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Aaron, Ben, and Carl are liquidating their business. They share income and losses in a 1:2:3...

Aaron, Ben, and Carl are liquidating their business. They share income and losses in a 1:2:3 ratio, respectively, and currently have capital balances of $15,000, $13,000, and $12,000, respectively. In addition, the partnership has $5,000 in cash, $15,000 in accounts payable, and $50,000 in noncash assets. Aaron and Ben are personally solvent, but Carl is not. Assuming that the noncash assets are sold for $20,000, prepare all liquidation entries in the journal provided without explanation.

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Expert Solution

S.no. Account Titles & Explanation Debit $ Credit $
1 Cash     20,000
Loss on realization     30,000
Non-cash Assets     50,000
( To record the sale of Non-cash assets )
2 Aaron , Capital ( 30,000 x 1/6 )        5,000
Ben, Capital ( 30,000 x 2/6 )     10,000
Carl, Capital ( 30,000 x 3 /6 )     15,000
Loss on realization     30,000
( To record the allocation of loss on realization )
3 Accounts Payable     15,000
Cash     15,000
( To record the payment of liabilities )
4 Aaron, Capital ( 3,000 x 1/3 )        1,000
Ben ,Capital ( 3,000 x 2/3)        2,000
Carl, Capital ( 15,000 - 12,000 )        3,000
( To record absorption of Carl deficiency )
5 Aaron, Capital ( 15,000 - 5,000 - 1,000 )        9,000
Ben ,Capital (13,000 - 10,000 - 2,000 )        1,000
Cash ( 5,000 + 20,000 - 15,000 )     10,000
( To record the final distribution of cash to partners)

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