After the accounts are closed on February 3, 2016, prior to liquidating the part
ID: 2417824 • Letter: A
Question
After the accounts are closed on February 3, 2016, prior to liquidating the partnership, the capital accounts of William Gerloff, Joshua Chu, and Courtney Jewett are $19,140, $4,700, and $21,860, respectively. Cash and noncash assets total $5,660 and $54,780, respectively. Amounts owed to creditors total $14,740. The partners share income and losses in the ratio of 2:1:1. Between February 3 and February 28, the noncash assets are sold for $33,580, the partner with the capital deficiency pays the deficiency to the partnership, and the liabilities are paid.
Chart of Accounts
Labels and Amount Descriptions
Statement of Partnership Liquidation
1. Prepare a statement of partnership liquidation, indicating (a) the sale of assets and division of loss, (b) the payment of liabilities, (c) the receipt of the deficiency (from the appropriate partner), and (d) the distribution of cash. 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 items (a) - (d), the cell can be left blank. However, in the balance rows, a balance of zero MUST be indicated by entering "0".
Gerloff, Chu, and Jewett
Statement of Partnership Liquidation
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Cash +
Noncash Assets =
Liabilities +
Capital, Gerloff (2/4) +
Capital, Chu (1/4) +
Capital, Jewett (1/4)
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Balances
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Journal
2. Assume the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency. Journalize the entries on Feb. 28 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.
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JOURNAL
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Required: 1. Prepare a statement of partnership liquidation, indicating (a) the sale of assets and division of loss, (b) the payment of liabilities, (c) the receipt of the deficiency (from the appropriate partner), and (d) the distribution of cash. 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 items (a) - (d), 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 declares bankruptcy and is unable to pay the deficiency. Journalize the entries on Feb. 28 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.Explanation / Answer
Answer 1. Gerloff, Chu, and Jewett Statement of Partnership Liquidation For Period February 3, 2016 Cash + Noncash Assets = Liabilities + Capital Gerloff (2/4) + Capital Chu (1/4) + Capital Jewett (1/4) Balances before realization $5,200 $55,900 $15,000 $19,300 $4,500 $22,300 Sale of assets and division of loss $34,300 ($55,900) ($10,800) ($5,400) ($5,400) Balances after realization $39,500 $0 $15,000 $8,500 ($900) $16,900 Payment of liabilities ($15,000) $0 ($15,000) Balances after payment of liabilities $24,500 $0 $0 $8,500 ($900) $16,900 Receipt of deficiency $900 $0 $0 $0 $900 $0 Balances $25,400 $0 $0 $8,500 $0 $16,900 Cash distributed to partners ($25,400) ($8,500) ($16,900) Final balances $0 $0 $0 $0 $0 $0 Answer 2. Journal Entry Date Particulars Dr. Amount Cr. Amount Feb. 3 William Gerloff Capital A/c Dr. $600 Courtney Jewett Capital A/c Dr. $300 To Joshua Chu Capital A/c $900 (Chu partner deficiency is distributed between the partner in the ratio of 2:1) Feb. 3 William Gerloff Capital A/c Dr. $7,900 Courtney Jewett Capital A/c Dr. $16,600 To Cash A/c $24,500 (Cash is distributed between the partners)