Partnership and Corporate Liquidation Class Notes

PARTNERSHIP AND CORPORATE LIQUIDATION - Could be fractional year
- Normally annual interest rate is
PARTNERSHIP
given
Partnership Formation - Provided regardless if profit or loss
- Interest can be fraction of interest
1. Cash – face value ratio given to all partners
2. Non Cash Assets – agreed value, fair
value, appraised value (order of BASED ON CAPITAL BASED ON DRAWING
priority) Average Capital (if Interest decreases
3. Inventory – LCNRV silent) net income
4. Liabilities – assumed if silent • Simple
5. Capital • Peso
- Bonus Method (if silent) – no month/peso day
(if silent)
change in capital
- Investment/Withdrawal Method
• AC > Unadjusted – additional Salaries
investment
- Can be fractional
• AC < Unadjusted – withdrawal
- Provided regardless if profit or loss
Adjusting Entries - Starts from the date of operation
NOT FROM DATE OF FORMATION
1. Revalue accounts with their contra
accounts and capital Bonus
2. When transferring to new books, record
- Given only if there is profit
PPE at net amount while AR at gross
- If silent, net income is before salary,
with its allowance
interest, and bonus
PARTNERSHIP CORPORATION
Case 1: Net Income is before Salary, Interest,
Arises from meeting Arises when issued
of the minds by certificate from and Bonus
SEC 𝑁𝐼 − 𝑑𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛𝑠
( ) 𝐵𝑅
1 + 𝐵𝑅
Extinguished by Extinguished by
liquidation dissolution Case 2: Net Income is after Salary, Interest, and
Bonus

Partnership Operations 𝑁𝐼 + 𝑑𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛𝑠
( ) 𝐵𝑅
1 − 𝐵𝑅
IF SILENT: DIVIDE PROFITS AND LOSSES
ACCORDING TO ORIGINAL CAPITAL Partnership Dissolution
CONTRIBUTIONS - Change in ownership
Only division of profits is given: apply same ratio Admission by Purchase without Revaluation
for division of losses (silent)
Only division of losses is given: divide profits - Ignore purchase price
according to original capital contributions - Personal transactions
Interest