Question

Problem 12-6A Liquidation of a partnership LO P5

Kendra, Cogley, and Mei share income and loss in a 3:2:1 ratio. The partners have decided to liquidate their partnership. On the day of liquidation their balance sheet appears as follows.
  

KENDRA, COGLEY, AND MEI Balance Sheet May 31
Assets				Liabilities and Equity
Cash	$	84,800		Accounts payable	$	252,000
Inventory		538,200		Kendra, Capital		74,200
				Cogley, Capital		166,950
				Mei, Capital		129,850
Total assets	$	623,000		Total liabilities and equity	$	623,000

Required:
For each of the following scenarios, complete the schedule allocating the gain or loss on the sale of inventory. Prepare journal entries to record the below transactions. (Do not round intermediate calculations. Amounts to be deducted or Losses should be entered with a minus sign. Round your final answers to the nearest whole dollar.)

(1) Inventory is sold for $621,000.
(2) Inventory is sold for $468,000.
(3) Inventory is sold for $329,400 and any partners with capital deficits pay in the amount of their deficits.
(4) Inventory is sold for $240,600 and the partners have no assets other than those invested in the partnership.

Complete this question by entering your answers in the tabs below.

• Required 1 Inventory
• Required 1 GJ
• Required 2 Inventory
• Required 2 GJ
• Required 3 Inventory
• Required 3 GJ
• Required 4 Inventory
• Required 4 GJ

Complete the schedule allocating the gain or loss on the sale of inventory is $329,400 and any partners with capital deficits pay in the amount of their deficits.

	Step 1) Determination of Gain (Loss) Proceeds from the sale of inventory $329,400 Inventory cost Gain on sale Step 2) Allocation of the Gain (Loss) to the Partners. KENDRA COGLEY MEI Total Initial capital balances $74,200 $166,950 $129,850 $371,000 Allocation of gains (losses) 0 Capital balances after gains (losses) $74,200 $166,950 $129,850 $371,000

Prepare journal entries to record the inventory is sold for $329,400 and any partners with capital deficits pay in the amount of their deficits.

No	Transaction	General Journal	Debit	Credit
1	(a)	Cash
		Loss on sale of inventory
		Inventory
2	(b-1)	Kendra, Capital
		Cogley, Capital
		Mei, Capital
		Loss on sale of inventory		208,800
3	(b-2)	Cash
		Kendra, Capital
4	(c)	Accounts payable
		Cash
5	(d)	Cogley, Capital
		Mei, Capital
		Cash

Complete the schedule allocating the gain or loss on the sale of inventory $240,600 and the partners have no assets other than those invested in the partnership.

Step 1) Determination of gain (loss) Proceeds from the sale of inventory $240,600 Inventory Cost Step 2) Allocation of the gain (loss) to the partners and distribution of deficit(s) KENDRA COGLEY MEI Total Initial capital balances $74,200 $166,950 $129,850 $371,000 Allocation of gains (losses) 0 Capital balances after gains (losses) 74,200 166,950 129,850 371,000 Allocation of deficit balance 0 Capital balances after deficit allocation $74,200 $166,950 $129,850 $371,000

Prepare journal entries to record the inventory is sold for $240,600 and the partners have no assets other than those invested in the partnership.

No	Transaction	General Journal	Debit	Credit
1	(a)	Cash
		Loss on sale of inventory
		Inventory
2	(b-1)	Kendra, Capital
		Cogley, Capital
		Mei, Capital
		Loss on sale of inventory
3	(b-2)	Cogley, Capital
		Mei, Capital
		Kendra, Capital
4	(c)	Accounts payable
		Cash
5	(d)	Cogley, Capital
		Mei, Capital

• 
  

Answer 1

Part 3

Step: 1 Determination of gain (loss)

Proceeds from the sale of inventory	329400
Inventory cost	538200
Gain on sale	(208800)

Step: 2 Allocation of the Gain (Loss) to the partners

		KENDRA		COGLEY		MEI	Total
Initial capital balance		74200		166950		129850	371000
Allocation of gains (losses)	3/6	(104400)	2/6	(69600)	1/6	(34800)	(232200)
Capital balances after gains (losses)		(30200)		97350		95050	162200

208800*3/6 =104400

208800*2/6 =69600

208800*1/6 =34800

Par 3 GJ

Transaction	General Journal	Debit	Credit
a	Cash	329400
	Loss on sale of inventory	208800
	Inventory		538200
	(To record sale of inventory)
b-1	Kendra, Capital	104400
	Cogley, Capital	69600
	Mei, Capital	34800
	Loss on sale of inventory		208800
	(To allocate loss sale of inventory to the partners)
b-2	Cash	30200
	Kendra, Capital		30200
c	Accounts Payable	252000
	Cash		252000
	(To record the payment of liabilities)
d	Cogley, Capital (166950-69600)	97350
	Mei, Capital (129850-34800)	95050
	Cash (84800+329400-252000+30200)		192400
	(To record the disbursement of the remaining cash to the partners)

Part 4

Step: 1 Determination of gain (loss)

Proceeds from the sale of inventory	240600
Inventory cost	538200
Gain on sale	(297600)

Step: 2 Allocation of the Gain (Loss) to the partners

		KENDRA		COGLEY		MEI	Total
Initial capital balance		74200		166950		129850	371000
Allocation of gains (losses)	3/6	(148800)	2/6	(99200)	1/6	(49600)	(297600)
Capital balances after gains (losses)		(74600)		67750		80250	73400
Allocation of deficit balance		74600	2/3	(49733)	1/3	(24867)	0
Capital balances after deficit allocation		0		18017		55383	73400

297600*3/6 =148800

297600*2/6 =99200

297600*1/6 =49600

74600*2/3 = 49733

74600*1/3 = 24867

Par 4 GJ

Transaction	General Journal	Debit	Credit
a	Cash	240600
	Loss on sale of inventory	297600
	Inventory		538200
	(To record sale of inventory)
b	Kendra, Capital	148800
	Cogley, Capital	99200
	Mei, Capital	49600
	Loss on sale of inventory		297600
	(To allocate loss sale of inventory to the partners)
c	Accounts Payable	252000
	Cash		252000
	(To record the payment of liabilities)
d	Cogley, Capital (166950-99200-49733)	18017
	Mei, Capital (129850-49600-24867)	55383
	Cash (84800+240600-252000)		73400
	(To record the disbursement of the remaining cash to the partners)