
creditors, then…
The partner with the debit capital balance must
either
 Contribute that amount to the firm, or
 If unable, the debit balance is absorbed by the
remaining partners
 Profit and loss ratios of remaining partners
remains consistent relative to each other
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-9
Statement of Partnership
Liquidation
Beginning balances in cash, noncash assets, liabilities
and partner accounts are adjusted as assets are
converted to cash, and cash payments are made.
Other Partner Balances
The Uniform Partnership Act ranks amounts
owed to partners, other than capital balances,
higher than the capital balances.
However, a partner with a debit capital balance
may only offset other amounts owed to the
partner with the debit capital account balance.
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-10
3: SAFE PAYMENTS
Partnership Liquidation
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-11
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-12
Safe Payments - definition
Safe payments are distributions that can be
made to partners with the assurance that the
amounts distributed will not need to be
returned to the partnership at some later date
to cover known liabilities or realign partner
capital.
Assumptions:
 All partners are personally insolvent
 Noncash assets represent possible losses
 Additional cash may be needed for liquidation
expenses
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-13
What Safe Payments Do /Don't Do
Safe payments schedules
 Determine the amount of advance payment
 Must be prepared for each cash distribution
unless capital balances align with profit and
loss ratios
Don't
 Change the capital balances
 Affect the statement of partnership
liquidation
 Help project timing of distributions
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-14
Compute Safe Payments
Begin with partner capital adjusted for
outstanding loans
Assume all noncash assets are losses
 Distribute losses to partners
Plan for other loss contingencies
 Distribute contingent losses to partners
Redistribute possible losses from partners
 Adjust profit and loss ratio
Safe payments are made after non-partner
creditors have been paid.
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-15
Example of Safe Payments
BMN Partnership has the following balances:
Prepare a Safe Payments Schedule:
1. Net out partner loans/capital
2. Assume noncash assets are losses
3. Allow for other losses (assume $10)
4. Redistribute potential partner losses
Cash $80 Loan payable to Nan $20
Loan from Max 10 Buz Capital (50%) 50
Land 20 Max Capital (30%) 70
Building, net 140 Nan Capital (20%) 110
$250 $250
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-16
Partners must agree to any advance distribution.
Possible
losses
Buz
(50%)
Max
(30%)
Nan
(20%)
Equity (net of loans) $50 $60 $130
Assumed losses:
Loss on assets ($160) (80) (48) (32)
Other losses (10) (5) (3) (2)
Subtotal ($35) $9 $96
Assume Buz loss
New ratio 3:2 35 (21) (14)
Subtotal $0 ($12) $82
Assume Max loss 12 (12)
Safe Payments $0 $0 $70
Example of Safe Payments (cont.)
4: INSTALLMENT
LIQUIDATIONS
Partnership Liquidation
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-17
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-18
Installment Liquidations
Involve distributions of cash to partners
 As it is available
 Before all gains and losses are realized
Orderly liquidation of solvent partnership
 Liabilities, other than those to partners, are
paid first
 Then, partners can receive distributions
 Prepare a safe payment schedule for each
distribution
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-19
Frequent Reports
A Statement of Partnership Liquidation is
prepared showing:
 Sale of noncash assets, distributions of P/L
 Payment of creditors
 Distributions to partners
Safe Payment Schedule is prepared
 Before distributions to partners
An updated Statement of Partnership
Liquidation is prepared, so there is a new
Safe Payment Schedule …
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-20
Installment Liquidation: Example
Kemp's total
investment is $360
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-21
At Jan. 31, there is $640 in cash.
 Liabilities still due are $500
 Can we give the $140 to the partners, and if so, to
whom?
The safe payment schedule answers this.
 Assume the remaining noncash assets are losses
and allow for an extra $20 loss
Installment Liquidation:
Example (cont.)
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-22
Safe Payment Schedule, Jan. 31
Kemp can receive safe payments up to $120,
if Duro and Ross agree.
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-23
Updating the Liquidation Statement
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-24
January Distributions
The liquidation schedule shows that
 The creditors were paid their $500
 Kemp was paid $20 on the loan and $100 of
capital (maximum safe payment)
Cash of $20 remained in the partnership
on February 1.
5: CASH DISTRIBUTION
PLANS
Partnership Liquidation
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-25
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-26
Cash Distribution Plan
A Cash Distribution Plan can be prepared at
the start of the liquidation.
1. Rank the partners
 Vulnerability to partnership losses
 Most vulnerable to least
2. Prepare a schedule of assumed loss absorption
 Assume most vulnerable partner's equity loss
first, then next, …
3. Prepare a cash distribution plan
4. Then, a cash distribution schedule
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-27
1. Vulnerability Ranking
Partners are ranked according to loss
absorption potential
Loss absorption potential =
Partner equity / loss ratio
Duro, Kemp, and Roth have $340, $360, and
$160 equity with profit-loss ratios of 50%,
30%, and 20%
Duro: 340/.5 = $ 680
Kemp: 360/.3 = $1,200
Roth: 160/.2 = $ 800
Duro is most vulnerable, Kemp is least.
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-28
2. Assume Loss Absorption
Assume partnership losses sufficient to wipe out
Duro first, then additional losses to eliminate Roth.
*$680 is from Duro’s vulnerability ranking.
*$60 = (800–680) x (30%+20%) additional loss for Roth.
Duro Kemp Roth Total*
Equity (net of loans) $340 $360 $160 $860
Assumed losses:
Share 5:3:2 (340) (204) (136) (680)
Subtotal $0 $156 $24
Assume additional losses:
New ratio 3:2 (36) (24) (60)
Subtotal $0 $120 $0 $120
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-29
3. Cash Distribution Plan
If the $500 liabilities have not yet been paid,
and two cash distributions are planned for
$550 and $250, a cash distribution schedule
is prepared.
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-30
4. Cash Distribution Schedule
6: INSOLVENCY
Partnership Liquidation
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-31
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-32
Insolvent Partnership
After all noncash assets are converted to cash,
what happens if cash is insufficient to pay all
creditors?
Creditor options
1. Accept only partial payment
2. Look to partners for personal resources
 May go to most solvent partners
 UPA requires partners to
 Pay own share of unsatisfied liabilities
 Pay proportionate share for partners who can't
or don't
This work is protected by United States copyright laws and
is provided solely for the use of instructors in teaching
their courses and assessing student learning.
Dissemination or sale of any part of this work
(including on the World Wide Web) will destroy the
integrity of the work and is not permitted. The
work and materials from it is should never be made
available to students except by instructors using the
accompanying text in their classes. All recipients of this
work are expected to abide by these restrictions and to
honor the intended pedagogical purposes and the needs of
other instructors who rely on these materials.
!
All rights reserved. No part of this publication may be
reproduced, stored in a retrieval system, or transmitted, in any
form or by any means, electronic, mechanical, photocopying,
recording, or otherwise, without the prior written permission of
the publisher. Printed in the United States of America.
Copyright ©2012 Pearson Education,
Inc. Publishing as Prentice Hall
17-33

More Related Content

Similar to Presentasi PPT Partnership Liquidation.pptx

Solution Manual Advanced Accounting by Baker 9e Chapter 16
Solution Manual Advanced Accounting by Baker 9e Chapter 16Solution Manual Advanced Accounting by Baker 9e Chapter 16
Solution Manual Advanced Accounting by Baker 9e Chapter 16
Saskia Ahmad
 
Chapter 1An Introduction to the Foundations of Financial.docx
Chapter 1An Introduction to the Foundations of Financial.docxChapter 1An Introduction to the Foundations of Financial.docx
Chapter 1An Introduction to the Foundations of Financial.docx
walterl4
 
Partnership accounts
Partnership accountsPartnership accounts
Partnership accounts
Tej Kiran
 
solusi manual advanced acc zy Chap016
solusi manual advanced acc zy Chap016solusi manual advanced acc zy Chap016
solusi manual advanced acc zy Chap016
Suzie Lestari
 
Itf ipp ch10_2012_final
Itf ipp ch10_2012_finalItf ipp ch10_2012_final
Itf ipp ch10_2012_final
dphil002
 
How to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
How to Form an Angel or Venture Fund: Legal, Business and Tax StrategiesHow to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
How to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
ideatoipo
 
How to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
How to Form an Angel or Venture Fund: Legal, Business and Tax StrategiesHow to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
How to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
ideatoipo
 
Accounting for Partnership by Guerrero et al
Accounting for Partnership by Guerrero et alAccounting for Partnership by Guerrero et al
Accounting for Partnership by Guerrero et al
Adrian Chris Arevalo
 
Accounting Principles, 12th Edition Ch12
Accounting Principles, 12th Edition Ch12Accounting Principles, 12th Edition Ch12
Accounting Principles, 12th Edition Ch12
AbdelmonsifFadl
 
Partnership Accounting 2
Partnership Accounting 2Partnership Accounting 2
Partnership Accounting 2
Lebogang Modise
 
Partnership accounting for advanced level.ppt
Partnership accounting for advanced level.pptPartnership accounting for advanced level.ppt
Partnership accounting for advanced level.ppt
Joshua702886
 
Session 1 Ross (2)
Session 1  Ross (2)Session 1  Ross (2)
Session 1 Ross (2)
ajithsrc
 
Financial Management; Chapter: cost of capital
Financial Management; Chapter: cost of capitalFinancial Management; Chapter: cost of capital
Financial Management; Chapter: cost of capital
Arshad Islam
 
Interest of capital of partners appropriation of profit and loss
Interest of capital of partners  appropriation of profit and lossInterest of capital of partners  appropriation of profit and loss
Interest of capital of partners appropriation of profit and loss
Tutors On Net
 
FIN Chapter 9.ppt
FIN  Chapter 9.pptFIN  Chapter 9.ppt
FIN Chapter 9.ppt
ssuserbea996
 
Chapter 3Understanding FinancialStatements and Cash Flow.docx
Chapter 3Understanding FinancialStatements and Cash Flow.docxChapter 3Understanding FinancialStatements and Cash Flow.docx
Chapter 3Understanding FinancialStatements and Cash Flow.docx
walterl4
 
Chapter 10
Chapter 10Chapter 10
Chapter 10
dphil002
 
Partnership general
Partnership  generalPartnership  general
Partnership general
Sachin Bhurase
 
Rohan acs ppt
Rohan acs pptRohan acs ppt
Rohan acs ppt
Poonam Singh
 
LESSON-4.-PARTNERSHIP-LIQUIDATION.-PPT.pdf
LESSON-4.-PARTNERSHIP-LIQUIDATION.-PPT.pdfLESSON-4.-PARTNERSHIP-LIQUIDATION.-PPT.pdf
LESSON-4.-PARTNERSHIP-LIQUIDATION.-PPT.pdf
HannaDump1
 

Similar to Presentasi PPT Partnership Liquidation.pptx (20)

Solution Manual Advanced Accounting by Baker 9e Chapter 16
Solution Manual Advanced Accounting by Baker 9e Chapter 16Solution Manual Advanced Accounting by Baker 9e Chapter 16
Solution Manual Advanced Accounting by Baker 9e Chapter 16
 
Chapter 1An Introduction to the Foundations of Financial.docx
Chapter 1An Introduction to the Foundations of Financial.docxChapter 1An Introduction to the Foundations of Financial.docx
Chapter 1An Introduction to the Foundations of Financial.docx
 
Partnership accounts
Partnership accountsPartnership accounts
Partnership accounts
 
solusi manual advanced acc zy Chap016
solusi manual advanced acc zy Chap016solusi manual advanced acc zy Chap016
solusi manual advanced acc zy Chap016
 
Itf ipp ch10_2012_final
Itf ipp ch10_2012_finalItf ipp ch10_2012_final
Itf ipp ch10_2012_final
 
How to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
How to Form an Angel or Venture Fund: Legal, Business and Tax StrategiesHow to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
How to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
 
How to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
How to Form an Angel or Venture Fund: Legal, Business and Tax StrategiesHow to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
How to Form an Angel or Venture Fund: Legal, Business and Tax Strategies
 
Accounting for Partnership by Guerrero et al
Accounting for Partnership by Guerrero et alAccounting for Partnership by Guerrero et al
Accounting for Partnership by Guerrero et al
 
Accounting Principles, 12th Edition Ch12
Accounting Principles, 12th Edition Ch12Accounting Principles, 12th Edition Ch12
Accounting Principles, 12th Edition Ch12
 
Partnership Accounting 2
Partnership Accounting 2Partnership Accounting 2
Partnership Accounting 2
 
Partnership accounting for advanced level.ppt
Partnership accounting for advanced level.pptPartnership accounting for advanced level.ppt
Partnership accounting for advanced level.ppt
 
Session 1 Ross (2)
Session 1  Ross (2)Session 1  Ross (2)
Session 1 Ross (2)
 
Financial Management; Chapter: cost of capital
Financial Management; Chapter: cost of capitalFinancial Management; Chapter: cost of capital
Financial Management; Chapter: cost of capital
 
Interest of capital of partners appropriation of profit and loss
Interest of capital of partners  appropriation of profit and lossInterest of capital of partners  appropriation of profit and loss
Interest of capital of partners appropriation of profit and loss
 
FIN Chapter 9.ppt
FIN  Chapter 9.pptFIN  Chapter 9.ppt
FIN Chapter 9.ppt
 
Chapter 3Understanding FinancialStatements and Cash Flow.docx
Chapter 3Understanding FinancialStatements and Cash Flow.docxChapter 3Understanding FinancialStatements and Cash Flow.docx
Chapter 3Understanding FinancialStatements and Cash Flow.docx
 
Chapter 10
Chapter 10Chapter 10
Chapter 10
 
Partnership general
Partnership  generalPartnership  general
Partnership general
 
Rohan acs ppt
Rohan acs pptRohan acs ppt
Rohan acs ppt
 
LESSON-4.-PARTNERSHIP-LIQUIDATION.-PPT.pdf
LESSON-4.-PARTNERSHIP-LIQUIDATION.-PPT.pdfLESSON-4.-PARTNERSHIP-LIQUIDATION.-PPT.pdf
LESSON-4.-PARTNERSHIP-LIQUIDATION.-PPT.pdf
 

Recently uploaded

Initial Public Offering (IPO) Process.ppt
Initial Public Offering (IPO) Process.pptInitial Public Offering (IPO) Process.ppt
Initial Public Offering (IPO) Process.ppt
ribhi87
 
快速制作美国迈阿密大学牛津分校毕业证文凭证书英文原版一模一样
快速制作美国迈阿密大学牛津分校毕业证文凭证书英文原版一模一样快速制作美国迈阿密大学牛津分校毕业证文凭证书英文原版一模一样
快速制作美国迈阿密大学牛津分校毕业证文凭证书英文原版一模一样
rlo9fxi
 
Seeman_Fiintouch_LLP_Newsletter_Jun_2024.pdf
Seeman_Fiintouch_LLP_Newsletter_Jun_2024.pdfSeeman_Fiintouch_LLP_Newsletter_Jun_2024.pdf
Seeman_Fiintouch_LLP_Newsletter_Jun_2024.pdf
Ashis Kumar Dey
 
BIHC Briefing June 2024 from Bank+Insurance Hybrid Capital in association wit...
BIHC Briefing June 2024 from Bank+Insurance Hybrid Capital in association wit...BIHC Briefing June 2024 from Bank+Insurance Hybrid Capital in association wit...
BIHC Briefing June 2024 from Bank+Insurance Hybrid Capital in association wit...
Neil Day
 
Exploring-Madhya-Pradesh-Culture-Heritage-and-Land-Records.pptx
Exploring-Madhya-Pradesh-Culture-Heritage-and-Land-Records.pptxExploring-Madhya-Pradesh-Culture-Heritage-and-Land-Records.pptx
Exploring-Madhya-Pradesh-Culture-Heritage-and-Land-Records.pptx
cosmo-soil
 
Discover the Future of Dogecoin with Our Comprehensive Guidance
Discover the Future of Dogecoin with Our Comprehensive GuidanceDiscover the Future of Dogecoin with Our Comprehensive Guidance
Discover the Future of Dogecoin with Our Comprehensive Guidance
36 Crypto
 
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck mari...
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck mari...TEST BANK Principles of cost accounting 17th edition edward j vanderbeck mari...
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck mari...
Donc Test
 
Independent Study - College of Wooster Research (2023-2024)
Independent Study - College of Wooster Research (2023-2024)Independent Study - College of Wooster Research (2023-2024)
Independent Study - College of Wooster Research (2023-2024)
AntoniaOwensDetwiler
 
FCCS Basic Accounts Outline and Hierarchy.pptx
FCCS Basic Accounts Outline and Hierarchy.pptxFCCS Basic Accounts Outline and Hierarchy.pptx
FCCS Basic Accounts Outline and Hierarchy.pptx
nalamynandan
 
13 Jun 24 ILC Retirement Income Summit - slides.pptx
13 Jun 24 ILC Retirement Income Summit - slides.pptx13 Jun 24 ILC Retirement Income Summit - slides.pptx
13 Jun 24 ILC Retirement Income Summit - slides.pptx
ILC- UK
 
Detailed power point presentation on compound interest and how it is calculated
Detailed power point presentation on compound interest  and how it is calculatedDetailed power point presentation on compound interest  and how it is calculated
Detailed power point presentation on compound interest and how it is calculated
KishanChaudhary23
 
Tdasx: In-Depth Analysis of Cryptocurrency Giveaway Scams and Security Strate...
Tdasx: In-Depth Analysis of Cryptocurrency Giveaway Scams and Security Strate...Tdasx: In-Depth Analysis of Cryptocurrency Giveaway Scams and Security Strate...
Tdasx: In-Depth Analysis of Cryptocurrency Giveaway Scams and Security Strate...
nimaruinazawa258
 
falcon-invoice-discounting-a-premier-investment-platform-for-superior-returns...
falcon-invoice-discounting-a-premier-investment-platform-for-superior-returns...falcon-invoice-discounting-a-premier-investment-platform-for-superior-returns...
falcon-invoice-discounting-a-premier-investment-platform-for-superior-returns...
Falcon Invoice Discounting
 
一比一原版美国新罕布什尔大学(unh)毕业证学历认证真实可查
一比一原版美国新罕布什尔大学(unh)毕业证学历认证真实可查一比一原版美国新罕布什尔大学(unh)毕业证学历认证真实可查
一比一原版美国新罕布什尔大学(unh)毕业证学历认证真实可查
taqyea
 
欧洲杯投注-欧洲杯投注买球-欧洲杯投注买球网|【​网址​🎉ac22.net🎉​】
欧洲杯投注-欧洲杯投注买球-欧洲杯投注买球网|【​网址​🎉ac22.net🎉​】欧洲杯投注-欧洲杯投注买球-欧洲杯投注买球网|【​网址​🎉ac22.net🎉​】
欧洲杯投注-欧洲杯投注买球-欧洲杯投注买球网|【​网址​🎉ac22.net🎉​】
brunasordi905
 
OAT_RI_Ep20 WeighingTheRisks_May24_Trade Wars.pptx
OAT_RI_Ep20 WeighingTheRisks_May24_Trade Wars.pptxOAT_RI_Ep20 WeighingTheRisks_May24_Trade Wars.pptx
OAT_RI_Ep20 WeighingTheRisks_May24_Trade Wars.pptx
hiddenlevers
 
The state of welfare Resolution Foundation Event
The state of welfare Resolution Foundation EventThe state of welfare Resolution Foundation Event
The state of welfare Resolution Foundation Event
ResolutionFoundation
 
Who Is Abhay Bhutada, MD of Poonawalla Fincorp
Who Is Abhay Bhutada, MD of Poonawalla FincorpWho Is Abhay Bhutada, MD of Poonawalla Fincorp
Who Is Abhay Bhutada, MD of Poonawalla Fincorp
beulahfernandes8
 
Dr. Alyce Su Cover Story - China's Investment Leader
Dr. Alyce Su Cover Story - China's Investment LeaderDr. Alyce Su Cover Story - China's Investment Leader
Dr. Alyce Su Cover Story - China's Investment Leader
msthrill
 
1比1复刻(ksu毕业证书)美国堪萨斯州立大学毕业证本科文凭证书原版一模一样
1比1复刻(ksu毕业证书)美国堪萨斯州立大学毕业证本科文凭证书原版一模一样1比1复刻(ksu毕业证书)美国堪萨斯州立大学毕业证本科文凭证书原版一模一样
1比1复刻(ksu毕业证书)美国堪萨斯州立大学毕业证本科文凭证书原版一模一样
28xo7hf
 

Recently uploaded (20)

Initial Public Offering (IPO) Process.ppt
Initial Public Offering (IPO) Process.pptInitial Public Offering (IPO) Process.ppt
Initial Public Offering (IPO) Process.ppt
 
快速制作美国迈阿密大学牛津分校毕业证文凭证书英文原版一模一样
快速制作美国迈阿密大学牛津分校毕业证文凭证书英文原版一模一样快速制作美国迈阿密大学牛津分校毕业证文凭证书英文原版一模一样
快速制作美国迈阿密大学牛津分校毕业证文凭证书英文原版一模一样
 
Seeman_Fiintouch_LLP_Newsletter_Jun_2024.pdf
Seeman_Fiintouch_LLP_Newsletter_Jun_2024.pdfSeeman_Fiintouch_LLP_Newsletter_Jun_2024.pdf
Seeman_Fiintouch_LLP_Newsletter_Jun_2024.pdf
 
BIHC Briefing June 2024 from Bank+Insurance Hybrid Capital in association wit...
BIHC Briefing June 2024 from Bank+Insurance Hybrid Capital in association wit...BIHC Briefing June 2024 from Bank+Insurance Hybrid Capital in association wit...
BIHC Briefing June 2024 from Bank+Insurance Hybrid Capital in association wit...
 
Exploring-Madhya-Pradesh-Culture-Heritage-and-Land-Records.pptx
Exploring-Madhya-Pradesh-Culture-Heritage-and-Land-Records.pptxExploring-Madhya-Pradesh-Culture-Heritage-and-Land-Records.pptx
Exploring-Madhya-Pradesh-Culture-Heritage-and-Land-Records.pptx
 
Discover the Future of Dogecoin with Our Comprehensive Guidance
Discover the Future of Dogecoin with Our Comprehensive GuidanceDiscover the Future of Dogecoin with Our Comprehensive Guidance
Discover the Future of Dogecoin with Our Comprehensive Guidance
 
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck mari...
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck mari...TEST BANK Principles of cost accounting 17th edition edward j vanderbeck mari...
TEST BANK Principles of cost accounting 17th edition edward j vanderbeck mari...
 
Independent Study - College of Wooster Research (2023-2024)
Independent Study - College of Wooster Research (2023-2024)Independent Study - College of Wooster Research (2023-2024)
Independent Study - College of Wooster Research (2023-2024)
 
FCCS Basic Accounts Outline and Hierarchy.pptx
FCCS Basic Accounts Outline and Hierarchy.pptxFCCS Basic Accounts Outline and Hierarchy.pptx
FCCS Basic Accounts Outline and Hierarchy.pptx
 
13 Jun 24 ILC Retirement Income Summit - slides.pptx
13 Jun 24 ILC Retirement Income Summit - slides.pptx13 Jun 24 ILC Retirement Income Summit - slides.pptx
13 Jun 24 ILC Retirement Income Summit - slides.pptx
 
Detailed power point presentation on compound interest and how it is calculated
Detailed power point presentation on compound interest  and how it is calculatedDetailed power point presentation on compound interest  and how it is calculated
Detailed power point presentation on compound interest and how it is calculated
 
Tdasx: In-Depth Analysis of Cryptocurrency Giveaway Scams and Security Strate...
Tdasx: In-Depth Analysis of Cryptocurrency Giveaway Scams and Security Strate...Tdasx: In-Depth Analysis of Cryptocurrency Giveaway Scams and Security Strate...
Tdasx: In-Depth Analysis of Cryptocurrency Giveaway Scams and Security Strate...
 
falcon-invoice-discounting-a-premier-investment-platform-for-superior-returns...
falcon-invoice-discounting-a-premier-investment-platform-for-superior-returns...falcon-invoice-discounting-a-premier-investment-platform-for-superior-returns...
falcon-invoice-discounting-a-premier-investment-platform-for-superior-returns...
 
一比一原版美国新罕布什尔大学(unh)毕业证学历认证真实可查
一比一原版美国新罕布什尔大学(unh)毕业证学历认证真实可查一比一原版美国新罕布什尔大学(unh)毕业证学历认证真实可查
一比一原版美国新罕布什尔大学(unh)毕业证学历认证真实可查
 
欧洲杯投注-欧洲杯投注买球-欧洲杯投注买球网|【​网址​🎉ac22.net🎉​】
欧洲杯投注-欧洲杯投注买球-欧洲杯投注买球网|【​网址​🎉ac22.net🎉​】欧洲杯投注-欧洲杯投注买球-欧洲杯投注买球网|【​网址​🎉ac22.net🎉​】
欧洲杯投注-欧洲杯投注买球-欧洲杯投注买球网|【​网址​🎉ac22.net🎉​】
 
OAT_RI_Ep20 WeighingTheRisks_May24_Trade Wars.pptx
OAT_RI_Ep20 WeighingTheRisks_May24_Trade Wars.pptxOAT_RI_Ep20 WeighingTheRisks_May24_Trade Wars.pptx
OAT_RI_Ep20 WeighingTheRisks_May24_Trade Wars.pptx
 
The state of welfare Resolution Foundation Event
The state of welfare Resolution Foundation EventThe state of welfare Resolution Foundation Event
The state of welfare Resolution Foundation Event
 
Who Is Abhay Bhutada, MD of Poonawalla Fincorp
Who Is Abhay Bhutada, MD of Poonawalla FincorpWho Is Abhay Bhutada, MD of Poonawalla Fincorp
Who Is Abhay Bhutada, MD of Poonawalla Fincorp
 
Dr. Alyce Su Cover Story - China's Investment Leader
Dr. Alyce Su Cover Story - China's Investment LeaderDr. Alyce Su Cover Story - China's Investment Leader
Dr. Alyce Su Cover Story - China's Investment Leader
 
1比1复刻(ksu毕业证书)美国堪萨斯州立大学毕业证本科文凭证书原版一模一样
1比1复刻(ksu毕业证书)美国堪萨斯州立大学毕业证本科文凭证书原版一模一样1比1复刻(ksu毕业证书)美国堪萨斯州立大学毕业证本科文凭证书原版一模一样
1比1复刻(ksu毕业证书)美国堪萨斯州立大学毕业证本科文凭证书原版一模一样
 

Presentasi PPT Partnership Liquidation.pptx

  • 1. to accompany Advanced Accounting, 11th edition by Beams, Anthony, Bettinghaus, and Smith Chapter 17 Partnership Liquidation Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-1
  • 2. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-2 Partnership Liquidation: Objectives 1. Understand the legal aspects of partnership liquidation. 2. Apply simple partnership liquidation computations and accounting. 3. Perform safe payment computations. 4. Understand installment liquidations. 5. Learn about cash distribution plans for installment liquidations. 6. Comprehend liquidations when either the partnership or the partners are insolvent.
  • 3. 1: LEGAL ASPECTS OF LIQUIDATION Partnership Liquidation Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-3
  • 4. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-4 Process of Liquidation 1. Convert noncash assets to cash 2. Recognize gains or losses and expenses 3. Settle all liabilities 4. Distribute cash to partners according to balances in capital accounts Assumes  Business is solvent  Partners have equity in net assets  No partner loans  Assets are converted to cash before cash is distributed to partners
  • 5. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-5 Order of Payment The Uniform Partnership Act provides the following rank ordering for payments in partnership liquidations: 1. Amounts owed to creditors other than partners and amounts owed to partners other than for capital and profits 2. Amounts due to partners liquidating their capital balance upon conclusion of the liquidation of partnership assets and liabilities
  • 6. 2: SIMPLE LIQUIDATION Partnership Liquidation Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-6
  • 7. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-7 Simple Liquidation Convert all assets to cash, and then make a single distribution to partners in final settlement. Gains and losses on conversion of assets are distributed to partners.  Use established profit and loss ratios  Ignore salary, bonus, interest allowances
  • 8. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-8 Debit Capital in Solvent Firm If one or more (not all) partners has a debit balance in capital AND the firm has sufficient cash and other assets of value to pay all creditors, then… The partner with the debit capital balance must either  Contribute that amount to the firm, or  If unable, the debit balance is absorbed by the remaining partners  Profit and loss ratios of remaining partners remains consistent relative to each other
  • 9. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-9 Statement of Partnership Liquidation Beginning balances in cash, noncash assets, liabilities and partner accounts are adjusted as assets are converted to cash, and cash payments are made.
  • 10. Other Partner Balances The Uniform Partnership Act ranks amounts owed to partners, other than capital balances, higher than the capital balances. However, a partner with a debit capital balance may only offset other amounts owed to the partner with the debit capital account balance. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-10
  • 11. 3: SAFE PAYMENTS Partnership Liquidation Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-11
  • 12. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-12 Safe Payments - definition Safe payments are distributions that can be made to partners with the assurance that the amounts distributed will not need to be returned to the partnership at some later date to cover known liabilities or realign partner capital. Assumptions:  All partners are personally insolvent  Noncash assets represent possible losses  Additional cash may be needed for liquidation expenses
  • 13. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-13 What Safe Payments Do /Don't Do Safe payments schedules  Determine the amount of advance payment  Must be prepared for each cash distribution unless capital balances align with profit and loss ratios Don't  Change the capital balances  Affect the statement of partnership liquidation  Help project timing of distributions
  • 14. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-14 Compute Safe Payments Begin with partner capital adjusted for outstanding loans Assume all noncash assets are losses  Distribute losses to partners Plan for other loss contingencies  Distribute contingent losses to partners Redistribute possible losses from partners  Adjust profit and loss ratio Safe payments are made after non-partner creditors have been paid.
  • 15. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-15 Example of Safe Payments BMN Partnership has the following balances: Prepare a Safe Payments Schedule: 1. Net out partner loans/capital 2. Assume noncash assets are losses 3. Allow for other losses (assume $10) 4. Redistribute potential partner losses Cash $80 Loan payable to Nan $20 Loan from Max 10 Buz Capital (50%) 50 Land 20 Max Capital (30%) 70 Building, net 140 Nan Capital (20%) 110 $250 $250
  • 16. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-16 Partners must agree to any advance distribution. Possible losses Buz (50%) Max (30%) Nan (20%) Equity (net of loans) $50 $60 $130 Assumed losses: Loss on assets ($160) (80) (48) (32) Other losses (10) (5) (3) (2) Subtotal ($35) $9 $96 Assume Buz loss New ratio 3:2 35 (21) (14) Subtotal $0 ($12) $82 Assume Max loss 12 (12) Safe Payments $0 $0 $70 Example of Safe Payments (cont.)
  • 17. 4: INSTALLMENT LIQUIDATIONS Partnership Liquidation Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-17
  • 18. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-18 Installment Liquidations Involve distributions of cash to partners  As it is available  Before all gains and losses are realized Orderly liquidation of solvent partnership  Liabilities, other than those to partners, are paid first  Then, partners can receive distributions  Prepare a safe payment schedule for each distribution
  • 19. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-19 Frequent Reports A Statement of Partnership Liquidation is prepared showing:  Sale of noncash assets, distributions of P/L  Payment of creditors  Distributions to partners Safe Payment Schedule is prepared  Before distributions to partners An updated Statement of Partnership Liquidation is prepared, so there is a new Safe Payment Schedule …
  • 20. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-20 Installment Liquidation: Example Kemp's total investment is $360
  • 21. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-21 At Jan. 31, there is $640 in cash.  Liabilities still due are $500  Can we give the $140 to the partners, and if so, to whom? The safe payment schedule answers this.  Assume the remaining noncash assets are losses and allow for an extra $20 loss Installment Liquidation: Example (cont.)
  • 22. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-22 Safe Payment Schedule, Jan. 31 Kemp can receive safe payments up to $120, if Duro and Ross agree.
  • 23. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-23 Updating the Liquidation Statement
  • 24. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-24 January Distributions The liquidation schedule shows that  The creditors were paid their $500  Kemp was paid $20 on the loan and $100 of capital (maximum safe payment) Cash of $20 remained in the partnership on February 1.
  • 25. 5: CASH DISTRIBUTION PLANS Partnership Liquidation Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-25
  • 26. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-26 Cash Distribution Plan A Cash Distribution Plan can be prepared at the start of the liquidation. 1. Rank the partners  Vulnerability to partnership losses  Most vulnerable to least 2. Prepare a schedule of assumed loss absorption  Assume most vulnerable partner's equity loss first, then next, … 3. Prepare a cash distribution plan 4. Then, a cash distribution schedule
  • 27. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-27 1. Vulnerability Ranking Partners are ranked according to loss absorption potential Loss absorption potential = Partner equity / loss ratio Duro, Kemp, and Roth have $340, $360, and $160 equity with profit-loss ratios of 50%, 30%, and 20% Duro: 340/.5 = $ 680 Kemp: 360/.3 = $1,200 Roth: 160/.2 = $ 800 Duro is most vulnerable, Kemp is least.
  • 28. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-28 2. Assume Loss Absorption Assume partnership losses sufficient to wipe out Duro first, then additional losses to eliminate Roth. *$680 is from Duro’s vulnerability ranking. *$60 = (800–680) x (30%+20%) additional loss for Roth. Duro Kemp Roth Total* Equity (net of loans) $340 $360 $160 $860 Assumed losses: Share 5:3:2 (340) (204) (136) (680) Subtotal $0 $156 $24 Assume additional losses: New ratio 3:2 (36) (24) (60) Subtotal $0 $120 $0 $120
  • 29. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-29 3. Cash Distribution Plan If the $500 liabilities have not yet been paid, and two cash distributions are planned for $550 and $250, a cash distribution schedule is prepared.
  • 30. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-30 4. Cash Distribution Schedule
  • 31. 6: INSOLVENCY Partnership Liquidation Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-31
  • 32. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-32 Insolvent Partnership After all noncash assets are converted to cash, what happens if cash is insufficient to pay all creditors? Creditor options 1. Accept only partial payment 2. Look to partners for personal resources  May go to most solvent partners  UPA requires partners to  Pay own share of unsatisfied liabilities  Pay proportionate share for partners who can't or don't
  • 33. This work is protected by United States copyright laws and is provided solely for the use of instructors in teaching their courses and assessing student learning. Dissemination or sale of any part of this work (including on the World Wide Web) will destroy the integrity of the work and is not permitted. The work and materials from it is should never be made available to students except by instructors using the accompanying text in their classes. All recipients of this work are expected to abide by these restrictions and to honor the intended pedagogical purposes and the needs of other instructors who rely on these materials. ! All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright ©2012 Pearson Education, Inc. Publishing as Prentice Hall 17-33