Question

Problem 12-6A Liquidation of a partnership LO P5

Kendra, Cogley, and Mei share income and loss in a 3:2:1 ratio. The partners have decided to liquidate their partnership. On the day of liquidation their balance sheet appears as follows.
  

KENDRA, COGLEY, AND MEI Balance Sheet May 31
Assets				Liabilities and Equity
Cash	$	103,900		Accounts payable	$	258,000
Inventory		537,600		Kendra, Capital		76,700
				Cogley, Capital		172,575
				Mei, Capital		134,225
Total assets	$	641,500		Total liabilities and equity	$	641,500

Required:
For each of the following scenarios, complete the schedule allocating the gain or loss on the sale of inventory. Prepare journal entries to record the below transactions. (Do not round intermediate calculations. Amounts to be deducted or Losses should be entered with a minus sign. Round your final answers to the nearest whole dollar.)

(1) Inventory is sold for $608,400.
(2) Inventory is sold for $469,200.
(3) Inventory is sold for $358,800 and any partners with capital deficits pay in the amount of their deficits.
(4) Inventory is sold for $298,800 and the partners have no assets other than those invested in the partnership.
  

Complete this question by entering your answers in the tabs below.

Required 1 Inventory

Required 1 GJ

Required 2 Inventory

Required 2 GJ

Required 3 Inventory

Required 3 GJ

Required 4 Inventory

Required 4 GJ

Complete the schedule allocating the gain or loss on the sale of inventory is $608,400.

	Step 1) Determination of Gain (Loss) Proceeds from the sale of inventory Inventory cost Gain on sale Step 2) Allocation of the Gain (Loss) to the Partners. KENDRA COGLEY MEI Total Initial capital balances $76,700 $172,575 $134,225 $383,500 Allocation of gains (losses) 3 / 6 2 / 6 1 / 6 0 Capital balances after gains (losses) $76,700 $172,575 $134,225 $383,500

1. Record the sale of inventory.

2. Allocate the gain(loss) on the sale of inventory to the partners.

3. Record the payment of the liabilities.

4. Record the disbursement of the remaining cash to the partners.

Complete the schedule allocating the gain or loss on the sale of inventory is $469,200.

Complete this question by entering your answers in the tabs below.

Complete the schedule allocating the gain or loss on the sale of inventory is $469,200.

	Step 1) Determination of Gain (Loss) Proceeds from the sale of inventory $469,200 Inventory cost Step 2) Allocation of the gain (Loss) to the Partners. KENDRA COGLEY MEI Total Initial capital balances $76,700 $172,575 $134,225 $383,500 Allocation of gains (losses) 0 Capital balances after gains (losses) $76,700 $172,575 $134,225 $383,500

1. Record the sale of inventory.

2. Allocate the gain(loss) on the sale of inventory to the partners.

3. Record the payment of the liabilities.

4. Record the disbursement of the remaining cash to the partners.

Complete the schedule allocating the gain or loss on the sale of inventory is $358,800 and any partners with capital deficits pay in the amount of their deficits.

	Step 1) Determination of Gain (Loss) Proceeds from the sale of inventory $358,800 Inventory cost Step 2) Allocation of the Gain (Loss) to the Partners. KENDRA COGLEY MEI Total Initial capital balances $76,700 $172,575 $134,225 $383,500 Allocation of gains (losses) 0 Capital balances after gains (losses) $76,700 $172,575 $134,225 $383,500

1. Record the sale of inventory.

2. Allocate the gain(loss) on the sale of inventory to the partners.

3. The partner(s) with deficit balances repay the amount of their deficit(s).

4. Record the payment of the liabilities.

5. Record the disbursement of the remaining cash to the partners.

Complete the schedule allocating the gain or loss on the sale of inventory $298,800 and the partners have no assets other than those invested in the partnership.

Step 1) Determination of gain (loss) Proceeds from the sale of inventory $298,800 Inventory Cost Step 2) Allocation of the gain (loss) to the partners and distribution of deficit(s) KENDRA COGLEY MEI Total Initial capital balances $76,700 $172,575 $134,225 $383,500 Allocation of gains (losses) 0 Capital balances after gains (losses) 76,700 172,575 134,225 383,500 Allocation of deficit balance 0 Capital balances after deficit allocation $76,700 $172,575 $134,225 $383,500

1. Record the sale of inventory for $298,800.

2. Record the allocation of the gain or loss on the sale of inventory to the partners.

3. Assuming that the partners have no assets other than those invested, allocate any partner(s) deficit balances to the remaining partners.

4. Record the payment of the liabilities.

5. Record the disbursement of the remaining cash to the partner(s).

Answer 1

(1) Inventory is sold for $608,400.

STEP 1) Determination of Gain (Loss)
Proceeds from sale of Inventory				608,400
Inventory Cost				537,600
Gain on Sale				70,800
STEP 2) Allocation of the Gain (Loss) to the partners
			KENDRA			COGLEY			MEI	TOTAL
Initial Capital Balance			76,700			172,575			134,225	383,500
Allocation of gains (Losses)		3/6	35,400		2/6	23,600		1/6	11,800	70,800
Capital Balance after gain (Losses)			112,100			196,175			146,025	454,300

S.No	General Journal	Debit	Credit
1.	Record the Sale of Inventory
	Cash	608,400
	Inventory		537,600
	Gain on sale of Inventory		70,800
2.	Allocate the gain (loss) on the sale of inventory to the partners.
	Gain on sale of Inventory	70,800
	Kendra, Capital		35,400
	Cogley, Capital		23,600
	Mei, Capital		11,800
3.	Record the payment of the liabilities.
	Accounts Payable	258,000
	Cash		258,000
4.	Record the disbursement of the remaining cash to the partners.
	Kendra, Capital	112,100
	Cogley, Capital	196,175
	Mei, Capital	146,025
	Cash		454,300

(2) Inventory is sold for $469,200.

STEP 1) Determination of Gain (Loss)
Proceeds from sale of Inventory				469,200
Inventory Cost				537,600
Gain (Loss) on Sale				(68,400)
STEP 2) Allocation of the Gain (Loss) to the partners
			KENDRA			COGLEY			MEI	TOTAL
Initial Capital Balance			76,700			172,575			134,225	383,500
Allocation of gains (Losses)		3/6	(34,200)		2/6	(22,800)		1/6	(11,400)	(68,400)
Capital Balance after gain (Losses)			42,500			149,775			122,825	315,100

S.No	General Journal	Debit	Credit
1.	Record the Sale of Inventory
	Cash	469,200
	Loss on Sale of Inventory	68,400
	Inventory		537,600
2.	Allocate the gain (loss) on the sale of inventory to the partners.
	Kendra, Capital	34,200
	Cogley, Capital	22,800
	Mei, Capital	68,400
	Loss on sale of Inventory		68,400
3.	Record the payment of the liabilities.
	Accounts Payable	258,000
	Cash		258,000
4.	Record the disbursement of the remaining cash to the partners.
	Kendra, Capital	42,500
	Cogley, Capital	149,775
	Mei, Capital	122,825
	Cash		315,100

(3) Inventory is sold for $358,800 and any partners with capital deficits pay in the amount of their deficits.

STEP 1) Determination of Gain (Loss)
Proceeds from sale of Inventory				358,800
Inventory Cost				537,600
Gain (Loss ) on Sale				(178,800)
STEP 2) Allocation of the Gain (Loss) to the partners
			KENDRA			COGLEY			MEI	TOTAL
Initial Capital Balance			76,700			172,575			134,225	383,500
Allocation of gains (Losses)		3/6	(89,400)		2/6	(59,600)		1/6	(29,800)	(178,800)
Capital Balance after gain (Losses)			(12,700)			112,975			104,425	204,700

S.No	General Journal	Debit	Credit
1.	Record the Sale of Inventory
		358,800
	Cash	178,800
	Loss on Sale of Inventory
	Inventory		537,600
2.	Allocate the gain (loss) on the sale of inventory to the partners.
	Kendra, Capital	89,400
	Cogley, Capital	59,600
	Mei, Capital	29,800
	Loss on sale of Inventory		178,800
3.	The partner(s) with deficit balances repay the amount of their deficit(s).
	Cash	12,700
	Kendra, Capital		12,700
4.	Record the payment of the liabilities.
	Accounts Payable	258,000
	Cash		258,000
5.	Record the disbursement of the remaining cash to the partners.
	Cogley, Capital	112,975
	Mei, Capital	104,425
	Cash		217,400

4) Inventory is sold for $298,800 and the partners have no assets other than those invested in the partnership.

STEP 1) Determination of Gain (Loss)
Proceeds from sale of Inventory				298,800
Inventory Cost				537,600
Gain (Loss) on Sale				(238,800)
STEP 2) Allocation of the Gain (Loss) to the partners
			KENDRA			COGLEY			MEI	TOTAL
Initial Capital Balance			76,700			172,575			134,225	383,500
Allocation of gains (Losses)		3/6	(119,400)		2/6	(79,600)		1/6	(39,800)	(238,800)
Capital Balance after gain (Losses)			(42,700)			92,975			94,425	144,700
Allocation of Deficit Balance			42,700		2/3	(28,467)		1/3	(14,233)	0
Capital Balance after Deficit allocation			0			64,508			80,192	144,700

* if partners doesn’t have any assets other than those invested then in case of deficit balance in any partners account will be bear by others partners having balance in their account in their ratio

In the given case KENDRA, COGLEY, MEI ratio: 3:2:1

So COGLEY and MEI ratio: 2:1

And they will bear the deficit of Kendra in ratio of: 2:1

S.No	General Journal	Debit	Credit
1.	Record the Sale of Inventory
		298,800
	Cash	238,800
	Loss on Sale of Inventory
	Inventory		537,600
2.	Allocate the gain (loss) on the sale of inventory to the partners.
	Kendra, Capital	119,400
	Cogley, Capital	79,600
	Mei, Capital	39,800
	Loss on sale of Inventory		238,800
3.	Assuming that the partners have no assets other than those invested, allocate any partner(s) deficit balances to the remaining partners.
	Cogley, Capital	28,467
	Mei, Capital	14,233
	Kendra Capital		42,700
4.	Record the payment of the liabilities.
	Accounts Payable	258,000
	Cash		258,000
5.	Record the disbursement of the remaining cash to the partners.
	Cogley, Capital	64,508
	Mei, Capital	80,192
	Cash		144,700