In: Accounting
Part A
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 |
$ |
61,000 |
Liabilities |
$ |
47,000 |
Accounts receivable |
128,000 |
Rodgers, loan |
81,000 |
||
Inventory |
147,000 |
Wingler, capital (30%) |
189,000 |
||
Land |
108,000 |
Norris, capital (10%) |
134,000 |
||
Building and equipment (net) |
191,000 |
Rodgers, capital (20%) |
97,000 |
||
Guthrie, capital (40%) |
87,000 |
||||
Total assets |
$ |
635,000 |
Total liabilities and capital |
$ |
635,000 |
When the liquidation commenced, liquidation expenses of $26,000 were anticipated as being necessary to dispose of all property.
Prepare a predistribution plan for this partnership.
Part B
The following transactions transpire during the liquidation of the Wingler, Norris, Rodgers, and Guthrie partnership:
Prepare journal entries to record these liquidation transactions.
Part A | ||||
Wingler, Norris, Rodgers, and Guthrie | ||||
Statement of Partnership Liquidation | ||||
Partner's Capital | ||||
Wingler Capital(30%) | Norris Capital(10%) | Rodgers Loan and Capital(20%) | Guthrie Capital(40%) | |
Opening Balance | $ 189,000.00 | $ 134,000.00 | $ 178,000.00 | $ 87,000.00 |
Loss of $217500 assumed (allocated on a 30:10:20:40)(SCHEDULE-1) | $ (65,250.00) | $ (21,750.00) | $ (43,500.00) | $ (87,000.00) |
Step one Balance | $ 123,750.00 | $ 112,250.00 | $ 134,500.00 | $ - |
Loss of $247500 assumed (allocated on a 30:10:20)SCHEDULE-2) | $ (123,750.00) | $ (41,250.00) | $ (82,500.00) | $ - |
Step Two Balance | $ - | $ 71,000.00 | $ 52,000.00 | $ - |
Loss of $78000 assumed (allocated on a 10:20)SCHEDULE-3) | $ (26,000.00) | $ (52,000.00) | ||
Step Three Balance | $ - | $ 45,000.00 | $ - | $ - |
Payment of all liabilities and liquidation expenses must be assured | ||||
Next $45000 goes entirely to norris | ||||
Next 78000 is allocated to norris(10/30)and rodgers(20/30)) | ||||
Next247500 is allocated to wingler (30/60 ,norris(10/60)and rodgers(20/60)) | ||||
Any further cash distribution are divided on the original profit and loss ratio | ||||
Wingler
(30%),Norris(10%),Guthrie (40%) ,Rodgers (20%) |
||||
Schedule 1 | ||||
Partner | capital balance/loss allocation | Max loss that can be absporbed | ||
Wingler | 189000/30% | $ 630,000.00 | ||
Norris | 134000/10% | $ 1,340,000.00 | ||
Rodgers | 178000/20% | $ 890,000.00 | ||
Guthrie | 87000/40% | $ 217,500.00 | Most vulnerable to cash | |
Schedule 2 | ||||
Partner | capital balance/loss allocation | Max loss that can be absporbed | ||
Wingler | 123750/(30/60) | $ 247,500.00 | Most vulnerable to cash | |
Norris | 112250/(10/60) | $ 673,500.00 | ||
Rodgers | 134500/(20/60) | $ 403,500.00 | ||
Schedule 3 | ||||
Partner | capital balance/loss allocation | Max loss that can be absporbed | ||
Norris | 71000/(10/30) | $ 213,000.00 | ||
Rodgers | 52000/(20/30) | $ 78,000.00 | Most vulnerable to cash |
PART B
Journal Entries - | |||
Date | Particulars | Debit | Credit |
1 | Cash | $102,400.00 | |
Wingler Capital | $7,680.00 | ||
Norris Capital | $2,560.00 | ||
Rodgers Loan and Capital | $5,120.00 | ||
Guthrie Capital | $10,240.00 | ||
Accounts Receivable | $128,000.00 | ||
(Receivable are collected with losses allocated to partner | |||
2 | Cash | $173,000.00 | |
Wingler Capital | $37,800.00 | ||
Norris Capital | $12,600.00 | ||
Rodgers Loan and Capital | $25,200.00 | ||
Guthrie Capital | $50,400.00 | ||
Land ,building & Equipment | $299,000.00 | ||
(Land ,building & Equipmente are sold with losses allocated to partner | |||
3 | Wingler Capital | $70,200.00 | |
Norris Capital | $94,400.00 | ||
Rodgers Loan | $81,000.00 | ||
Rodgers Capital | $17,800.00 | ||
Cash(note-1) | $263,400.00 | ||
(To Distribute safe capital balance ) | |||
4 | No journal entries Guthrie, who has become personally insolvent | ||
5 | Liability | $47,000.00 | |
cash | $47,000.00 | ||
(To Paid Liability) | |||
6 | Cash | $78,000.00 | |
Wingler Capital | $34,500.00 | ||
Norris Capital | $11,500.00 | ||
Rodgers Loan and Capital | $23,000.00 | ||
Inventory | $147,000.00 | ||
Related SolutionsPart A The partnership of Wingler, Norris, Rodgers, and Guthrie was formed several years ago as...Part A
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
$
35,000
Liabilities
$
69,000
Accounts receivable
102,000
Rodgers, loan
55,000
Inventory
121,000
Wingler, capital (30%)
150,000
Land
95,000
Norris, capital (10%)
108,000
Building and equipment
(net)
178,000...
The partnership of Wingler, Norris, Rodgers, and Guthrie was formed several years ago as a local...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...
The partnership of Wingler, Norris, Rodgers, and Guthrie was formed several years ago as a local...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
$
37,000
Liabilities
$
68,000
Accounts receivable
104,000
Rodgers, loan
57,000
Inventory
123,000
Wingler, capital (30%)
153,000
Land
96,000
Norris, capital (10%)
110,000
Building and equipment (net)
179,000
Rodgers, capital...
The partnership of Wingler, Norris, Rodgers, and Guthrie was formed several years ago as a local...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
33000
Liabilities
70000
A/R
100000
Rodgers, loan
53000
Inventory
119000
Wingler, Cap. (30%)
147000
Land
94000
Norris, Cap. (10%)
106000
Building & Equipment
177000
Rodgers, Cap. (20%)
83000
Guthrie, Cap....
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Liabilities
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