Question

Bold and Victory decide to liquidate their partnership business. Their capital balances were $40,000 each, and they share income and losses in the ratio of 3:1, respectively. On the date of liquidation, the following balances were recorded in the books of the firm: Cash $50,000 Noncash assets $90,000 Accounts payable $60,000 The noncash assets are sold for $34,000 and all liabilities duly paid off. Liquidation expenses amounted to $4,000. Both partners are personally solvent. Required: Prepare all the liquidation entries necessary to close the books of accounts.

Answer 1

Solution:	STATEMENT OF PARTNERSHIP LIQUIDATION
	Particulars	Cash	+	Non Cash Assets	=	Accounts Payble +	Bold, Capital	Victory, Capital
							75.00%	25.00%
	Beginning Balance	$                 50,000	+	$               90,000	=	$                   60,000	$                      40,000	$                      40,000
	Sale of Non Cash and allocation of Gain	$                 34,000		$              -90,000		$                            -	$                     -42,000	$                     -14,000
							($56,000 X 75%)	($56,000 X 25%)
	(Loss of $ 56,000 - Distriuted to partner in there ratio
	New Balance	$                 84,000	+	$                         -	=	$                   60,000	$                       -2,000	$                      26,000
	Pay Liabilities	$                -60,000	+	$                         -	=	$                 -60,000	$                                -	$                                -
	New Balance	$                 24,000	+	$                         -	=	$                            -	$                       -2,000	$                      26,000
	Cash Taken from Negative balance in capital accounts	$                    2,000		$                         -		$                            -	$                         2,000	$                                -
	New Balance	$                 26,000	+	$                         -	=	$                            -	$                                -	$                      26,000
	Cash Distributed to Partners	$                -26,000	+	$                         -	=	$                            -	$                                -	$                     -26,000
	Final Balance	$                           -	+	$                         -	=	$                            -	$                                -	$                                -
Solution:
Transaction	Account Title and Explanation	Debit		Credit
A	Cash	$                 34,000
	Loss on Sale of Assets	$                 56,000
	Assets			$               90,000
	(To Record the sale of other assets)
B	Bold's Capital	$                 42,000
	Victory's Capital	$                 14,000
	Loss on sale of Assets			$               56,000
	(To Record the distribution of Loss on sale of assets)
C	Account Payable	$                -60,000
	Cash			$              -60,000
	(To Record the payment of Acct Payable)
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