Question

Joe, Jim, and Jay have been partners for several years. The partners allocate all profits and losses on a 4:4:2 basis, respectively. Now, each partner has become personally insolvent and, the three partners have decided to liquidate the business in hopes of solving their personal financial issues. As of September 1, the partnership’s balance sheet is as follows:

Assets			Liabilities and Capital
Cash	$	35,000	Liabilities	$	131,000
Accounts receivable		132,000	Joe, capital		60,000
Inventory		122,000	Jim, capital		99,000
Land, building, and equipment (net)		71,000	Jay, capital		70,000
Total assets	$	360,000	Total liabilities and capital	$	360,000

Required:

Prepare journal entries for the following transactions (if no entry is required for a transaction/ event, indicate "No journal entry required"):

1. Sold all inventory for $80,000 cash (1 point).
2. Paid $14,700 in liquidation expenses (1 point).
3. Paid $64,000 of the partnership’s liabilities (1 point).
4. Collected $84,000 of the accounts receivable (1 point).
5. Distributed safe cash balances; the partners anticipate no further liquidation expenses (5 points).

Answer 1