March, April, and May have been in partnership for a number of years. The partne
ID: 2530995 • 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 4:2:2 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 $62,000 cash.
B. Paid $9,300 in liquidation expenses.
C. Paid $46,000 of the partnership’s liabilities.
D. Collected $51,000 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 $23,000.
H. Paid all remaining liabilities of the partnership.
I. Distributed cash held by the business to the partners.
Cash $ 17,000 Liabilities $ 53,000 Accounts receivable 87,000 March, capital 34,000 Inventory 86,000 April, capital 81,000 Land, building, and equipment (net) 30,000 May, capital 52,000 Total assets $ 220,000 Total liabilities and capital $ 220,000Explanation / Answer
Working Ledgers
Cash Account
Journal Entries Particular Debit Credit A Cash Account 62,000 - Liquidation Account 24,000 To Inventory 86,000 (Being entry made to record sale of inventory at a loss) B Liquidation Account 9,300 To Cash Account 9,300 (being entry made to record payment for liquidation expenses) C Partnership Liability 46,000 To Cash Account 46,000 (Being entry made to account settlement of liability) d Cash Account 51,000 To Accounts Receivable 51,000 (Being entry made to record receipt of cash from receivables) e Entry will be made last after settling all expenses f Cash Account 12,600 Liquidation Account 23,400 To Receivables 36,000 (being entry made on receipt of receivable balance ) g Cash Account 23,000 TO Liquidation Account 7,000 To Land, Building and equipment's 30,000 (being entry made to record sale of land, building and equipment's) h Partnership Liability 7,000 To Cash Account 7,000 (Being entry made to account settlement of liability) i March Account 31,850 April Account 15,925 May Account 15,925 TO Liquidation Account 63,700 (Liquidation loss shared in the profit sharing ratio of 4:2:2) Cash Account 1,03,300 To March Account 2,150 To April Account 65,075 To May Account 36,075 (being entry made to record cash settlement to partner )