Reference no: EM132744425

Apple, Banana and Lemon have decided to liquidate their partnership on Dec. 1, 2020. The statement of financial position is shown below:

Lump-Sum Liquidation B. ABL Partnership

Statement of Financial Position

Dec 01, 2020

Assets Cash P 25,000

Accounts Receivable (net) 75,000

Inventories 100,000

Property and Equipment (net) 300,000

Total Assets P 500,000

Liabilities and Capital

Accounts Payable P240,000

Loan Payable-Bantilles 30,000

Apple, Capital 120,000

Banana, Capital 50,000

Lemon, Capital 60,000

Total Liabilities and Capital P500,000

Additional information:

a) The personal assets (excluding partnership capital and loan interests) and personal liabilities of each partner as of Dec. 1, 2020, are presented below:

                                        Apple                Banana              Lemon

Personal assets         P250,000          P300,000            P350,000

Personal liabilities       (230,000)           (240,000)            (325,000)

Personal net worth      P 20,000            P 60,000         P 25,000

b) Apple, Banana, and Lemon share profits and losses in the ratio 20:40:40, respectively.

c) In the partnership agreement, interest will not accrue on partners' loan balances during the liquidation process.

d) All of the non-cash assets were sold on Dec. 10, 2020 for P260,000.

Problem 1: How to prepare the liquidation journal entries?

Problem 2: How to prepare the statement of liquidation?