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 | $ | 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 | Rodgers, capital (20%) | 84,000 | ||
Guthrie, capital (40%) | 65,000 | ||||
Total assets | $ | 531,000 | Total liabilities and capital | $ | 531,000 |
When the liquidation commenced, liquidation expenses of $17,000 were anticipated as being necessary to dispose of all property.
Prepare a predistribution plan for this partnership.
Prepare a predistribution plan for this partnership. (Do not round intermediate calculations.)
Part B
The following transactions transpire during the liquidation of the Wingler, Norris, Rodgers, and Guthrie partnership:
Collected 80 percent of the total accounts receivable with the rest judged to be uncollectible.
Sold the land, building, and equipment for $160,000.
Made safe capital distributions.
Learned that Guthrie, who has become personally insolvent, will make no further contributions.
Paid all liabilities.
Sold all inventory for $81,000.
Made safe capital distributions again.
Paid actual liquidation expenses of $8,000 only.
Made final cash disbursements to the partners based on the assumption that all partners other than Guthrie are personally solvent.
Prepare journal entries to record these liquidation transactions.
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