Sedgwick Company at December 31 has cash $20,200, noncash assets $106,000, liabi
ID: 2583989 • Letter: S
Question
Sedgwick Company at December 31 has cash $20,200, noncash assets $106,000, liabilities $55,800, and the following capital balances: Floyd $46,200 and DeWitt $24,200. The firm is liquidated, and $118,000 in cash is received for the noncash assets. Floyd and DeWitt income ratios are 60% and 40%, respectively. Sedgwick Company now decides to liquidate the partnership. Prepare the entries to record: (Credit account titles are automatically indented when amount is entered. Do not indent manually.) (a) The sale of noncash assets. (b) The allocation of the gain or loss on realization to the partners. (c) Payment of creditors. (d) Distribution of cash to the partners
Explanation / Answer
journal entries
a) cash a/c dr 118000$
To non cash asset a/c 106000$
To gain on sale of non cash asset a/c 12000$
(being non cash asset sold)
b) gain on sale of non cash asset a/c dr 12000$
To floyd capital a/c 7200$
To dewitt capital a/c 4800$
(12000*6/10,12000*4/10)
(being gain distributed to partners in profit sharing ratio of 6:4)
c) creditors a/c dr 55800$
To cash a/c 55800$
(being creditors settled)
d) floyd capital a/c dr 49440
dewitt capital a/c dr 32960
To cash a/c 82400
(20200+118000-55800)
(being cash distributed to partners in profit sharing ratio of 6:4)