Question

The partnership of Wingler, Norris, Rodgers, and Guthrie was formed several years ago as a local architectural firm. Several partners have recently undergone personal financial problems and have decided to terminate operations and liquidate the business. The following balance sheet is drawn up as a guideline for this process:

Cash	$	29,000	Liabilities	$	72,000
Accounts receivable		96,000	Rodgers, loan		49,000
Inventory		115,000	Wingler, capital (30%)		141,000
Land		92,000	Norris, capital (10%)		102,000
Building and equipment (net)		175,000	Rodgers, capital (20%)		81,000
			Guthrie, capital (40%)		62,000
Total assets	$	507,000	Total liabilities and capital	$	507,000

  

When the liquidation commenced, liquidation expenses of $17,000 were anticipated as being necessary to dispose of all property.

Part B

The following transactions transpire during the liquidation of the Wingler, Norris, Rodgers, and Guthrie partnership:

1. Collected 90 percent of the total accounts receivable with the rest judged to be uncollectible.
2. Sold the land, building, and equipment for $157,000.
3. Distributed safe payments of cash.
4. Learned that Guthrie, who has become personally insolvent, will make no further contributions.
5. Paid all liabilities.
6. Sold all inventory for $78,000.
7. Distributed safe payments of cash again.
8. Paid actual liquidation expenses of $11,000 only.
9. Made final cash disbursements to the partners based on the assumption that all partners other than Guthrie are personally solvent.

Prepare journal entries for

• Record the cash received from accounts receivable and loss allocated to partners.

• Record the cash received from land, building and equipment and allocate loss to partners.

• Record the entry for initial distribution of cash as per predistribution plan.

• Record Guthrie's insolvency.

• Record the settlement of all liabilities.

• Record the cash received from inventory and loss allocated to partners.

• Record the distribution of cash as per predistribution plan.

• Record the cash paid for liquidation expenses.

• Record the elimination of deficit balance of insolvent partner.

• Record the distribution of remaining cash based on final capital balances.

Answer 1