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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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BuyFindarrow_forward

Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094
Textbook Problem

Distribution of cash upon liquidation

David Oliver and Umar Ansari, with capilal balances of $28,000 and $35,000, respectively, decide to liquidate their partnership. After selling the noncash assets and paying the liabilities, there is $67,000 of cash remaining. If the partners share income and losses equally, how should the cash be distributed?

To determine

Determine the distribution of cash upon liquidation

Explanation

Partnership: It is that form of organization which is owned and managed by two or more persons who invest and share the profits and losses according to a pre-determined ratio.

Liquidating Partnership: The winding up of process of partnership is called liquidation of partnership. At the time of liquidation of partnership realization of account is prepared.

The following table shows the distribution of cash upon liquidation, when the partners share the profits and losses equally.

 OATotal
Capital balances before realization$28,000$35,000$63,000
Division of gain on realization(1)$2,000$2,000 
Capital balances after realization$30,000$37,000 
Cash distributed to partners$30,000$37,000 
Final balances$0$0 

 Table (1)

Working notes (1)

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