Afterr the accounts are closed on September 10, 2010, prior to liquidating the p
ID: 2444090 • Letter: A
Question
Afterr the accounts are closed on September 10, 2010, prior to liquidating the partnership, the capital accounts of Kris Harken, Brett Sedlacek, and Amy Eldridge are $31,000, $5,700, and $24,500, respectively. Cash and noncash assets total $7,800 and $61,400, respectively. Amounts owed to creditors total $8,000. The partners share income and losses in the ratio of 1:1:2. Between September 10 and September 30, the noncash assets are sold for $32,600, the partner with the capital deficiency pays his or her deficiency to the partnership, and the liabilities are paid.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.
2. Assume the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency. Journalize the entires to (a) allocate the partner's deficiency and (b) distribute the remaining cash.
Explanation / Answer
1 a and b Realisation Account Non CASH assets $61,400 Creditors $8,000 cash-creditors $8,000 cash-sale of assets $32,600 Loss on realisation of assets $28,800 $69,400 $69,400 cand d Cash Account Balance $7,800 creditors $8,000 Realisation-assets $32,600 Brett-capital $1,500 Balance sharedbetwen the $33,900 Total $41,900 partners $41,900 Capital accounts Kris Brett Amy Balances $31,000 $5,700 $24,500 Loss on realisastion of assets $7,200 $7,200 $14,400 Balances $23,800 ($1,500) $10,100 cash $23,800 Nil $10,100 Balance Nil Nil 2. Now the partner with negative capital declared bankrupt, here Brett is having nagative capital of $1500, and he became bankrupt, so his loss of capital should be divided between Kris and AMY in their new sharing ratios , that is 1:2, and they should introduce the required cash. Brett capital $1,500 Kris capital $500 Amy capital $1,000 Kris capital $23,800 Amy capital $10,100 cash $33,900 b. Capital accounts Kris Brett Amy Balances $31,000 $5,700 $24,500 Loss on realisastion of assets $7,200 $7,200 $14,400 Balances $23,800 ($1,500) $10,100 Cash Account Balance $7,800 creditors $8,000 Realisation-assets $32,600 Kris capital $500 Balance sharedbetwen the $33,900 Amy capital $1,000 partners Total $41,900 Total $41,900