Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781259916960
Author: Wild, John J., Shaw, Ken W.
Publisher: Mcgraw-hill Education,
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Chapter 12, Problem 6APSA
To determine

To prepare:

Journal entries for liquidation of partnership when inventory is sold for $500,000

Expert Solution
Check Mark

Explanation of Solution

Journal entries for liquidation of partnership are as follows:

    S.No.Accounts titles and Explanation Debit Credit
    (a)Sale of inventory:

    Cash
    $ 500,000.00

    Loss on Sale
    $ 37,200.00


    Inventory

    $ 537,200.00

    (Being inventory sold for cash)






    (b)Allocation of Gain or loss:






    Kendra's Capital
    $ 18,600.00


    Cogley's Capital
    $ 12,400.00


    Mei's Capital
    $ 6,200.00


    Loss on Sale

    $ 37,200.00

    (Being loss shared by partners in the income sharing ratio)






    (c)Payment of Liabilities at book value:






    Accounts Payable
    $ 245,500.00


    Cash

    $ 245,500.00

    (being liabilities paid at their book value)






    (d)Distribution of cash:






    Kendra's Capital
    $ 74,400.00


    Cogley's Capital
    $ 200,100.00


    Mei's Capital
    $ 160,800.00


    Cash

    $ 435,300.00

    (Being Cash distributed to partners)


Working Note:

The distribution of cash is calculated as follows:

    Kendra Cogley Mei Total
    Cash



    $180,800.00
    Add: Sale of Inventory
    $500,000.00
    Less: Payment of Liabilities
    $(245,500.00)
    Net Cash Available $ 435,300.00





    Partner's Capital
    $93,000.00
    $212,500.00
    $167,000.00
    $472,500.00
    Less: Loss on Sale (Shared in the Ratio 3:2:1)
    $ (18,600.00)
    $ (12,400.00)
    $(6,200.00)
    $(37,200.00)
    Capital Balance/ (Deficit)
    $74,400.00
    $200,100.00
    $160,800.00
    $435,300.00





    Distribution of Cash$74,400.00 $ 200,100.00 $ 160,800.00 $ 435,300.00

Requirement-3:

To determine

To prepare:

Journal entries for liquidation of partnership when inventory is sold for $320,000 and the partner with deficit bring it in cash

Expert Solution
Check Mark

Explanation of Solution

Journal entries for liquidation of partnership are as follows:

    S.No.Accounts titles and Explanation Debit Credit
    (a)Sale of inventory:

    Cash
    $ 320,000.00

    Loss on Sale
    $ 217,200.00


    Inventory

    $ 537,200.00

    (Being inventory sold for cash)






    (b)Allocation of Gain or loss:






    Kendra's Capital
    $ 108,600.00


    Cogley's Capital
    $ 72,400.00


    Mei's Capital
    $ 36,200.00


    Loss on Sale

    $ 217,200.00

    (Being loss shared by partners in the income sharing ratio)






    (c)Payment of Liabilities at book value:






    Accounts Payable
    $ 245,500.00


    Cash

    $ 245,500.00

    (being liabilities paid at their book value)






    (d)Distribution of cash:




    Cogley's Capital
    $ 140,100.00


    Mei's Capital
    $ 130,800.00


    Kendra's Capital

    $ 15,600.00

    Cash

    $ 255,300.00

    (Being Cash distributed to partners)


Working Note:

The distribution of cash is calculated as follows:

    Kendra Cogley Mei Total
    Cash



    $180,800.00
    Add: Sale of Inventory
    $320,000.00
    Less: Payment of Liabilities
    $(245,500.00)
    Net Cash Available $ 255,300.00





    Partner's Capital
    $93,000.00
    $212,500.00
    $167,000.00
    $472,500.00
    Less: Loss on Sale (Shared in the Ratio 3:2:1)
    $ (108,600.00)
    $ (72,400.00)
    $ (36,200.00)
    $(217,200.00)
    Capital Balance/ (Deficit)
    $ (15,600.00)
    $140,100.00
    $130,800.00
    $255,300.00
    Distribution of Cash$ (15,600.00)$ 140,100.00 $ 130,800.00 $ 255,300.00

Requirement-4:

To determine

To prepare:

Journal entries for liquidation of partnership when inventory is sold for $320,000 and the partner with deficit bring it in cash

Expert Solution
Check Mark

Explanation of Solution

Journal entries for liquidation of partnership are as follows:

    S.No.Accounts titles and Explanation Debit Credit
    (a)Sale of inventory:

    Cash
    $ 250,000.00

    Loss on Sale
    $ 287,200.00


    Inventory

    $ 537,200.00

    (Being inventory sold for cash)






    (b)Allocation of Gain or loss:






    Kendra's Capital
    $ 143,600.00


    Cogley's Capital
    $ 95,733.33


    Mei's Capital
    $ 47,866.67


    Loss on Sale

    $ 287,200.00

    (Being loss shared by partners in the income sharing ratio)






    (c)Payment of Liabilities at book value:






    Accounts Payable
    $ 245,500.00


    Cash

    $ 245,500.00

    (being liabilities paid at their book value)






    (d)Distribution of cash:






    Cogley's Capital
    $ 83,033.33


    Mei's Capital
    $ 102,266.67


    Cash

    $ 185,300.00

    (Being Cash distributed to partners)


Working Note:

The distribution of cash is calculated as follows:

    Kendra Cogley Mei Total
    Cash



    $180,800.00
    Add: Sale of Inventory
    $250,000.00
    Less: Payment of Liabilities
    $(245,500.00)
    Net Cash Available $ 185,300.00





    Partner's Capital
    $93,000.00
    $212,500.00
    $167,000.00
    $472,500.00
    Less: Loss on Sale (Shared in the Ratio 3:2:1)
    $ (143,600.00)
    $ (95,733.33)
    $ (47,866.67)
    $(287,200.00)
    Capital Balance/ (Deficit)
    $ (50,600.00)
    $116,766.67
    $119,133.33
    $185,300.00
    Sharing of Deficit pf Kendra's Capital (In the ratio 2:1)
    $50,600.00
    $ (33,733.33)
    $ (16,866.67)






    Distribution of Cash$-$83,033.33 $ 102,266.67 $ 185,300.00

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