BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124

Solutions

Chapter
Section
BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
ISBN: 9781337272124
Textbook Problem

On November 1, the firm of Sails, Welch, and Greenberg decided to liquidate its partnership.

The partners have capital balances of $58,000, $72,000, and $10,000, respectively. The cash balance is $32,000, the book values of noncash assets total $128,000, and liabilities total $20,000. The partners share income and losses in the ratio of 2:2:1.

Instructions

  1. 1. Prepare a statement of partnership liquidation, covering the period November 1–30, for each of the following independent assumptions:
    1. a. All of the noncash assets are sold for $156,000 in cash, the creditors are paid, and the remaining cash is distributed to the partners.
    2. b. All of the noncash assets are sold for $55,000 in cash, the creditors are paid, the partner with the debit capital balance pays the amount owed to the firm, and the remaining cash is distributed to the partners.
  2. 2. Assume that the partner with the capital deficiency in part (b) declares bankruptcy and is unable to pay the deficiency. Journalize the entries to (a) allocate the partner’s deficiency and (b) distribute the remaining cash.

1. a

To determine

Prepare statement of partnership liquidation.

Explanation

Working note 1

Calculation of division of realization Profit among partners:

The following table determines the realization profit.

 Sale price of Non cash asset (A) $  156,000
Book value of Non cash asset (B) $  128,000
Realization profit (A) – (B) $  28,000

Table (2)

The profit and loss sharing ratio among partners...

1. b

To determine

Prepare statement of partnership liquidation.

2. a

To determine

Record the journal entry to allocate the partner’s deficiency, assuming that the partner with capital deficiency declares bankruptcy.

2. b

To determine

Record the journal entry to distribute the cash among the partners, assuming that the partner with capital deficiency declares bankruptcy.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What rights do stockholders have?

Foundations of Business (MindTap Course List)

Why should policymakers think about incentives?

Brief Principles of Macroeconomics (MindTap Course List)

(Costs in the Short Run) Identify each of the curves in the following graph:

ECON: MICRO4 (New, Engaging Titles from 4LTR Press)

REQUIRED LUMP SUM PAYMENT Starting next year, you will need 10,000 annually for 4 years to complete your educat...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)