Question

Dawes​, Vickerman​, and Wrester are liquidating their partnership. Before selling the assets and paying the​ liabilities, the capital balances are Dawes $46,000​; Vickerman​, $25,000​; and Wrester​, $23,000. The​ profit-and-loss-sharing ratio has been 3​:1​:1 for Dawes​, Vickerman​, and Wrester​, respectively. The partnership has $84,000 cash, $ 41,000 ​non-cash assets, and $31,000 accounts payable.

Requirements:

1. Assuming the partnership sells the​ non-cash assets for $45,000​, record the journal entries for the sale of​ non-cash assets, allocation of gain or loss on​ liquidation, the payment of the outstanding​ liabilities, and the distribution of remaining cash to partners. ​(Record debits​ first, then credits. Select the explanation on the last line of the journal entry​ table.)

-Journalize the sale of the​ non-cash assets for $45,000.

-Journalize the allocation of the gain or loss to the​ partners' capital accounts.

-Journalize the payment of the liabilities.

-Journalize the distribution of remaining cash to the partners.

2. Assuming the partnership sells the​ non-cash assets for $19,000​, record the journal entries for the sale of​ non-cash assets, allocation of gain or loss on​ liquidation, the payment of the outstanding​ liabilities, and the distribution of remaining cash to partners.  ​(Record debits​ first, then credits. Select the explanation on the last line of the journal entry​ table.)

-Journalize the sale of the​ non-cash assets for $19,000.

-Journalize the allocation of the gain or loss to the​ partners' capital accounts.

-Journalize the payment of the liabilities.

-Journalize the distribution of remaining cash to the partners.

Answer 1

Answer:

1. Assuming the partnership sells the​ non-cash assets for $45,000​

• Journal- sale of the​ non-cash assets

Account	Debit	Credit
Cash	$45,000
Non-cash assets		$41,000
Profit on sale		$4,000
Total	$45,000	$45,000

• Journal- Allocation of the gain to the​ partners' capital accounts

	Dawes	Vickerman​	Wrester	Total
Opening balances	$46,000	$25,000	$23,000	$94,000
Profit on sale	$2,400	$800	$800	$4,000
Total	$48,400	$25,800	$23,800	$98,000

Calculation: Total gain of $4,000 is to be allocated between the 3 partners Dawes​, Vickerman​ and Wrester in their profit-and-loss-sharing ratio which is 3:1:1

• Journal- Payment of the liabilities

Account	Debit	Credit
Accounts Payable	$31,000
Cash		$31,000
Total	$31,000	$31,000

Explanation:

After the sale of the non-cash assets, the cash available to the partnership is the opening balance of $84,000 plus the cash from the disposal of the non cash assets of $45,000 which equals a total of $129,000.

This cash is used to settle the Accounts payable of $31,000 leaving remaining cash of $129,000 – $31,000 = $98,000 to be distributed.

• Journal- Distribution of remaining cash to the partners

	Dawes	Vickerman​	Wrester	Total
Opening balances after gain	$48,400	$25,800	$23,800	$98,000
Remaining Cash	-$48,400	-$25,800	-$23,800	-$98,000
Total	0	0	0	0

• Account	Debit	Credit
  Capital- Dawes	$48,400
  Capital- Vickerman	$25,800
  Capital- Wrester	$23,800
  Cash		$98,000
  Total	$98,000	$98,000

• Liquidation of a Partnership – Summary Allocation

	Cash	Non-cash asset	Accounts Payable	Dawes	Vickerman	Wrester
Opening balance	$84,000	$41,000	-$31,000	$46,000	$25,000	$23,000
Sell Non-cash assset	$45,000	-$41,000	-	$2,400	$800	$800
Pay accounts payable	-$31,000	-	$31,000	-	-	-
Remaining cash	-$98,000	-	-	-$48,400	-$25,800	-$23,800
Total	0	0	0	0	0	0

2. Assuming the partnership sells the​ non-cash assets for $19,000

• Journal- sale of the​ non-cash assets

Account	Debit	Credit
Cash	$19,000
Non-cash assets		$41,000
Loss on sale	$22,000
Total	$41,000	$41,000

• Journal- Allocation of the gain to the​ partners' capital accounts

	Dawes	Vickerman​	Wrester	Total
Opening balances	$46,000	$25,000	$23,000	$94,000
Loss on sale	-$13,200	-$4,400	-$4,400	-$22,000
Total	$32,800	$20,600	$18,600	$72,000

Calculation: Total loss of $22,000 is to be allocated between the 3 partners Dawes​, Vickerman​ and Wrester in their profit-and-loss-sharing ratio which is 3:1:1

• Journal- Payment of the liabilities

Account	Debit	Credit
Accounts Payable	$31,000
Cash		$31,000
Total	$31,000	$31,000

Explanation:

After the sale of the non-cash assets, the cash available to the partnership is the opening balance of $84,000 plus the cash from the disposal of the non cash assets of $19,000 which equals a total of $103,000.

This cash is used to settle the Accounts payable of $31,000 leaving remaining cash of $103,000 – $31,000 = $72,000 to be distributed.

• Journal- Distribution of remaining cash to the partners

	Dawes	Vickerman​	Wrester	Total
Opening balances after loss	$32,800	$20,600	$18,600	$72,000
Remaining Cash	-$32,800	-$20,600	-$18,600	-$72,000
Total	0	0	0	0

• Account	Debit	Credit
  Capital- Dawes	$32,800
  Capital- Vickerman	$20,600
  Capital- Wrester	$18,600
  Cash		$72,000
  Total	$72,000	$72,000

• Liquidation of a Partnership – Summary Allocation

	Cash	Non-cash asset	Accounts Payable	Dawes	Vickerman	Wrester
Opening balance	$84,000	$41,000	-$31,000	$46,000	$25,000	$23,000
Sell Non-cash assset	$19,000	-$41,000	-	-$13,200	-$4,400	-$4,400
Pay accounts payable	-$31,000	-	$31,000	-	-	-
Remaining cash	-$72,000	-	-	-$32,800	-$20,600	-$18,600
Total	0	0	0	0	0	0