Question

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.

Answer 1

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)