Question

In: Accounting

March, April, and May have been in partnership for a number of years. The partners allocate...

March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 3:3:2 basis, respectively. Recently, each partner has become personally insolvent and, thus, the partners have decided to liquidate the business in hopes of remedying their personal financial problems. As of September 1, the partnership’s balance sheet is as follows:

  Cash $ 14,000      Liabilities $ 58,000   
  Accounts receivable 87,000      March, capital 28,000   
  Inventory 80,000      April, capital 78,000   
  Land, building, and equipment (net) 32,000      May, capital 49,000   
  Total assets $ 213,000      Total liabilities and capital $ 213,000   

Prepare journal entries for the following transactions: (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

a. Sold all inventory for $59,000 cash.
b. Paid $8,400 in liquidation expenses.
c. Paid $43,000 of the partnership’s liabilities.
d. Collected $51,000 of the accounts receivable.
e. Distributed safe cash balances; the partners anticipate no further liquidation expenses.
f. Sold remaining accounts receivable for 30 percent of face value.
g. Sold land, building, and equipment for $20,000.
h. Paid all remaining liabilities of the partnership.
i. Distributed cash held by the business to the partners.

Solutions

Expert Solution

Journal Entries :-

Sr. No. Particulars Debit($) Credit($)
a. Cash A/c Dr. 59,000
Loss on sale of Inventory A/c Dr. 21,000
To Inventory A/c 80,000
b. Liquidation Expenses A/c Dr. 8,400
To Cash A/c 8,400
c. Liabilities A/c Dr. 43,000
To Cash A/c 43,000
d. Cash A/c Dr. 51,000
To Accounts Receivable A/c 51,000
e. March Capital A/c Dr 10,405.16
April Capital A/c Dr. 28,985.81
May Capital A/c Dr. 18,209.03
To Cash A/c 57,600
f. Cash A/c Dr. 10,800
Bad Debts A/c Dr. 25,200
To Accounts Receivable A/c 36,000
g. Cash A/c Dr. 20,000
Loss on sale of Land, Building & Equipment A/c 12,000
To Land, Building and Equipment A/c 32,000
h. Liabilities A/c Dr. 15,000
To Cash A/c 15,000
i. March Capital A/c 5,563.87
April Capital A/c 15,499.35
May Capital A/c 9736.78
To Cash A/c 30,800

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