Question

March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 2:3:1 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 $ 21,000 Liabilities $ 75,000 Accounts receivable 104,000 March, capital 35,000 Inventory 81,000 April, capital 85,000 Land, building, and equipment (net) 45,000 May, capital 56,000 Total assets $ 251,000 Total liabilities and capital $ 251,000 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.) Sold all inventory for $66,000 cash. Paid $10,500 in liquidation expenses. Paid $50,000 of the partnership’s liabilities. Collected $56,000 of the accounts receivable. Distributed safe cash balances; the partners anticipate no further liquidation expenses. Sold remaining accounts receivable for 20 percent of face value. Sold land, building, and equipment for $27,000. Paid all remaining liabilities of the partnership. Distributed cash held by the business to the partners.

Answer 1

Journal Entry
Date	Accounts & Expalnations	Debit	Credit
1	Cash	66000
	Partner's Capital	15000
	Inventory		81000
	(Inventory Sold)
2	Partner's Capital (Liquidation Exp.)	10500
	Cash		10500
	(Liquidation Exp. Made)
3	Liabilities	50000
	Cash		50000
	(Liabilities Paid off)
4	Cash	56000
	Accounts Receivable		56000
	(Accounts Receivable Collected)
5	Partner's Capital	57500
	Cash		57500
	(safe Cash distributed)
6	Cash	9600
	Partner's Capital	38400
	Accounts Receivable		48000
	(Accounts Receivable Collected @ 20% of Face value)
7	Cash	27000
	Partner's Capital	18000
	Land,Building & Equipment		45000
	( Land building & Equipment Sold)
8	Liabilities	25000
	Cash		25000
	(Liabilities Paid off)
9	Partner's Capital	36600
	Cash		36600
	(Remaining cash Distributed among Partners)

Calculation of safe cash under serial no. 5 Entry
		Opening cash	21000
		Realised from Inventory	66000
		Realised from A/R	56000
			143000
Less;-	Liquidation Exp.	10500
	Liabilities Paid Off	50000
	Tobe Held for Remaining Liabilities (75000-50000)	25000	85500
	Safe cash tobe Distributed among Partners		57500

Calculation of distributed cash held by the business to the partners under serial no. 9 Entry
	Previously Held for Remaining Liabilities (75000-50000)		25000
	Realised from A/R (104000-56000)*20%		9600
	Realised from Land, Building & Equipment		27000
			61600
Less;-	Remaining Liabilities Paid Off (75000-50000)		25000
	Distributed cash held by the business among Partners		36600