Problem 12-3A The partners in Crawford Company decide to liquidate the firm when
ID: 2530331 • Letter: P
Question
Problem 12-3A The partners in Crawford Company decide to liquidate the firm when the balance sheet shows the following CRAWFORD COMPANY Balance Sheet May 31, 2017 Assets Liabilities and Owners' Equity $13,700 26,800 4,300 32,900 21,850 2,550 $102,100 $29,500 Notes payable Cash Accounts receivable Allowance for doubtful accounts Inventory Equipment Accumulated depreciation-equipment 24,200 Accounts payable (1,200) Salaries and wages payable 34,700 A. Jamison, capital 20,800 S. Moyer, capital (5,900) P. Roper, capital Total $102,100 Total The partners share income and loss 5:3:2. During the process of liquidation, the following transactions were completed in the following sequence 1. A total of $53,050 was received from converting noncash assets into cash 2. Gain or loss on realization was allocated to partners 3. Liabilities were paid in full 4. P. Roper paid his capital deficiency 5. Cash was paid to the partners with credit balancesExplanation / Answer
1. The first step is to realise the Non-Cash Assets for Cash. Only the Assets are realised in this step and liabilities are not:
2. Now distributed the loss of 19,550 to the 3 partners in the ratio of 5:3:2
3. Once the loss is distribute, we need to pay back the liabilities:
The remaining capital accounts are:
A Jamison = 32900 - 9775 = 23,125
S Moyer = 21850 - 5865 = 15,985
P Roper = 2550 - 3910 = -1,360
4. Proper would have to bring in this deficiency:
The remaining Cash is:
29,500 + 53,050 + 1,360 -44,800 = 39,110
This would be distrubted to A Jamison and S Moyer
The Capital Accounts are as follows:
The Cash Account is as follows:
Question Part B
If Roper had not settled the balance it would be distributed to the others in the ratio of 5: 3
The Remaining Cash would be:
29,500 + 53,050 + - 44,800 = 37,750. This would be distibuted to the other 2 parters as:
Debit Credit Cash 53,050 Loss on Realisation 19,550 Accumulated Depreciation - Equipment 5,900 Allowance for Doubtful Accounts 1,200 Accounts Receivable 24,200 Inventory 34,700 Equipment 20,800