Question

Kendra, Cogley, and Mei share income and loss in a 3:2:1 ratio. The partners have decided to liquidate their partnership. On the day of liquidation their balance sheet appears as follows.
  

KENDRA, COGLEY, AND MEI Balance Sheet May 31
Assets				Liabilities and Equity
Cash	$	82,600		Accounts payable	$	246,000
Inventory		539,400		Kendra, Capital		75,200
				Cogley, Capital		169,200
				Mei, Capital		131,600
Total assets	$	622,000		Total liabilities and equity	$	622,000

Required:
For each of the following scenarios, complete the schedule allocating the gain or loss on the sale of inventory. Prepare journal entries to record the below transactions. (Do not round intermediate calculations. Amounts to be deducted or Losses should be entered with a minus sign. Round your final answers to the nearest whole dollar.)

(1) Inventory is sold for $627,000.
(2) Inventory is sold for $464,400.
(3) Inventory is sold for $334,200 and any partners with capital deficits pay in the amount of their deficits.
(4) Inventory is sold for $273,600 and the partners have no assets other than those invested in the partnership.
  

Answer 1

(1) Inventory is sold for $ 627,000

(i) Cash A/c Dr. 627,000

To Inventory A/c 539,400

To Kendra Capital 43,800

To Cogley Capital A/c 29,200

To Mei Capital A/c 14,600

(Being Inventory sold and profit made on sale of inventory transferred to partner's capital account in 3:2:1 ratio)

(ii) Account Payable A/c Dr. 246,000

To Cash A/c 246,000

(Being payment made.)

(iii) Kendra Capital A/c Dr. 119,000

Cogley Capital A/c Dr. 198,400

Mei Capital A/c Dr. 146,200

To Cash A/c 463,600

(Being full and final payment made to partners according to their balance in capital account)

Working Note: Inventory amounting $ 539,400 is sold for $ 627,000 so there has been a profit of 87,600 which has been transferred to partner's capital account in 3:2:1 ratio)

(2) Inventory is sold for $464,400

(i) Cash A/c Dr. 464,400

Kendra Capital A/c Dr.37,500

Cogley Capital A/c Dr. 25,000

Mei Capital A/c Dr. 12,500

To Inventory A/c 539,400

(Being inventory sold and loss on sale transfer to partner's capital account in 3:2:1 ratio)

(2) Account Payable A/c Dr. 246,000

To Cash A/c 246,000

(Being payment made)

(3) Kendra Capital A/c Dr. 37,700

Cogley Capital A/c Dr. 144,200

Mei Capital A/c Dr. 119,100

To Cash A/c 301,000

(Being full and final payment made to parnter as per their capital account balance.)

Working Note: Inventory amounting to $ 539,400 is sold for $ 464,400 resulting in a loss of $ 75,000 which has been distributed in partner's capital account in their profit sharing ratio of 3:2:1)

(3) Inventory is sold for $334,200 and any partners with capital deficits pay in the amount of their deficits.

(i) Cash A/c Dr. 334,200

Kendra Capital A/c Dr. 102,600

Cogley Capital A/c Dr. 68,400

Mei Capital A/c Dr. 34,200

To Inventory A/c 539,400

(Being inventory sold and loss made on sale transferred to partner's capital account in 3:2:1 ratio)

(ii) Account Payable A/c Dr. 246,000

To Cash A/c 246,000

(Being amount paid)

(iii) Cash A/c Dr. 27,400

To Kendra Capital A/c 27,400

(Being deficit balance paid in by the partner)

(iv) Cogley Capital A/c Dr. 100,800

Mei Capital A/c Dr. 97,400

To Cash A/c 198,200

(Being full and final payment made to partners as per their capital account balances)

Working Note: Inventory amounting to $539,400 is sold for 334,200 resulting in a loss of 205,200 which has been transferred to parnter,s capital account in their profit sharing ratio of 3:2:1

(4) Inventory is sold for $273,600 and the partners have no assets other than those invested in the partnership.

(i) Cash A/c Dr. 273,600

Kendra Capital A/c Dr. 132,900

Cogley Capital A/c Dr. 88,600

Mei Capital A/c Dr. 44,300

To Inventory A/c 539,400

(Being inventory sold and loss transferred to partner's capital account)

(ii) Account Payable A/c Dr. 246,000

To Cash A/c 246,000

(Being payment made)

(iii) Cogley Capital A/c Dr. 38466.67

Mei Capital A/c Dr. 19,233.33

To Kendra Capital A/c 57,700

(Being kendra debit balance of capital account transferred to remaining's capital accoount in 2:1 ratio as kendra has no other asset other than share in partnership so his share of loss will be borne by remaining partner)

(iii) Cogley Capital A/c Dr. 42,133,33

Mei Capital A/c Dr. 68,066.67

To Capital A/c 110,200

(Being full and final payment made to partners as per their balance in capital account)

Working Note: Inventory amounting to $ 539,400 is sold for 273,600 so the loss incurred has been transferred to partner's capital account in their profit sharing ratio of 3:2:1

Note: Cash balance and other accounts balances will be nil after the above journal entries in each case.