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	$	67,000		Liabilities	$	41,000
Noncash assets		267,000		Frick, capital (60%)		159,000
				Wilson, capital (20%)		43,000
				Clarke, capital (20%)		91,000
Total assets	$	334,000		Total liabilities and capital	$	334,000

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 $9,000 are estimated as a basis for this computation.

Sold noncash assets with a book value of $110,000 for $67,000.

Paid all liabilities.

Distributed cash based on safe capital balances again.

Sold remaining noncash assets for $59,000.

Paid actual liquidation expenses of $7,000 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

Predistribution Plan

Profit Ratio					60%	20%	20%
	Total Asset	Cash	Non Cash Asset	Liabilities	Frick	Wilson	Clark
Begingin Balance	334,000.00	67,000.00	267,000.00	-41,000.00	-159,000.00	-43,000.00	-91,000.00
Record Asset Sales
Sales for $ 67000	-43,000.00	67,000.00	-110,000.00		25,800.00	8,600.00	8,600.00
Sales for $ 59000	-98,000.00	59,000.00	-157,000.00		58,800.00	19,600.00	19,600.00
Payment of Liabilities	-41,000.00	-41,000.00		41,000.00
Pyament of Liqudation Exp	-7,000.00	-7,000.00			4,200.00	1,400.00	1,400.00
Balance	145,000.00	145,000.00			70,200.00	13,400.00	61,400.00

Journal Entries

For recording sales of non cash asset

Cash A/c Dr $ 126000.00
Frick Capital A/c Dr $ 84600.00
Wilson Capital A/c Dr $ 28200.00
Clark Capital A/c Dr $ 28200.00
   To Non Cash Asset $ 267000.00

For recording payment of Liabilities

Liabilities A/c Dr $ 41000.00
   To Cash $ 41000.00

For recoding payment of Liqudation Expenses

Frick Capital A/c Dr $ 4200.00
Wilson Capital A/c Dr $ 1400.00
Clark Capital A/c Dr $ 1400.00
   To Cash A/c $ 7000.00

For final distribution of cash amoung the partners

Frick Capital A/c Dr $ 70200.00
Wilson Capital A/c Dr $ 13400.00
Clark Capital A/c Dr $ 61400.00
   To Cash A/c $ 145000.00