Question

The partnership of Smith, Dean and Waddlington has elected to cease all operations and liquidate its business property. A balance sheet drawn up at this time shows the following account balances:

Cash	$ 48,000		Liabilities	$ 35,000
Noncash Assets	160,000		Smith, Capital (50%)	92,500
			Dean, Capital (25%)	23,750
			Waddlington, Capital (25%)	56,750
Total Assets	$208,000		Total Liabilities & Capital	$208,000

The following transactions occur in liquidating this business:

Distributed safe balances immediately to the partner(s). Liquidation expenses of $8,000 are estimated as a basis for this computation.

Sold $80,000 of the noncash assets for $48,000.

Paid all liabilities.

Distributed safe balances again.

Sold remaining noncash transactions for $42,000.

Paid liquidation expenses of $6,000.

Distributed remaining cash to the partners and closed the financial records of the business permanently.

Produce a final schedule of liquidation for the partnership based on the transactions recorded

Answer 1

1		$
	Book Value of noncash assets	160,000
	Less: Amount realized ( $ 48,000 + $ 42,000 )	(90,000)
	Loss on sale of noncash assets	70,000
2		$
	Available cash balance	48,000
	Add: Sale value of noncash assets	90,000
	Sub-total	138,000
	Less: Payment of liabilities	(35,000)
	Less: Liquidation expenses	(6,000)
	Net cash available for distribution	97,000
3	Partner's capital account
		Smith (50%)	Dean ( 25%)	Waddlington (25%)	Total
	Capital balance before liquidation	92,500	23,750	56,750	173,000
	Distribution of loss on sale of noncash assets	(35,000)	(17,500)	(17,500)	(70,000)
	Actual liquidation expenses	(3,000)	(1,500)	(1,500)	(6,000)
	Revised capital balance	54,500	4,750	37,750	97,000
	Distribution of cash available after liquidation	(54,500)	(4,750)	(37,750)	(97,000)
	Net capital balance after distribution of cash and settlement	0	0	0	0