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	$ 51,000		Liabilities	$ 37,000
Noncash assets	183,000		Frick, capital (60%)	105,000
			Wilson, capital (20%)	29,000
			Clarke, capital (20%)	63,000
Total assets	$234,000		Total liabilities and capital	$234,000

Part A

Prepare a predistribution plan for this partnership

Part B

The following transactions occur in liquidating this business:

1.	Distributed cash based on safe capital balances immediately to the partners. Liquidation expenses of $10,000 are estimated as a basis for this computation.
2.	Sold noncash assets with a book value of $82,000 for $51,000.
3.	Paid all liabilities.
4.	Distributed cash based on safe capital balances again.
5.	Sold remaining noncash assets for $45,000.
6.	Paid actual liquidation expenses of $8,000 only.
7.	Distributed remaining cash to the partners and closed the financial records of the business permanently.

  

Answer 1

Reliasation A/c
	$			$
To Non cash Assets	183,000	By Liabilities		37,000
To Cash (Liabilities)	37,000	By Cash (Non Cash Assets)		51,000
To Cash (Liquidation Expenses)	8,000	By Cash (Remaining Non Cash Assets)		45,000
		By Partner capital
		Frick	57,000
		Wilson	19,000
		Clarke	19,000	95,000
	228,000			228,000

Cash A/c
Opening	51,000	By Liabilities		37,000
To Non-Cash Assets	51,000	By Expenses		8,000
To Non-Cash Assets	45,000	By Partner capital
		Frick	61,200
		Wilson	20,400
		Clarke	20,400	102,000
	147,000			147,000

Note:

Profit and Loss is shared in Prodit sharing ratio.

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