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Accounting

27th Edition
WARREN + 5 others
ISBN: 9781337272094

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Section
BuyFindarrow_forward

Accounting

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

Statement of partnership liquidation

After closing the accounts on July 1, prior to liquidating the partnership, the capital account balances of Gold, Porter, and Sims are $55,000, $45,000, and 520,000, respectively. Cash, noncash assets, and liabilities total $56,000, $96,000, and $32,000, respectively. Between July 1 and July 29, the noncash assets are sold for 590,000, the liabilities are paid, and the remaining cash is distributed to the partners. The partners share net income and loss in the ratio of 3:2:1. Prepare a statement of partnership liquidation for the period July 1-29.

To determine

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.

To prepare:  The statement of partnership liquidation for the period July 1-29

Explanation

W. N-1

Calculation of the sale of assets and division of loss:

Loss=($96,000-$90,000)=$6,000

So, $6,000 is to be shared among the three partners G, P and S in the profit & loss sharing ratio of 3:2:1 respectively.

 Share of G =($6,000×36)=$3,000

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