March, April, and May have been in partnership for a number of years. The partne
ID: 2520875 • Letter: M
Question
March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 2:3:1 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:
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.)
A) Sold all inventory for $75,000 cash.
B) Paid $13,200 in liquidation expenses.
C) Paid $59,000 of the partnership’s liabilities.
D) Collected $74,000 of the accounts receivable.
E) Distributed safe cash balances; the partners anticipate no further liquidation expenses.
F) Sold remaining accounts receivable for 35 percent of face value.
G) Sold land, building, and equipment for $36,000.
H)Paid all remaining liabilities of the partnership.
I) Distributed cash held by the business to the partners.
Cash $ 30,000 Liabilities $ 119,000 Accounts receivable 122,000 March, capital 42,000 Inventory 99,000 April, capital 94,000 Land, building, and equipment (net) 69,000 May, capital 65,000 Total assets $ 320,000 Total liabilities and capital $ 320,000Explanation / Answer
NO Explanation Debit Credit a Cash 75000 March Capital 24000/6*2 8000 April Capital 12000 May Capital 4000 Inventory 99000 (99000-75000)=24000 2+3+1 = 6 b March Capital 4400 April Capital 6600 May Capital 2200 Cash 13200 13200/6*2,3,1 c Liabilities 59000 Cash 59000 d Cash 74000 Accounts Receivables 74000 e April 9850 May 36950 Cash 46800 f Cash 48000*35% 16800 March Capital (48000-16800/6*2 10400 April Capital 15600 May Capital 5200 48000 (122000-74000) g Cash 36000 March Capital 11000 April Capital 16500 May Capital 5500 Land , Building, Equipment 69000 h Liabilities 60000 Cash 60000 (119000-59000) Partner Current capital adjusted Share of maximum loss Potential Capital March 29600 39000 -9400 April 75400 58500 16900 May 58800 19500 39300 Based on the above potentiallosses, March would have a deficit capital balance of $9,400 which in turn has to be allocated to the two partners having positive capital balances: Partner Potential Capital (Above) Share of March's Deficit Potential Capital April 16900 -7050 9850 May 39300 -2350 36950 *Maximum losses could be suffered on the remaining (122000-74000) $48,000 in accounts receivable and the $69,000 in land, building, and equipment.