Question

In: Accounting

March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 4:2:2 basis, respectively. Recently, each partner has become personally insolvent and, thus, the partners have decided to liquidate the

March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 4:2:2 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$26,000Liabilities$95,000
Accounts receivable
114,000March, capital
57,000
Inventory
104,000April, capital
90,000
Land, building, and equipment (net)
59,000May, capital
61,000
Total assets$303,000Total liabilities and capital$303,000

 

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.)

 

  1. Sold all inventory for $71,000 cash.

  2. Paid $12,000 in liquidation expenses.

  3. Paid $55,000 of the partnership’s liabilities.

  4. Collected $63,000 of the accounts receivable.

  5. Distributed safe payments of cash; the partners anticipate no further liquidation expenses.

  6. Sold remaining accounts receivable for 30 percent of face value.

  7. Sold land, building, and equipment for $32,000.

  8. Paid all remaining liabilities of the partnership.

  9. Distributed cash held by the business to the partners.

 


Solutions

Expert Solution

a)Cash  $  71,000

March, Capital (4/8 of loss) $ 16,500

April, Capital (2/8) $ 8,250

May, Capital (2/8) $ 8,250

                        Inventory 
 $  104,000


b)March, Capital  $ 6,000

April, Capital  $ 3,000

May, Capital  $ 3,000

                        Cash 
 $ 12,000
c)Liabilities $ 55,000

                        Cash 
 $  55,000




d)Cash  $ 63,000

                     A/R
 $  63,000


e)April, Capital  $ 41,000

May, Capital  $ 12,000

                      Cash 
 $ 53,000




f)Cash  $  15,300

March, Capital  $  17,850

April, Capital  $   8,925

May, Capital  $   8,925

                   A/R
 $   51,000




g)Cash  $  32,000

March, Capital  $  13,500

April, Capital  $    6,750

May, Capital  $    6,750

            Land, Building and   Equipment  $ 59,000



h)Liabilities $ 40,000

                   Cash
 $ 40,000




i)March, Capital  $ 3,150

April, Capital  $ 22,075

May, Capital  $ 22,075

                    Cash 
 $ 47,300







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