Question

Lui, Montavo, and Johnson plan to liquidate their Premium Pool and Spa business. They have always shared profit and losses in a 1:4:5 ratio, and on the day of the liquidation their balance sheet appeared as follows:

Premium Pool and Spa Balance Sheet June 30, 2017
Assets							Liabilities
Cash				$	79,250		Accounts payable				$	151,100
Machinery	$	616,750					Equity
Less: Accumulated depreciation		151,000			465,750		Jim Lui	$	77,700
Total assets				$	545,000		Kent Montavo, capital		202,300
							Dave Johnson, capital		113,900
							Total equity					393,900
							Total liabilities and equity				$	545,000

Required:
Part 1
Under the assumption that the machinery is sold and the cash is distributed to the proper parties on June 30, 2017, complete the schedule provided below. Show the sale, the gain or loss allocation, and the distribution of the cash in each of the following unrelated cases:

a. The machinery is sold for $516,000. (Negative answers should be indicated by a minus sign.)

	Premium Pool and Spa June 30, 2017 Cash Machinery Accum. Deprec., Machinery Accounts Payable Jim Lui, Capital Kent Montavo, Capital Dave Johnson, Capital Account balances June 30, 2017 Sale of Machinery for $516000 Balance Payment of liabilities Balance Distribution of cash to partners Balance

b. The machinery is sold for $403,000. (Negative answers should be indicated by a minus sign.)

	Premium Pool and Spa June 30, 2017 Cash Machinery Accum. Deprec., Machinery Accounts Payable Jim Lui, Capital Kent Montavo, Capital Dave Johnson, Capital Account balances June 30, 2017 Sale of Machinery for $403000 Balance Payment of liabilities Balance Distribution of cash to partners Balance

c. The machinery is sold for $199,000, and any partners with resulting deficits can and do pay in the amount of their deficits. (Negative answers should be indicated by a minus sign.)

	Premium Pool and Spa June 30, 2017 Cash Machinery Accum. Deprec., Machinery Accounts Payable Jim Lui, Capital Kent Montavo, Capital Dave Johnson, Capital Account balances June 30, 2017 Sale of Machinery for $199000 Balance Payment of liabilities Balance Johnson pays deficiency Balance Distribution of cash to partners Balance

d. The machinery is sold for $215,000, and the partners have no assets other than those invested in the business. (Negative answers should be indicated by a minus sign.)

	Premium Pool and Spa June 30, 2017 Cash Machinery Accum. Deprec., Machinery Accounts Payable Jim Lui, Capital Kent Montavo, Capital Dave Johnson, Capital Account balances June 30, 2017 Sale of Machinery for $215000 Balance Payment of liabilities Balance Allocation of deficiency Balance Distribution of cash to partners Balance

Part 2
Prepare the entry to record the final distribution of cash assuming the machinery is sold for $516,000.

Record the final distribution of cash to the partners.

Answer 1

Answer Part 1-a.
Premium Pool & Spa June 30, 2017
	Cash	Machinery	Accum. Dep. Machinery	Accounts Payable	Jim Lui, Capital	Kent Montavo, Capital	Dave Johnson, Capital
Accounts Balances Jun 30, 2017	79,250.00	616,750.00	(151,000.00)	151,100.00	77,700.00	202,300.00	113,900.00
Sale of Machinery for $516,000	516,000.00	(616,750.00)	151,000.00	-	5,025.00	20,100.00	25,125.00
Balance	595,250.00	-	-	151,100.00	82,725.00	222,400.00	139,025.00
Payment of Liabilities	(151,100.00)			(151,100.00)
Balance	444,150.00	-	-	-	82,725.00	222,400.00	139,025.00
Distribution of Cash to Partners	(444,150.00)				(82,725.00)	(222,400.00)	(139,025.00)
Balance	-	-	-	-	-	-	-
Answer Part 1-b.
Premium Pool & Spa June 30, 2017
	Cash	Machinery	Accum. Dep. Machinery	Accounts Payable	Jim Lui, Capital	Kent Montavo, Capital	Dave Johnson, Capital
Accounts Balances Jun 30, 2017	79,250.00	616,750.00	(151,000.00)	151,100.00	77,700.00	202,300.00	113,900.00
Sale of Machinery for $403,000	403,000.00	(616,750.00)	151,000.00	-	(6,275.00)	(25,100.00)	(31,375.00)
Balance	482,250.00	-	-	151,100.00	71,425.00	177,200.00	82,525.00
Payment of Liabilities	(151,100.00)			(151,100.00)
Balance	331,150.00	-	-	-	71,425.00	177,200.00	82,525.00
Distribution of Cash to Partners	(331,150.00)				(71,425.00)	(177,200.00)	(82,525.00)
Balance	-	-	-	-	-	-	-
Answer Part 1-c.
Premium Pool & Spa June 30, 2017
	Cash	Machinery	Accum. Dep. Machinery	Accounts Payable	Jim Lui, Capital	Kent Montavo, Capital	Dave Johnson, Capital
Accounts Balances Jun 30, 2017	79,250.00	616,750.00	(151,000.00)	151,100.00	77,700.00	202,300.00	113,900.00
Sale of Machinery for $199000	199,000.00	(616,750.00)	151,000.00	-	(26,675.00)	(106,700.00)	(133,375.00)
Balance	278,250.00	-	-	151,100.00	51,025.00	95,600.00	(19,475.00)
Payment of Liabilities	(151,100.00)			(151,100.00)
Balance	127,150.00	-	-	-	51,025.00	95,600.00	(19,475.00)
Johnson Pays Deficiency	19,475.00						19,475.00
Balance	146,625.00	-	-	-	51,025.00	95,600.00	-
Distribution of Cash to Partners	(146,625.00)				(51,025.00)	(95,600.00)	-
Balance	-	-	-	-	-	-	-
Answer Part 1-d.
Premium Pool & Spa June 30, 2017
	Cash	Machinery	Accum. Dep. Machinery	Accounts Payable	Jim Lui, Capital	Kent Montavo, Capital	Dave Johnson, Capital
Accounts Balances Jun 30, 2017	79,250.00	616,750.00	(151,000.00)	151,100.00	77,700.00	202,300.00	113,900.00
Sale of Machinery for $215000	215,000.00	(616,750.00)	151,000.00	-	(25,075.00)	(100,300.00)	(125,375.00)
Balance	294,250.00	-	-	151,100.00	52,625.00	102,000.00	(11,475.00)
Payment of Liabilities	(151,100.00)			(151,100.00)
Balance	143,150.00	-	-	-	52,625.00	102,000.00	(11,475.00)
Allocation of Deficiency	-				(2,295.00)	(9,180.00)	11,475.00
Balance	143,150.00	-	-	-	50,330.00	92,820.00	-
Distribution of Cash to Partners	(143,150.00)				(50,330.00)	(92,820.00)	-
Balance	-	-	-	-	-	-	-

Answer Part 2.
Journal Entry
Date	Particulars	Dr. Amt.	Cr. Amt.
1	Jim Lui, Capital	82,725.00
	Kent Montavo, Capital	222,400.00
	Dave Johnson, Capital	139,025.00
	Cash		444,150.00
	(record the final dustribution to partners)