Concept explainers
Liquidation of
To choose:The correct answer to determine how partnership creditors should seek recovery of their claims.
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Chapter 16 Solutions
ADVANCED FINANCIAL ACCOUNTING IA
- Kendra, Cogley, and Mei share income and loss in a 3:2:1 ratio (in ratio form: Kendra, 3⁄6; Cogley, 2⁄6; and Mei, 1⁄6). The partners have decided to liquidate their partnership. On the day of liquidation, their balance sheet appears as follows. Required Prepare journal entries for (a) the sale of inventory, (b) the allocation of its gain or loss, (c) the payment of liabilities at book value, and (d) the distribution of cash in each of the following separate cases: Inventory is sold for (1) $600,000; (2) $500,000; (3) $320,000 and partners with deficits pay their deficits in cash; and (4) $250,000 and partners with deficits do not pay their deficits. (Round to the nearest dollar.)arrow_forwardYour book also talks about the liquidation process of a partnership. According to your text, there are four process steps in winding down a partnership's operations. What are they? List and describe them. (does not a long answer)arrow_forwardRequired information Use the following information for the Exercises below. [The following information applies to the questions displayed below.) Turner, Roth, and Lowe are partners who share income and loss in a 2:3:5 ratio (in percents: Turner, 20%; Roth, 30%; and Lowe, 50% ). The partners decide to liquidate the partnership. Immediately before liquidation, the partnership balance sheet shows total assets, $138,000; total liabilities, $88,000; Turner, Capital, $3,500; Roth, Capital, $14,500; and Lowe, Capital, $32,000. Cash received from selling the assets was sufficient to repay all but $33,000 to the creditors. Exercise 12-14 Liquidation of limited partnership LO P5 Assume that the Turner, Roth, and Lowe partnership is a limited partnership. Turner and Roth are general partners and Lowe is a limited partner. How much should each partner contribute to cover the remaining capital deficiency of $33,000? (Do not round intermediate calculations. Losses and deficits amounts to be…arrow_forward
- Write a Sample Format of Statement of Liquidation (Lump Sump) Other Instruction (Assumptions) 1. Values should be written as XXX if positive and (XXX) if negative 2. 7 Partners [Jk, V, RM, Jimin, Hobi, Jin and Suga] 3. There is a gain in the realization of assets 4. There is liquidation expense. 5. V has receivables from partnership. 6. Jin and Suga have payables to the partnershiparrow_forwardA partnership has the following balance sheet prior to liquidation (partners’ profit and loss ratios are in parentheses): During liquidation, other assets are sold for $80,000, liabilities are paid in full, and $15,000 in liquidation expenses are paid. What amount of cash does each partner receive as a result of this liquidation? Playa, $6,000; Bahia, $4,500; Arco, $4,500. Playa, $10,000; Bahia, $18,500; Arco, $19,500. Playa, $16,000; Bahia, $23,000; Arco, $24,000. Playa, $19,200; Bahia, $14,400; Arco, $14,400.arrow_forwardThe topic is about Partnership Liquidation. Based on the problem on the picture, choose the letter of correct answer; In November, Sarrah and Sapphira should receive: Sarrah Sapphira a. 45,000 67,500 b. 45,000 0 c. 0 67500 d. 81,500 103,500arrow_forward
- On June 30, 2021 – Gold, Titanium and Silver have decided to liquidate their partnership. The shared profits of the partners are in the ratio of 2:2:1, respectively. The partnership's post-closing trial balance is given in the picture. Required: 1.Prepare the liquidation journal entries. 2. Prepare the statement of liquidation.arrow_forwardThe following condensed balance sheet is for the partnership of Hardwick, Saunders, and Ferris, who share profits and losses in the ratio of 4:3:3, respectively: The partners decide to liquidate the partnership. Forty percent of the other assets are sold for $200,000. Prepare a proposed schedule of liquidation at this point in time.arrow_forwardAfter the tangible assets have been adjusted to current market prices, the capital accounts of Grayson Jackson and Harry Barge have balances of $64,900 and $86,500, respectively. Lewan Gorman is to be admitted to the partnership, contributing $43,300 cash to the partnership, for which he is to receive an ownership equity of $50,500. All partners share equally in income. a. Journalize the entry to record the admission of Gorman, who is to receive a bonus of $7,200. If an amount box does not require an entry, leave it blank. Cash Grayson Jackson, Capital Harry Barge, Capital Lewan Gorman, Capital b. What are the capital balances of each partner after the admission of the new partner? Partner Balance Grayson Jackson $ Harry Barge $ Lewan Gorman $arrow_forward
- A. Cara. Fatima and Zabra are sharing income and loss in a 1.2.2 ratio respectively and decided to d their partnership Prine to the final distribution of cash to the partners, Sarah (60,000), Fatima has capital balance of $94, 000, and Zahra has capital balance of $106,000. the cash balance is $200,000. Required: Prepare journal entries to record the above liquidation process When: Sara is able to pay the amount she owes to the partnership. B. Batool plans to withdraw from "BRF Partnership". The recorded balance of Batool's capital account is $60,000. The remaining partners, Reem and Afrah, agreed to pay Batool cash of $58,000. The partners share income and loss equally. Required Prepare the journal entry to record the above withdrawal transaction.arrow_forwardOn December 1, 2021 – Apple, Banana, and Lemon decided to finally liquidate their partnership. (Statement of financial position/Balance sheet is given in the picture) Required: 1. Prepare the liquidation journal entries. 2. Prepare the statement of liquidation.arrow_forwardThe following balance sheet is for a local partnership in which the partners have become very unhappy with each other. To avoid more conflict, the partners have decided to cease operations and sell all assets. Using this information, answer the following questions. Each question should be viewed as an situation related to the partnership’s liquidation. The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated to Adams, Baker, Carvil, and Dobbs on a 2:3:3:2 basis, respectively, how will the $10,000 be divided? The $10,000 cash that exceeds the partnership liabilities is to be disbursed immediately. If profits and losses are allocated on a 2:2:3:3 basis, respectively, how will the $10,000 be divided? The building is immediately sold for $70,000 to give total cash of $110,000. The liabilities are then paid, leaving a cash balance of $80,000. This cash is to be distributed to the partners. How much of this money will each…arrow_forward