Question

A, B and C are partners sharing profits and losses in the ratio of 60%,30% and 10%. They decided to liquidate their business. The balance Sheet on the date of liquidation was as follows:

Cash 20,000

Receivables 40,000

Other current assets 20,000

Machinery 80,000

Equipments 50,000

Land and building 300,000

Liabilities 150,000

Capital Account balances:

A 200,000

B 124,000

C 36,000

C had become insolvent and was unable to pay towards any of his partnership debts.

The assets and liabilities were realized as follows:

a. Receivables paid only 50% of their dues.

b. Other current assets were sold for $15,000

c. Machinery and equipments were sold at their market values of $30,000 and $20,000 respectively.

d. Land was sold at the book value of $70,000 but Building yielded 40% of the book values.

e. All liabilities were paid off. Solvent partners paid their debit capital balances if any, in cash.

f. The liquidation expenses amounted to $12,000

Reqd.

1. Show the statement of liquidation for the partnership.

2. Show necessary journal entries to record the liquidation of the business

Answer 1