Question

5. Cash was paid to the partners with credit balances.
River Song records the distribution of cash as follows.
12/31/12	A. Mangold Capital			301
	S. Otis Capital			301
		Cash		101
	(to record distribution of cash to partners)
(b) Post to the cash and capital accounts.
	Cash					101
date	Explanation		ref	Debit	Credit	Balance
12/31/12	beginning balance
12/31/12			J1
12/31/12			J1
12/31/12			J1
12/31/12			J1

RIVER SONG COMPANY Balance Sheet May 31, 2012 Assets Liabilities and Owners' Equity Cash $ 27,500 Notes payable $ 13,500 Accounts receivable 25,000 Accounts payable 27,000 Allowance for doubtful accounts (1,000) Salaries and wages payable 4,000 Inventory 34,500 A. Mangold, capital 33,000 Equipment 21,000 S. Otis, capital 21,000 Accumulated depreciation-equipment (5,500) P. Tyler, capital 3,000 Total $101,500 Total $101,500 The partners share income and loss 5:3:2. During the process of liquidation, the following transactions were completed in the following sequence. 1. A total of $55,000 was received from converting noncash assets into cash. 2. Gain or loss on realization was allocated to partners. 3. Liabilities were paid in full. 4. P. Tyler paid his capital deficiency. 5. Cash was paid to the partners with credit balances. zation Mangold Otis Instructions (a) Prepare the entries to record the transactions. (b) Post to the cash and capital accounts. (c) Assume that Tyler is unable to pay the capital deficiency. (1) Prepare the entry to allocate Tyler's debit balance to Mangold and Otis. (2) Prepare the entry to record the final distribution of cash.

Answer 1

Solution:
Part-1)

Particulars   Debit   Credit     
Cash   55,000         
Allowance for Doubtful Accounts   1,000         
Accumulated Depreciation—Equipment   5,500         
Loss on Realization   19,000         
Accounts Receivable       25,000     
Inventory       34,500     
Equipment       21,000     
             
A. Mangold, Capital ($19,000 X 5/10)   9,500         
S. Otis, Capital ($19,000 X 3/10)   5,700         
P. Tyler, Capital ($19,000 X 2/10)   3,800         
Loss on Realization       19,000     
             
Notes Payable   13,500         
Accounts Payable   27,000         
Salaries and Wages Payable   4,000         
Cash       44,500     
             
Cash   800         
P. Tyler, Capital ($3,800 – $3,000)       800     
             
A. Mangold, Capital ($33,000 – $9,500)   23,500         
S. Otis, Capital ($21,000 – $5,700)   15,300         
Cash       38,800     

Part-3)

Particulars   Debit   Credit     
A. Mangold, Capital ($800 X 5/8)   500         
S. Otis, Capital ($800 X 3/8)   300         
P. Tyler, Capital       800     
             
A. Mangold, Capital ($23,500 – $500)   23,000         
Otis, Capital ($15,300 – $300)   15,000         
Cash       38,000     

Cash 27,500 (3) 55,000 (5) S.Otis,Capital Bal 44,500 Bal (2) 5,700 21,000 (1) 38,800 (5) 15,300 Bal. 4) Bal. 800 -0 A. Mangold, Capital 9,500 Bal. P.Tyler, Capital 3,800 Bal. 33,000 2) 5) 3,000 2) 23,500 (4) Bal 800 Bal. -0-