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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$  60,000
Noncash assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	219,000
Total assets? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 279,000
Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	$  40,000
Frick, capital (60%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	129,000
Wilson, capital (20%)? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	35,000
Clarke, capital (20%) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	75,000
Total liabilities and capital? . . . . . . . . . . . . . . . . . . . . . . . . . . .	$ 279,000

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 $8,000 are estimated as a basis for this computation.

2.Sold noncash assets with a book value of $94,000 for $60,000.

3.Paid all liabilities.

4.Distributed cash based on safe capital balances again.

5.Sold remaining noncash assets for $51,000.

6.Paid actual liquidation expenses of $6,000 only.

7.Distributed remaining cash to the partners and closed the financial records of the business permanently.

Produce a final statement of liquidation for this partnership using the predistribution plan to determine payments of cash to partners based on safe capital balances.

Part C

Prepare journal entries to record the liquidation transactions reflected in the final statement of liquidation.

Use templete below

Partnership Liquidation Schedule

.

Produce a schedule of liquidation

FRICK, WILSON, AND CLARKE

Schedule of Partnership Liquidation

Final Balances

Cash

Noncash Assets

Liabilities

Frick, Capital (60%)

Wilson, Capital (20%)

Clarke, Capital (20%)

Beginning balances                                         $60,000           $219,000             $40,000           $129,000                 $35,000           $75,000

Distribution of $4,000 (cash in excess of liabilities and estimated liquidation expenses) in accordance with pre-distribution plan

Updated balances

Noncash assets sold

Updated balances

All liabilities are paid

Updated balances

Distribution of $48,000 (cash in excess of liabilities and estimated liquidation expenses) in accordance with pre-distribution plan

First distribution

                        Next

                        Next

Updated balances    

Noncash assets sold

Updated balances

Paid liquidation expenses

Updated balances

Final distribution based on ending capital account balances

Ending balance                                         $-0-          $-0-                   $-0-                   $-0-                     $-0-        $-0

Answer 1

Part B:

	FRICK, WILSON AND CLARKE
	Statement of Partnership Liquidation
Event	Transaction	Cash	Non-cash assets	Liabilities	Frick, capital 60%	Wilson, capital 20%	Clarke, capital 20%
									Beginning Balances	60000	219000	40000	129000	35000	75000
1	Distribution of safe cash	-12000			-7200	-2400	-2400
	Updated balances	48000	219000	40000	121800	32600	72600
2	Non-cash assets sold	60000	-94000		-20400	-6800	-6800
	Updated balances	108000	125000	40000	101400	25800	65800
3	Payment of liabilities	-40000		-40000
	Updated balances	68000	125000	0	101400	25800	65800
4	Distribution of safe cash	-60000			-36000	-12000	-12000
	Updated balances	8000	125000	0	65400	13800	53800
5	Non-cash assets sold	51000	-125000		-44400	-14800	-14800
	Updated balances	59000	0	0	21000	-1000	39000
6	Lquidation Expenses	-6000			-3600	-1200	-1200
	Updated balances	53000	0	0	17400	-2200	37800
7	Final distribution	-53000			-17400	2200	-37800
	Updated balances	0	0	0	0	0	0

Part C:

FRICK, WILSON AND CLARKE
Journal entries for liquidation
Event	Account title	Debit	Credit
1	Frick, Capital	7200
	Wilson, Capital	2400
	Clarke, capital	2400
	Cash		12000
	(Distribution of safe cash)
2.a.	Cash	60000
	Loss on sale of non-cash assets	34000
	Non-Cash assets		94000
	(Sale of non cash assets of $104,000 for $64,000)
2.b.	Frick, Capital	20400
	Wilson, Capital	6800
	Clarke, capital	6800
	Loss on sale of non-cash assets		34000
	(Loss on sale of assets distributed)
3	Liabilities	40000
	Cash		40000
	(Payment of liabilities)
4	Frick, Capital	36000
	Wilson, Capital	12000
	Clarke, capital	12000
	Cash		60000
	(Distribution of safe cash)
5.a.	Cash	51000
	Loss on sale of non-cash assets	74000
	Non-Cash assets		125000
	(Sale of non cash assets of $145,000 for $56,000)
5.b.	Frick, Capital	44400
	Wilson, Capital	14800
	Clarke, capital	14800
	Loss on sale of non-cash assets		89000
	(Loss on sale of assets distributed)
6	Frick, Capital	3600
	Wilson, Capital	1200
	Clarke, capital	1200
	Loss on sale of non-cash assets		6000
	(Liquidation expenses paid)
7	Frick, Capital	17400
	Clarke, capital	37800
	Wilson, Capital		2200
	Loss on sale of non-cash assets		53000
	(Final distribution of cash)