Question

Close books and prepare cash distribution plan

Arnold, Bell and Crane agree to liquidate their partnership as soon as possible. The partnership agreement calls for salaries of $50,000 and $70,000 for Arnold and Bell, respectively; any remaining profit or loss is divided in a 2:5:3 ratio. The preclosing trial balance for the partnership at July 31, 2020, the end of the firm's fiscal year, is:

Cash- 95,000

other assets- 350,000

liabilities- 114,000

loan payable (Crane)- 36,000

Capital (Arnold)- 85,000

Capital (Bell)-70,000

Capital (Crane)- 40,000

Sales- 732,000

operating expenses- 520,000

drawings (Arnold)- 60,000

drawings (Bell)- 27,000

drawings (Crane)- 25,000

total debit- 1,077,000 total credit- 1,077,000

Required

a. Prepare a schedule showing the balances in the capital accounts prior to liquidation

b. prepare a cash distribution plan for the liquidation

c. compute the amount that must be realized from the other assets to liquidate the liabilities and drive all capital accounts to zero

Answer 1

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