Question

On November 1, the firm of Sails, Welch, and Greenberg decided to liquidate their partnership. The partners have capital balances of $57,790, $72,420, and $9,510, respectively. The cash balance is $32,250, the book values of noncash assets total $127,410, and liabilities total $19,940. The partners share income and losses in the ratio of 2:2:1.

	Required:
1.	Prepare a statement of partnership liquidation, covering the period November 1–30, for each of the following independent assumptions: a. All of the noncash assets are sold for $155,320 in cash, the creditors are paid, and the remaining cash is distributed to the partners.* b. All of the noncash assets are sold for $54,720 in cash, the creditors are paid, the partner with the debit capital balance pays the amount owed to the firm, and the remaining cash is distributed to the partners.* * Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers (balance deficiencies, payments, cash distributions, divisions of loss), use a minus sign. If there is no amount to be reported for sale of assets, payment of liabilities, receipt of deficiency, or cash distribution rows, the cell can be left blank. However, in the balance rows, a balance of zero MUST be indicated by entering "0".
2.	Assume the partner with the capital deficiency in part (b) declares bankruptcy and is unable to pay the deficiency. Journalize the entries on Nov. 30 to (a) allocate the partner’s deficiency and (b) distribute the remaining cash. Refer to the Chart of Accounts for exact wording of account titles.

Sails, Welch, and Greenberg

Statement of Partnership Liquidation

1		Cash +	Noncash Assets =	Liabilities +	Capital, Sails (2/5) +	Capital, Welch (2/5) +	Capital, Greenberg (1/5)
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3
4
5
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8

1. b. Prepare a statement of partnership liquidation, covering the period November 1–30. Assume that all of the noncash assets are sold for $54,720 in cash, the creditors are paid, the partner with the debit capital balance pays the amount owed to the firm, and the remaining cash is distributed to the partners. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers (balance deficiencies, payments, cash distributions, divisions of loss), use a minus sign. If there is no amount to be reported for sale of assets, payment of liabilities, receipt of deficiency, or cash distribution rows, the cell can be left blank. However, in the balance rows, a balance of zero MUST be indicated by entering "0".

Sails, Welch, and Greenberg

Statement of Partnership Liquidation

1		Cash +	Noncash Assets =	Liabilities +	Capital, Sails (2/5) +	Capital, Welch (2/5) +	Capital, Greenberg (1/5)
2
3
4
5
6
7
8	Balances
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Assume the partner with the capital deficiency in part (b) declares bankruptcy and is unable to pay the deficiency. Journalize the entries on Nov. 30 to (a) allocate the partner’s deficiency and (b) distribute the remaining cash. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6

Answer 1

Sails, Welch, and Greenberg
Statement of Partnership Liquidation
For Period November 1–30, 2014
	Cash	+	Noncash Assets	=	Liabilities	+	Capital Sails (2/5)	+	Capital Welc (2/5)	+	Capital Greenberg (1/5)
Balances before realization	$    32,250		$ 127,410		$ 19,940		$ 57,790		$ 72,420		$              9,510
Sale of assets and division of gain	$ 155,320		$(127,410)		$          -		$ 11,164		$ 11,164		$              5,582
Balance after realization	$ 187,570		$           -		$ 19,940		$ 68,954		$ 83,584		$            15,092
Payment of liabilities	$ (19,940)				$ (19,940)		$          -		$          -		$                    -
Balance after payment of liabilities	$ 167,630		$           -		$          -		$ 68,954		$ 83,584		$            15,092
Cash distributed to partners	$(167,630)		$           -		$          -		$ (68,954)		$ (83,584)		$           (15,092)
Final balances	$           -		$           -		$          -		$          -		$          -		$                    -
Sails, Welch, and Greenberg
Statement of Partnership Liquidation
For Period November 1–30, 2014
	Cash	+	Noncash Assets	=	Liabilities	+	Capital Sails (2/5)	+	Capital Welc (2/5)	+	Capital Greenberg (1/5)
Balances before realization	$    32,250		$ 127,410		$ 19,940		$ 57,790		$ 72,420		$              9,510
Sale of assets and division of loss	$    54,720		$(127,410)				$ (29,076)		$ (29,076)		$           (14,538)
Balance after realization	$    86,970		$           -		$ 19,940		$ 28,714		$ 43,344		$             (5,028)
Payment of liabilities	$ (19,940)		$           -		$ (19,940)		$          -		$          -		$                    -
Balance after payment of liabilities	$    67,030		$           -		$          -		$ 28,714		$ 43,344		$             (5,028)
Receipt of deficiency	$      5,028						$          -		$          -		$              5,028
Balances	$    72,058		$           -		$          -		$ 28,714		$ 43,344		$                    -
Cash distributed to partners	$ (72,058)		0		0		$ (28,714)		$ (43,344)		0
Final balances	$           -		$           -		$          -		$          -		$          -		$                    -

ACCOUNTING EQUATION
	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1	Nov. 30	Sails Capital		$ 2,514				$ (2,514)
2		Welch Capital		$ 2,514				$ (2,514)
3		Greenberg Captial			$ 5,028			$    5,028
4	Nov. 30	Sails Capital		$26,200				$(26,200)
5		Welch Capital		$40,830				$(40,830)
6		Cash			$67,030	$(67,030)