Question

Trish Craig and Ted Smith have a bio-energy and consulting business and share profit and losses in a 3:1 ratio. They decide to liquidate their partnership on December 31, 2017, when the balance sheet shows the following:

Craig and Smith Consulting Balance Sheet December 31, 2017
Assets							Liabilities
Cash				$	92,500		Accounts payable				$	51,700
Property, plant and equipment	$	517,500					Equity
Less: Accumulated depreciation		200,500			317,000		Trsh Craig, capital	$	246,100
							Ted Smith, capital		111,700
Total assets				$	409,500
							Total equity					357,800
							Total liabilities and equity				$	409,500

Required:
Prepare the entries on December 31, 2017, to record the liquidation under each of the following independent assumptions:

a. Property plant and equipment are sold for $723,900.

1.Record the sale of property, plant and equipment.

2.Record the allocation of gain/loss to equity.

3.Record the payment of liabilities.

4.Record the final distribution of cash.

b. Property plant and equipment are sold for $141,300.

1.Record the sale of property, plant and equipment.

2.Record the allocation of gain/loss to equity.

3.Record the payment of liabilities.

4.Record the final distribution of cash.

Answer 1