Explanation Predistribution plan for liquidating the partnership Predistribution plan Available Cash Amount Recipient First $ 55,000 The firm pays all its liabilities of $47,000 and liquidation expenses of $8,000 Next $ 35,000 The firm pays $35,000 to person S Next $ 31,250 The firm pays $31,250 distributed between person S and person N in the ratio of 3:2 Next $ 50,000 The firm pays $50,000 distributed between person S, person N, person H in the ratio of 3:2:3 Further cash balances The firm pays all further cash balances distributed between person L, person S, person N and person H in the ratio of 2:3:2:3 Table: (1) Working note Calculate maximum allocated loss to all the partners Maximum allocated loss to person L = $ 15 , 000 20 % = $ 15 , 000 × 100 20 = $ 1 , 500 , 000 20 = $ 75 , 000 Now, calculate for other partners Maximum allocated loss to person N = $ 60 , 000 30 % = $ 60 , 000 × 100 30 = $ 6 , 000 , 000 30 = $ 200 , 000 Now, calculate for other partners Maximum allocated loss to person S = $ 75 , 000 20 % = $ 75 , 000 × 100 20 = $ 7 , 500 , 000 20 = $ 375 , 000 Now, calculate for other partners Maximum allocated loss to person H = $ 41 , 250 30 % = $ 41 , 250 × 100 30 = $ 41 , 250 , 000 30 = $ 137 , 500 Person L has the least maximum allocated loss so it is considered first. Calculate the distribution of loss of $75,000: Loss share to person L and person S = $ 75 , 000 × 20 % = $ 15 , 000 Loss share to person N and person H = $ 75 , 000 × 30 % = $ 22 , 500 Calculate ending balances of the partners Particulars Person L Person N Person S Person H Beginning balance $ 15,000 $ 60,000 $ 75,000 $ 41,250 Loss distribution $ (15,000) $ (22,500) $ (15,000) $ (22,500) New capital balance $ - $ 37,500 $ 60,000 $ 18,750 Table: (2) Calculate the maximum allocated loss to other partners Maximum allocated loss &#

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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 …

Partner Admission and Withdrawal

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Chapter 10, Problem 22P

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Prepare a predistribution plan for liquidating the partnership.

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Chapter 10, Problem 21P

Chapter 10, Problem 23P

Chapter 10 Solutions

FUNDAMENTALS OF ADVANCED ACCOUNTING >I

Ch. 10 - Prob. 1Q Ch. 10 - Prob. 2Q Ch. 10 - Prob. 3Q Ch. 10 - Prob. 4Q Ch. 10 - What is the purpose of a statement of liquidation?...Ch. 10 - Prob. 6Q Ch. 10 - Prob. 7Q Ch. 10 - Prob. 8Q Ch. 10 - What is the purpose of a proposed schedule of...Ch. 10 - Prob. 10Q

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STATEMENT OF PARTNER SHIP LIQUIDATION WITH LOSS After several years of operations, the partnership of Delco, Smith, and Walker is to be liquidated. After making closing entries on March 31, 20--, the following accounts remain Open. The noncash assets are sold for 165,000. Profits and losses are shared equally. REQUIRED 1. Prepare a statement of partnership liquidation for the period April 115, 20--, showing the following: (a) The sale of noncash assets on April 1 (b) The allocation of any gain or loss to the partners on April 1 (c) The payment of the liabilities on April 12 (d) The distribution of cash to the partners on April 15 2. Journalize these four transactions in a general journal.
ENTRIES FOR DISSOLUTION OF PARTNERSHIP Cummings and Stickel Construction Company, a partnership, is operating a general contracting business. Ownership of the company is divided among the partners, Katie Cummings, Julie Stickel, Roy Hewson, and Patricia Weber. Profits and losses are shared equally. The books are kept on the calendar-year basis. On August 10, after the business had been in operation for several years, Patricia Weber passed away. Mr. Weber wished to sell his wifes interest for 30,000. After the books were closed, the partners capital accounts had credit balances as follows: REQUIRED 1. Prepare the general journal entry required to enter the check issued to Mr. Weber in payment of his deceased wifes interest in the partnership. According to the partnership agreement, the difference between the amount paid to Mr. Weber and the book value of Patricia Webers capital account is allocated to the remaining partners based on their ending capital account balances. 2. Assume instead that Mr. Weber is paid 60,000 for the book value of Patricia Webers capital account. Prepare the necessary journal entry. 3. Assume instead that Julie Stickel (with the consent of the remaining partners) purchased Webers interest for 70,000 and gave Mr. Weber a personal check for that amount. Prepare the general journal entry for the partnership only.
The partnership of Tatum and Brook shares profits and losses in a 60:40 ratio respectively after Tatum receives a 10,000 salary and Brook receives a 15,000 salary. Prepare a schedule showing how the profit and loss should be divided, assuming the profit or loss for the year is: A. $40,000 B. $25,000 C. ($5,000) In addition, show the resulting entries to each partners capital account. Tatums capital account balance is $50,000 and Brooks is $60,000.

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