March,. Apri, and May have been in partnership for a number of years. The partne
ID: 2536185 • Letter: M
Question
March,. Apri, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 3:3:2 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: s 16,000 Liabilities Cash Accounts receivable Inventory Land, building, and equipment (net) Total assets 94,000 March, capital 85,000 Apri1, capital 43, 000 May, capital $ 74,000 33,000 80,000 51,000 $238,000 S238,000 Total liabilities and capital Prepare journal entries for the following transactions: (Do not round intermediate celculetions. If no entry is required for a transection/event, select "No journal entry required" in the first account field.) a. Sold all inventory for $61,000 cash. b. Paid $9,000 in liquidation expenses c. Paid $45,000 of the partnership's liabilities d. Collected $55,000 of the accounts receivable e. Distributed safe cash balances; the partners anticipate no further liquidation expenses. f. Sold remaining accounts receivable for 20 percent of face value. g. Sold land, building, and equipment for $22,000 h. Paid all remaining liabilities of the partnership i. Distributed cash held by the business to the partners. View tra n listExplanation / Answer
Answer
S No.
Particular
Dr. $
Cr. $
a
Cash
61,000
March Capital (3/8 * 24,000)
9,000
April Capital (3/8 * 24,000)
9,000
May Capital (2/8 * 24,000)
6,000
Inventory
85,000
(Being Inventory sold at loss and Loss of 24,000 (85,000 - 61,000) distributed among partners in 3:3:2)
b
March Capital (3/8 * 9,000)
3,375
April Capital (3/8 * 9,000)
3,375
May Capital (2/8 * 9,000)
2,250
Cash
9,000
(Being liquidation expenses of $9,000 distributed among partners in 3:3:2)
c
Liabilities
45,000
Cash
45,000
(Being liabilities paid in cash)
d
Cash
55,000
Accounts Receivable
55,000
(Being cash received from Accounts Receivable)
e
April Capital (Note 1)
30,800
May Capital
18,200
Cash
49,000
(Being cash paid to partners)
f
Cash ($39,000 * 20%)
7,800
March Capital (3/8 * 31,200)
11,700
April Capital (3/8 * 31,200)
11,700
May Capital (2/8 * 31,200)
7800
Accounts Receivable
39,000
(Being Accounts Receivable sold at 20% of book value and Loss of 31,200 (39,000 - 20%) distributed among partners in 3:3:2)
g
Cash
22,000
March Capital (3/8 * 21,000)
7,875
April Capital (3/8 * 21,000)
7,875
May Capital (2/8 * 21,000)
5,250
Land and Building
43,000
(Being Land and Building sold at loss and Loss of 21,000 (43,000 - 22,000) distributed among partners in 3:3:2)
h
Liabilities (74,000 - 45,000)
29,000
Cash
29,000
(Being remaining liabilities paid)
i
March Capital (Note 2)
11,175
April Capital
11,175
May Capital
7,450
Cash
29,800
(Being remaining cash paid to Partners)
Note 1
Maximum Loss = Remaining Assets
= Remaining Accounts Receivable + Land and Building
= (94,000 – 55,000) + 43,000
Maximum Loss = $82,000
March Share = $82,000 * 3/8 = $30,750
April Share = $82,000 * 3/8 = $30,750
May Share = $82,000 * 2/8 = $20,500
Cash to be paid to Partners
= Partner’s Capital – Inventory loss share – Liquidation expense share - Share in Maximum Loss
March = $33,000 – 9,000 – 3,375 – 30,750
Cash to be paid to March = ($10,125)
April = 80,000 – 9,000 – 3,375 – 30,750
Cash due to April = $36,875
May = 51,000 – 6,000 – 2,250 – 20,500
Cash due to May = $22,250
We have debit balance of March Capital, so we have to distribute that loss to remaining Partner’s Capital in 3:2
April Share in March Loss = 3/5 * $10,125 = $6,075
May share in March Loss = 2/5 * $10,125 = $4,050
Cash to be paid to April = Cash due – March Loss share
= $36,875 - 6,075
Cash to be paid to April = $30,800
Cash to be paid to May = $22,250- 4,050
Cash to be paid to May = $18,200
Note 2
Cash A/c
S no.
Particular
$
S No.
Particular
$
Opening Balance
16,000
b
March Capital
3,375
a
Inventory
61,000
b
April Capital
3,375
d
Accounts Receivable
55,000
b
May Capital
2,250
f
Accounts Receivable
7,800
c
Liabilities
45,000
g
Land and Building
22,000
e
April Capital
30,800
e
May Capital
18,200
h
Liabilities
29,000
Bal. C/d
29,800
Total
161,800
Total
132,000
Bal b/d
29,800
March Capital
11,175
April Capital
11,175
May Capital
7,450
Total
191,600
Total
191,600
Dear Student, if u have any doubt plz feel free to reach me.
S No.
Particular
Dr. $
Cr. $
a
Cash
61,000
March Capital (3/8 * 24,000)
9,000
April Capital (3/8 * 24,000)
9,000
May Capital (2/8 * 24,000)
6,000
Inventory
85,000
(Being Inventory sold at loss and Loss of 24,000 (85,000 - 61,000) distributed among partners in 3:3:2)
b
March Capital (3/8 * 9,000)
3,375
April Capital (3/8 * 9,000)
3,375
May Capital (2/8 * 9,000)
2,250
Cash
9,000
(Being liquidation expenses of $9,000 distributed among partners in 3:3:2)
c
Liabilities
45,000
Cash
45,000
(Being liabilities paid in cash)
d
Cash
55,000
Accounts Receivable
55,000
(Being cash received from Accounts Receivable)
e
April Capital (Note 1)
30,800
May Capital
18,200
Cash
49,000
(Being cash paid to partners)
f
Cash ($39,000 * 20%)
7,800
March Capital (3/8 * 31,200)
11,700
April Capital (3/8 * 31,200)
11,700
May Capital (2/8 * 31,200)
7800
Accounts Receivable
39,000
(Being Accounts Receivable sold at 20% of book value and Loss of 31,200 (39,000 - 20%) distributed among partners in 3:3:2)
g
Cash
22,000
March Capital (3/8 * 21,000)
7,875
April Capital (3/8 * 21,000)
7,875
May Capital (2/8 * 21,000)
5,250
Land and Building
43,000
(Being Land and Building sold at loss and Loss of 21,000 (43,000 - 22,000) distributed among partners in 3:3:2)
h
Liabilities (74,000 - 45,000)
29,000
Cash
29,000
(Being remaining liabilities paid)
i
March Capital (Note 2)
11,175
April Capital
11,175
May Capital
7,450
Cash
29,800
(Being remaining cash paid to Partners)