Question

I am looking to see how to determine the disposal of noncash assets. They were disposed of for $160,000. The balance before was $150,000. If I am doing a Proposal of Scheduled Liquidation - Subsequent Save House Capital balances would I be putting $10,000 under cash, decrease noncash assets by $150,000 and allocation the difference of $10,000 to the partners?

Answer 1

Yes.

You need to have the same effects but with a little bit different way. At first you need to convert the Non-cash asset into Liquidation A/c at the given book value (i.e. at $ 150000). Hence, you need to pass an entry debiting the 'Liquidation A/c' against an equal amount of credit to the 'Non-cash Asset' A/c. This entry will introduce the Non-cash asset into the process of liquidation.

Further, when sold for an amount of $160000, the Cash A/c will be debited with the same against a credit of similar value to the 'Liquidation A/c'. The balance left over of $10000 in the 'Liquidation A/c' as credit is the profit on sale of that particular Non-cash asset. However, this profit is not apparently a part of owners share directly. Since, the process of liquidation has been initiated the predecessors to the equity owners in ranking of payoffs will be given preference in the order of their dues. After paying the liquidating expenses, liquidators remuneration, dues to the workers and government, dues to the outsiders balance left over/ residue (if any) will be the claim of the final/ equity owners.