Question

Since their operations involve the tanning and waring of the skins of slughtered animals, the market for leather goods has deckined. Therefore, after 48 years of operation, the partnership of "the Good and the Ugly" has decided to liquidate. Below is the balance sheet of the partnership.

Cash	$25,000	Liabilities	$100,000
Inventory	225,000	Good, Capital (40%)	125,000
Fixed Assets	175,000	Bad, Capital (40%)	75,000
		Ugly, Capital (20%)	125,000
Total	$425,000	Total	$425,000

To liquidate:

-The partnership lowered the price of all goods. Internet sales were high amd partners removed $15,000 of the inventory to ship to internet customers. They sold the rest of the inventory collecting $175,000 in cash.

-Having reached the end of the month, the partners calculated a safe payment and distributed the cash. Because of shipping costs, they estimate that liquidation costs will be $10,000.

-The partnership shipped the rest of the inventory and collected $20,000 in cash. The then sold the fixed assets for $15,000, paid the liabilities and distributed the rest of the cash. Prepare schedules to record the liquidation process and calculation of safe payments.

Answer 1

Total Inventory = $225000 - $15000 - $175000 = $35000

Cash A/c ----------------------Dr $175000

To Inventory -------------------------------Cr $175000

Cash A/c -----------------------Dr $20000

To Internet Sales----------------------------------- ------------------- Cr $20000

Liquidation Expenses A/c -----------------------Dr $10000

To Cash A/c -----------------------------------------------------Cr $10000

Cash A/c -------------------------------------------Dr $15000

To Fixed Assets --------------------------------------------Cr $15000

Liability A/c ----------------------------------------Dr $100000

To Cash -----------------------------------------------------------Cr $100000

Cash = $25000 + $175000 + $15000 + $20000 - $10000 - $100000 = $125000

Fixed assets = $ 175000 - $15000 = $160000

Distribution of Loss

Goods Capital A/c --------------------Dr $78000

Bad Capital A/c ------------------------Dr $78000

Ugly Capital A/c -----------------------Dr $39000

To Fixed Assets --------------------------------------Cr $160000

To Inventory ------------------------------------------Cr $35000

Distribution of Cash

Goods Capital A/c --------------------Dr $50000

Bad Capital A/c ------------------------Dr $50000

Ugly Capital A/c -----------------------Dr $25000

To Cash --------------------------------------Cr $125000