Question

The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate its business property. A balance sheet drawn up at this time shows the following account balances:

Cash	$	64,000		Liabilities	$	38,000
Noncash assets		261,000		Frick, capital (60%)		156,000
				Wilson, capital (20%)		42,000
				Clarke, capital (20%)		89,000
Total assets	$	325,000		Total liabilities and capital	$	325,000

Part A

Prepare a predistribution plan for this partnership

Part B

The following transactions occur in liquidating this business:

Distributed cash based on safe capital balances immediately to the partners. Liquidation expenses of $8,000 are estimated as a basis for this computation.

Sold noncash assets with a book value of $108,000 for $64,000.

Paid all liabilities.

Distributed cash based on safe capital balances again.

Sold remaining noncash assets for $58,000.

Paid actual liquidation expenses of $6,000 only.

Distributed remaining cash to the partners and closed the financial records of the business permanently.

Produce a final statement of liquidation for this partnership using the predistribution plan to determine payments of cash to partners based on safe capital balances.

Part C

Prepare journal entries to record the liquidation transactions reflected in the final statement of liquidation.

Answer 1

Part A . Alocation Plan as follows

	Allocation Plan				60%	20%	20%
	total Assets	Cash	Non Cash Assets	Liabilities	Frick Capital	wilson Capital	Clarke	total
Adjusted Balance	3,25,000	64,000	2,61,000	-38,000	1,56,000	42,000	89,000	2,87,000
Asset Sale			-1,22,000
Asset Sale		1,22,000
loss of Asset Sale			1,39,000		-83,400	-27,800	-27,800
Pay Liability		-38,000		38,000
Pay liquidating exp		-8,000			-4800	-1600	-1600
Balance cash to partners		-1,40,000			-67,800	-12600	-59600
Total		0		0	0	0	0	0

PART B

	FINAL ALLOCATION			60%	20%	20%
	Cash	Non Cash Assets	Liabilities	Frick Capital	wilson Capital	Clarke
Adjusted Balance	64,000	2,61,000	-38,000	1,56,000	42,000	89,000
Asset Sale		-1,22,000
Asset Sale	1,22,000
loss of Asset Sale		-1,39,000		-83,400	-27,800	-27,800
Pay Liability	-38,000		38,000
Pay liquidating exp	-6,000			-3600	-1200	-1200
Balance cash to partners	-1,42,000			-69,000	-13000	-60000
Total	0	0	0	0	0	0

PART - C

JOURNAL	Debit	Credit
Cash	122000
Non Cash Assests		261000
Loss of sale asset	139000
sales of Non Cash Assets
Liabilities	38,000
Cash		38,000
payment ot liabilities
Liquidation Expenses	6000
Cash		6000
paid cash for liquidation expense
liabilities	38000
Cash		38000
Lost on sale		139000
Frick Capital	83400
Wilson Capital	27800
Clark capital	27800
Frick Capital	3600
Wilson Capital	1200
Clark capital	1200
Liquidation Expense		6000
Cash		142000
Frick Capital	69000
Wilson Capital	13000
Clark capital	60000