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Financial Accounting: Information for Decisions
8th Edition
ISBN: 9781259533006
Author: John J Wild
Publisher: McGraw-Hill Education
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In partnership liquidation the first cash distribution should be made for
Select one:
a. loan to bank
b. partner capital
c. loan to partner
d. Liquidation expenses
000
Required: Prepare the statement of liquidation..
Vic, Victor and Vincent are partners in Valentine partnership. They share profits and
losses equally. Their financial position prior to liquidation follows:
Lump-sum Liquidation
Partnership is insolvent and partner/s are personally insolvent.
Exercise 3.
Valentine Partnership
Statement of Financial Position
As at August 31, 20xx
Assets
Liabilities and Capital
P 80,000
800,000
Liabilities
Cash
Non-cash Assets
P 480,000
40,000
Vic, Capital
Victor, Capital
Vincent, Capital
Total Liabilities and Capital P 880.000
120,000
240.000
Total Assets
P 880,000
The personal assets and liabilities of the partners, beside their equities in the
partnership, are as follows:
Personal Assets
Personal Liabilities
Partners
P800,000
P500,000 :
P 40,000
P300,000
P500,000
Vic
Victor
P140,000
Vincent
Solvent partners are going to invest when cash is needed. Non-cash assets are sold
for P425,000. Liabilities in the amount of P480,000 are paid.
The Pen, Evan, and Torves Partnership has asked you to assist in winding-up its business affairs. You compile the following information:
1. The partnership's trial balance on June 30, 20X1, Is
Cash
Accounts Receivable (net)
Inventory
Plant and Equipment (net)
Accounts Payable
Pen, Capital
Evan, Capital
Torves, Capital
Total
Profit and loss percentages
Preliquidation capital balances
Loss absorption potential (capital balances / loss percent)
Decrease highest LAP to next highest:
Debit
$ 6,800
30,000
22,000
99,700
Decrease LAPS to next highest:
$ 158,500
2. The partners share profits and losses as follows: Pen, 50 percent; Evan, 30 percent; and Torves, 20 percent.
3. The partners are considering an offer of $108,000 for the firm's accounts receivable, Inventory, and plant and equipment as of June
30. The $108,000 will be paid to creditors and the partners in Installments, the number and amounts of which are to be negotiated.
Required:
Prepare a cash distribution plan as of June 30,…
Chapter D Solutions
Financial Accounting: Information for Decisions
Ch. D - Prob. 1DQCh. D - Prob. 2DQCh. D - Prob. 3DQCh. D - Prob. 4DQCh. D - Prob. 5DQCh. D - Prob. 6DQCh. D - Prob. 7DQCh. D - Prob. 8DQCh. D - Prob. 9DQCh. D - Prob. 10DQ
Ch. D - Prob. 11DQCh. D - Prob. 12DQCh. D - Prob. 1QSCh. D - Prob. 2QSCh. D - Prob. 3QSCh. D - Prob. 4QSCh. D - Prob. 5QSCh. D - Prob. 6QSCh. D - Prob. 7QSCh. D - Prob. 8QSCh. D - Prob. 1ECh. D - Prob. 2ECh. D - Prob. 3ECh. D - Prob. 4ECh. D - Prob. 5ECh. D - Prob. 6ECh. D - Prob. 7ECh. D - Prob. 8ECh. D - Prob. 9ECh. D - Prob. 10ECh. D - Prob. 11ECh. D - Prob. 12ECh. D - Prob. 1PSACh. D - Prob. 2PSACh. D - Prob. 3PSACh. D - Prob. 4PSACh. D - Prob. 5PSACh. D - Prob. 1PSBCh. D - Prob. 2PSBCh. D - Prob. 3PSBCh. D - Prob. 5PSBCh. D - Prob. 3BTN
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- ENTRIES: PARTNERSHIP LIQUIDATION On liquidation of the partnership of J. Hui and K. Cline, as of November 1, 20--, inventory with a book value of 180,000 is sold for 230,000. Given that Hui and Cline share profits and losses equally, prepare the entries for the sale and the allocation of gain.arrow_forwardk The Pen, Evan, and Torves Partnership has asked you to assist in winding-up its business affairs. You compile the following information: 1. The partnership's trial balance on June 30, 20X1, is Cash Accounts Receivable (net) Inventory Plant and Equipment (net) Accounts Payable Pen, Capital Evan, Capital Torves, Capital Total Profit and loss percentages Preliquidation capital balances Loss absorption potential (capital balances/loss percent) Decrease highest LAP to next highest Debit $ 7,808 34,000 24,808 99,908 Decrease LAPs to next highest: $ 164,908 2. The partners share profits and losses as follows: Pen, 50 percent; Evan, 25 percent; and Torves, 25 percent. 3. The partners are considering an offer of $110,000 for the firm's accounts receivable, inventory, and plant and equipment as of June 30. The $110,000 will be paid to creditors and the partners in installments, the number and amounts of which are to be negotiated. Required: Prepare a cash distribution plan as of June 30, 20X1,…arrow_forwardAlex and Bess have been in partnership for many years. The partners, who share profits and losses on a 60:40 basis, respectively, wish to retire and have agreed to liquidate the business. Liquidation expenses are estimated to be $5,000. At the date the partnership ceases operations, the balance sheet is as follows: Cash Noncash assets Total assets $ 50,000 150,000 $ 200,000 Liabilities Alex, capital Bess, capital Total liabilities and capital $40,000 90,000 70,000 $ 200,000 Part A: Prepare journal entries for the following transactions that occurred in chronological order: a. Distributed safe cash payments to the partners. b. Paid $30,000 of the partnership's liabilities. c. Sold noncash assets for $160,000. d. Distributed safe cash payments to the partners. e. Paid remaining partnership liabilities of $10,000. f. Paid $4,000 in liquidation expenses; no further expenses will be incurred. g. Distributed remaining cash held by the business to the partners.arrow_forward
- The following condensed balance sheet is for the partnership of Miller, Tyson, and Watson, who share profits and losses in the ratio of 6:2:2, respectively: Cash Other assets Total assets $ 49,000 135,000 $ 184,000 a. Assuming no liquidation expenses, calculate the safe payments that can be made to partners at this point in time. b. For how much money must the other assets be sold so that each partner receives some amount of cash in a liquidation? Complete this question by entering your answers in the tabs below. Required A Required B Safe payments Liabilities Miller, capital Tyson, capital Watson, capital Total liabilities and capital Assuming no liquidation expenses, calculate the safe payments that can be made to partners at this point in time. Tyson Miller $ 39,000 63,000 63,000 19,000 $ 184,000 Watsonarrow_forwardThe CDG Carlos, Dan, and Gall Partnership has decided to liquidate as of December 1, 20X6. A balance sheet on the date follows: Assets Cash Accounts Receivable (net) Inventories Property, Plant and Equipment (net) Total Assets Liabilities and Capital Liabilities: Accounts Payable Capital: CDG PARTNERSHIP Balance Sheet At December 1, 20x6 Carlos, Capital Dan, Capital Gail, Capital Total Capital Total Liabilities and Capital $138,000 68,000 78,000 Personal assets Personal liabilities Personal net worth $ 34,000 93,000 118,000 336,000 $581,000 $297,000 284,000 $581,000 Additional Information 1. Each partner's personal assets (excluding partnership capital interests) and personal liabilities as of December 1, 20X6, follow: Carlos Dan Gail $ 268,000 $310,000 $368,000 (239,000) (231,000) (340,000) $ 87,000 $ 28,000 $ 29,000 2. Carlos, Dan, and Gall share profits and losses in the ratio 15:45:40, 3. CDG sold all noncash assets on December 10, 20X6, for $276,000.arrow_forwardAlex and Bess have been in partnership for many years. The partners, who share profits and losses on a 70:30 basis, respectively, wish to retire and have agreed to liquidate the business. Liquidation expenses are estimated to be $8,000. At the date the partnership ceases operations, the balance sheet is as follows: Cash Noncash assets Total assets $ 68,000 270,000 Liabilities Alex, capital Bess, capital $ 338,000 Total liabilities and capital Part A: Prepare journal entries for the following transactions that occurred in chronological order: a. Distributed safe cash payments to the partners. b. Paid $29,400 of the partnership's liabilities. c. Sold noncash assets for $289,000. d. Distributed safe cash payments to the partners. e. Paid remaining partnership liabilities of $19,600. f. Paid $6,300 in liquidation expenses; no further expenses will be incurred. g. Distributed remaining cash held by the business to the partners. $ 49,000 189,000 100,000 $ 338,000 Part B: Prepare a final…arrow_forward
- After Non-Cash Assets have been sold and liabilities paid, the final step in the liquidation process is to distribute the balance of Cash to the partners. Consider the following: Cash $20 A, Capital Balance $8 B, Capital Balance $12 Gains and losses are shared equally between the partners. Which of the following is correct? Group of answer choice a.B would receive$12 as the final payment of cash. b. B would receive $10 as the final payment of cash. c. B would receive $8 as the final payment of cash. d. B would receive $20 as the final payment of cash.arrow_forwardKendra, 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_forwardA, B, and D Statement of Partnership Liquidation For the Day Ending January 1, 2022 Other assets Accounts payable Cash Partners' capital A B D Opening balance Allocation of gain (loss) Amount Ratio A B Darrow_forward
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