Chapter 12, Problem 6BPSB

To determine

To prepare:

Journal entries for liquidation of partnership when Equipment is sold for $530,000

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	$ 530,000
	Loss on Sale	$87,200
	Equipment		$617,200
	(Being Equipment sold for cash)
(b)	Allocation of Gain or loss:
	Lasu's Capital	$34,880
	Ramirez's Capital	$17,440
	Toney's Capital	$34,880
	Loss on Sale		$ 87,200
	(Being loss shared by partners in the income sharing ratio)
(c)	Payment of Liabilities at book value:
	Accounts Payable	$ 342,600
	Cash		$342,600
	(being liabilities paid at their book value)
(d)	Distribution of cash:
	Lasu's Capital	$ 265,520
	Ramirez's Capital	$ 178,360
	Toney's Capital	$92,120
	Cash		$536,000
	(Being Cash distributed to partners)

Working Note:

The distribution of cash is calculated as follows:

	Lasu	Ramirez	Toney	Total
Cash				$ 348,600
Add: Sale of Equipment				$ 530,000
Less: Payment of Liabilities				$(342,600)
Net Cash Available				$ 536,000
Partner's Capital	$300,400	$195,800	$127,000	$ 623,200
Less: Loss on Sale (Shared in the Ratio 2:1:2)	$(34,880)	$(17,440)	$(34,880)	$ (87,200)
Capital Balance/ (Deficit)	$265,520	$178,360	$ 92,120	$ 536,000
Distribution of Cash	$ 265,520	$ 178,360	$92,120	$ 536,000

Requirement-3:

To determine

To prepare:

Journal entries for liquidation of partnership when Equipment is sold for $200,000 and the partner with deficit bring it in cash

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	$ 200,000
	Loss on Sale	$ 417,200
	Equipment		$617,200
	(Being Equipment sold for cash)
(b)	Allocation of Gain or loss:
	Lasu's Capital	$ 166,880
	Ramirez's Capital	$83,440
	Toney's Capital	$ 166,880
	Loss on Sale		$417,200
	(Being loss shared by partners in the income sharing ratio)
(c)	Payment of Liabilities at book value:
	Accounts Payable	$ 342,600
	Cash		$342,600
	(being liabilities paid at their book value)
(d)	Distribution of cash:
	Lasu's Capital	$ 133,520
	Ramirez's Capital	$ 112,360
	Toney's Capital		$ 39,880
	Cash		$206,000
	(Being Cash distributed to partners)

Working Note:

The distribution of cash is calculated as follows:

	Lasu	Ramirez	Toney	Total
Cash				$ 348,600
Add: Sale of Equipment				$ 200,000
Less: Payment of Liabilities				$(342,600)
Net Cash Available				$ 206,000
Partner's Capital	$300,400	$195,800	$127,000	$ 623,200
Less: Loss on Sale (Shared in the Ratio 2:1:2)	$ (166,880)	$(83,440)	$ (166,880)	$(417,200)
Capital Balance/ (Deficit)	$133,520	$112,360	$(39,880)	$ 206,000
Distribution of Cash	$ 133,520	$ 112,360	$ (39,880)	$ 206,000

Requirement-4:

To determine

To prepare:

Journal entries for liquidation of partnership when Equipment is sold for $150,000 and the partner with deficit bring it in cash

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	$ 150,000
	Loss on Sale	$ 467,200
	Equipment		$617,200
	(Being Equipment sold for cash)
(b)	Allocation of Gain or loss:
	Lasu's Capital	$ 186,880
	Ramirez's Capital	$93,440
	Toney's Capital	$ 186,880
	Loss on Sale		$467,200
	(Being loss shared by partners in the income sharing ratio)
(c)	Payment of Liabilities at book value:
	Accounts Payable	$ 342,600
	Cash		$342,600
	(being liabilities paid at their book value)
(d)	Distribution of cash:
	Lasu's Capital	$73,600
	Ramirez's Capital	$82,400
	Cash		$156,000
	(Being Cash distributed to partners)

Working Note:

The distribution of cash is calculated as follows:

	Lasu	Ramirez	Toney	Total
Cash				$ 348,600
Add: Sale of Equipment				$ 150,000
Less: Payment of Liabilities				$(342,600)
Net Cash Available				$ 156,000
Partner's Capital	$300,400	$195,800	$127,000	$ 623,200
Less: Loss on Sale (Shared in the Ratio 2:1:2)	$ (186,880)	$(93,440)	$ (186,880)	$(467,200)
Capital Balance/ (Deficit)	$113,520	$102,360	$(59,880)	$ 156,000
Sharing of Deficit of Toney's Capital (In the ratio 2:1)	$(39,920)	$(19,960)	$ 59,880
Distribution of Cash	$73,600	$82,400	$-	$ 156,000