Partnerships:
Liquidation
Baker / Lembke / King
2
A new partner is admitted or a partner withdraws.
The specified term or task of the partnership has
been completed.
All partners agree to dissolve the partnership.
The partnership or an an individual partner is
bankrupt.
By court degree:
A partner is declared insane.
A partner seriously breaches the partnership agreement.
The court determines that a partnership may be
operated only at a loss.
A new partner is admitted or a partner withdraws.
The specified term or task of the partnership has
been completed.
All partners agree to dissolve the partnership.
The partnership or an an individual partner is
bankrupt.
By court degree:
A partner is declared insane.
A partner seriously breaches the partnership agreement.
The court determines that a partnership may be
operated only at a loss.
3
• A court so decrees.
• The partnership is
bankrupt.
• The partnership’s
business becomes
illegal.
if--4
Partnership creditors other than
partners.
Partners’ claims other than
capital and profits, such as loans
payable and accrued interest
payable.
Partners’ claims to capital or
profits, to the extent of credit
balances in capital accounts.
5
Personal creditors of
individual partners.
For general partners,
partnership creditors for
unpaid partnership
liabilities, regardless of
partner’s capital balance
in the partnership.
6
Basic Facts at Liquidation
Partners
Aldi Bayu Citra
Profit and loss percentage
40%
40%
20%
Partnership capital account Rp34,000,000 Rp10,000,000 Rp14,000,000
Aldi Bayu Citra
Personal assets
Rp150,000,000 Rp12,000,000 Rp42,000,000
Personal liabilities
(86,000,000) (16,000,000)
(14,000,000)
7
Trial Balance on Liquidation Date
ABC Partnership
Trial Balance
May 1, 19X5
Cash
Rp 10,000,000
Noncash Assets
90,000,000
Liabilities
Rp 42,000,000
Aldi, Capital (40%)
34,000,000
Bayu, Capital (40%)
10,000,000
Citra, Capital (20%)
14,000,000
8
Partnership Solvent--No Deficits
ABC Partnership
Statement of Partnership Realization and Liquidation Lump-Sum Liquidation (in 000’000)
Preliquidation balances 10 90 (42) (34) (10) (14)
10
Partnership Solvent--Deficit Created
ABC Partnership
Statement of Partnership Realization and Liquidation Lump-Sum Liquidation (in 000,000)
Preliquidation balances 10 90 (42) (34) (10) (14) Sale of assets and
distri-bution of Rp55 loss 35 (90) 22 22 11 45 -0- (42) (12) 12 (3) Payment to o/s creditors (42) 42
11
Partnership Solvent--Deficit Created
ABC Partnership
Statement of Partnership Realization and Liquidation Lump-Sum Liquidation (in 000,000)
(from previous slide) 3 -0- -0- (4) -0- 1 Contribution by Citra
to remedy capital deficit 1 (1)
2 -0- -0- (4) -0- -0-Lump-sum payments to
partners:
Partner’s capital (4) 4
Postliquidation balance -0- -0- -0- -0- -0-
12
Partnership Insolvent--Deficit Created
ABC Partnership
Statement of Partnership Realization and Liquidation Lump-Sum Liquidation (in 000,000)
distri-13
Partnership Insolvent--Deficit Created
ABC Partnership
Statement of Partnership Realization and Liquidation Lump-Sum Liquidation (in 000,000)
(from previous slide) 30 -0- (42) 6 -0- 6 Contribution by
Citra 12 (6) (6)
42 -0- (42) -0- -0- -0-Payment to outside
creditors (42) -0- 42 -0- -0-
-0-Postliquidation balances -0- -0- -0- -0- -0-
14
Installment Liquidation--May 19X5
ABC Partnership
Statement of Partnership Realization and Liquidation Lump-Sum Liquidation (in 000,000)
Preliquidation balances 10 90 (42) (34) (10) (14) Sale of assets and
bution of Rp10 loss 45 (55) 4 4 2 55 35 (42) (30) (6) (12) Payment to o/s creditors (42) 42
13 35 -0- (30) (6) (12) Safe payment to partners
15
Schedule of Safe Payments to Partners
ABC Partnership
Schedule of Safe Payments to Partners, May 31, 19X5
Capital balances, May 31,before cash distr. (30,000,000)(6,000,000)(12,000,000) Assume full loss of Rp35,000,000 on
remaining noncash assets and Rp10,000,000 in possible future
liquidation expenses 18,000,000 18,000,000 9,000,000 (12,000,000)12,000,000 (3,000,000) Assume Bayu’s potential deficit must
be absorbed by Aldi and Citra: (12,000,000) 40/60 x Rp12,000,000 8,000,000
20/60 x Rp12,000,000 4,000,000
(4,000,000) -0- 1,000,000 Assume Citra’s potential deficit must be
Partner
Aldi. Bayu Citra
16
Installment Liquidation--May 19X5
ABC Partnership
Statement of Partnership Realization and Liquidation Lump-Sum Liquidation (in 000,000)
Preliquidation balances 10 90 (42) (34) (10) (14) Sale of assets and
bution of Rp10 loss 45 (55) 4 4 2 55 35 (40) (30) (6) (12) Payment to o/s creditors (42) 42
13 35 -0- (30) (6) (12) Safe payment to partners (3) 3
(to next slide) 10 35 -0- (27) (6) (12)
17
Installment Liquidation--June 19X5
ABC Partnership
Statement of Partnership Realization and Liquidation Lump-Sum Liquidation (in 000,000)
(from previous slide) 10 35 -0- (27) (6) (12) Sale of assets and
tribution of Rp15 loss 15 (30) 6 6 3 25 5 -0- (21) -0- (9) Safe payment to partners
18
Schedule of Safe Payments to Partners
ABC Partnership
Schedule of Safe Payments to Partners, June 30, 19X5
Capital and loan balances, June 30 (21,000,000) -0- (9,000,000) Assume full loss of Rp5,000,000 on
remaining noncash assets and Rp10,000,000 in possible future
liquidation expenses 6,000,000 6,000,000 3,000,000 (15,000,000) 6,000,000 (6,000,000) Assume Bayu’s potential deficit must
be absorbed by Aldi and Citra: (6,000,000) 40/60 x Rp6,000,000 4,000,000
20/60 x Rp6,000,000 2,000,000
Safe payment to partners, June 30 (11,000,000) -0- (4,000,000)
Partner
Aldi. Bayu Citra
19
Installment Liquidation--June 19X5
ABC Partnership
Statement of Partnership Realization and Liquidation Lump-Sum Liquidation (in 000,000)
(from Slide 17) 10 35 -0- (27) (6) (12) Sale of assets and
tribution of Rp15 loss 15 (30) 6 6 3 25 5 -0- (21) -0- (9)
Safe payment to partners (15) 11 4
(to next slide) 10 5 -0- (10) -0- (5)
20
Installment Liquidation--July 19X5
ABC Partnership
Statement of Partnership Realization and Liquidation Lump-Sum Liquidation (in 000,000)
of insolvent partner: (3)
21
[(Capital + loan balances) Profit %] (85,000,000)(25,000,000)(70,000,000) Decrease highest LAP to next-highest:
Decrease Aldi by Rp15,000,000
(cash distribution of Rp6,000,000) 15,000,000
(70,000,000)(25,000,000)(70,000,000) Decrease LAP to next-highest level:
Decrease Aldi by Rp45,000,000, 45,000,000 (cash distribution of Rp22,000,000)
Decrease Citra by Rp45,000,000 45,000,000 (cash distribution of Rp11,000,000)
