Question

The partnership of Wingler, Norris, Rodgers, and Guthrie was formed several years ago as a local architectural firm. Several partners have recently undergone personal financial problems and have decided to terminate operations and liquidate the business. The following balance sheet is drawn up as a guideline for this process:

Cash	33000	Liabilities	70000
A/R	100000	Rodgers, loan	53000
Inventory	119000	Wingler, Cap. (30%)	147000
Land	94000	Norris, Cap. (10%)	106000
Building & Equipment	177000	Rodgers, Cap. (20%)	83000
		Guthrie, Cap. (40%)	64000
Total Assets	523000	Total Liabilities & Capital	523000

When the liquidation commenced, liquidation expenses of $15,000 were anticipated as being necessary to dispose of all property.

Part B

The following transactions transpire during the liquidation of the Wingler, Norris, Rodgers, and Guthrie partnership:

1. Collected 90 percent of the total accounts receivable with the rest judged to be uncollectible.

2. Sold the land, building, and equipment for $159,000.

3. Made safe capital distributions.

4. Learned that Guthrie, who has become personally insolvent, will make no further contributions.

5. Paid all liabilities.

6. Sold all inventory for $78,000.

7. Made safe capital distributions again.

8. Paid actual liquidation expenses of $9,000 only.

9. Made final cash disbursements to the partners based on the assumption that all partners other than Guthrie are personally solvent.

Prepare journal entries to record these liquidation transactions.

Answer 1

Partnership of Wingler, Norris, Rodgers, and Guthrie
	Assets					Liabilites	Rodgers Loan	Capital Accounts
	Cash	A/R	Inventory	Land	Building & Equipment			Wingler	Norris	Rodgers	Guthrie
Balance	33000	100000	119000	94000	177000	70000	53000	147000	106000	83000	64000
1.	90000	-100000						-3000	-1000	-2000	-4000
2.	159000			-94000	-177000			-33600	-11200	-22400	-44800
Balance	282000	0	119000	0	0	70000	53000	110400	93800	58600	15200
Less: Loss of Inventory			-119000					-35700	-11900	-23800	-47600
Balance	282000	0	0	0	0	70000	53000	74700	81900	34800	-32400
Loss of Guthrie transferred to other partners								-16200	-5400	-10800	32400
Balance	282000	0	0	0	0	70000	53000	58500	76500	24000	0
Less: reserve for realization expense, Liabilities and loan	-138000					-70000	-53000	-7500	-2500	-5000
Balance available for safe distribution	144000	0	0	0	0	0	0	51000	74000	19000	0
Cash distributed to partners	-144000							-51000	-74000	-19000
After First payment to Partners
													Assets					Liabilites	Rodgers Loan	Capital Accounts
	Cash	A/R	Inventory	Land	Building & Equipment	Wingler	Norris	Rodgers	Guthrie
Balance	138000	0	119000	0	0	70000	53000	59400	19800	39600	15200
5.	-70000					-70000
6.	78000		-119000					-12300	-4100	-8200	-16400
Balance	146000	0	0	0	0	0	53000	47100	15700	31400	-1200
Less: reserve for realization expense, Liabilities and loan	-68000						-53000	-4500	-1500	-3000	-6000
Balance	78000	0	0	0	0	0	0	42600	14200	28400	-7200
Loss of Guthrie transferred to other partners								-3600	-1200	-2400	7200
Balance available for safe distribution	78000	0	0	0	0	0	0	39000	13000	26000	0
Cash distributed to partners	-78000	0	0	0	0	0	0	-39000	-13000	-26000	0
After Second payment to Partners
													Assets					Liabilites	Rodgers Loan	Capital Accounts
	Cash	A/R	Inventory	Land	Building & Equipment	Wingler	Norris	Rodgers	Guthrie
Balance	68000	0	0	0	0	0	53000	8100	2700	5400	-1200
8	-9000							-2700	-900	-1800	-3600
Loss of Guthrie transferred to other partners								-2400	-800	-1600	4800
Balance	59000	0	0	0	0	0	53000	3000	1000	2000	0
Cash distributed to partners	-59000						-53000	-3000	-1000	-2000
Balance	0	0	0	0	0	0	0	0	0	0	0

JOURNAL Entries
Date	General Journal			Debit	Credit
a.	Realization Account			420000
	Liabilities			70000
	A/R				100000
	Inventory				119000
	Land				94000
	Building & Equipment				177000
1	Cash			90000
	Realiztion				90000
2	Cash			159000
	Realiztion				159000
3	Wingler's Capital			51000
	Norris's Capital			74000
	Rodger's Capital			19000
	Cash				144000
5	Realization			70000
	Cash				70000
6	Cash			78000
	Realiztion				78000
7	Wingler's Capital			39000
	Norris's Capital			13000
	Rodger's Capital			26000
	Cash				78000
8	Realization			9000
	Cash				9000
	Roger's Loan			53000
	Cash				53000
9	Wingler's Capital			51600
	Norris's Capital			17200
	Rodger's Capital			34400
	Guthrie's Capital			68800
	Realization				172000
	Wingler's Capital			2400
	Norris's Capital			800
	Rodger's Capital			1600
	Guthrie's Capital				4800
	Wingler's Capital			3000
	Norris's Capital			1000
	Rodger's Capital			2000
	Cash				6000