The Field, Brown & Snow partnership was begun with investments by the partners as follows: Field, $131,250; Brown, $165,000; and Snow, $153,750. The partners decide to liquidate, sharing all losses equally. On May 31, after all assets were sold and all creditors were paid, only $45,000 in partnership cash remained. 1. Compute the capital account balance of each partner after the liquidation of assets and payment of creditors. 2. Assume that the partner with a deficit pays cash to cover the deficit. Prepare the journal entries on May 31 to record (a) the cash received to cover the deficit and (b) the final disbursement of cash to the partners. 3. Assume that the partner with a deficit does not reimburse the partnership. Prepare journal entries (a) to transfer the deficit to the other partners and (b) to record the final disbursement of cash to the partners.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
The Field, Brown & Snow partnership was begun with investments by the partners as follows: Field, $131,250;
Brown, $165,000; and Snow, $153,750. The partners decide to liquidate, sharing all losses equally. On May
31, after all assets were sold and all creditors were paid, only $45,000 in partnership cash remained.
1. Compute the capital account balance of each partner after the liquidation of assets and payment of
creditors.
2. Assume that the partner with a deficit pays cash to cover the deficit. Prepare the
to record (a) the cash received to cover the deficit and (b) the final disbursement of cash to the partners.
3. Assume that the partner with a deficit does not reimburse the partnership. Prepare journal entries (a) to
transfer the deficit to the other partners and (b) to record the final disbursement of cash to the partners.
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