Question

Exercise 16-1 The CPA Partnership operated by Cook, Parks, and Argo is being liquidated. A balance sheet prepared at this stage in their liquidation process is presented below. Cash $44,000 Liabilities $34,000 Other Assets 51,000 Parks, Loan 10,000 Cook, Capital 28,000 Parks, Capital 9,000 Argo, Capital 14,000    Total $95,000    Total $95,000 The partners share profits and losses 30% (Cook), 50% (Parks), and 20% (Argo). The partners are all personally insolvent.

(a) The partners wish to distribute the $44,000 in cash. Record in journal entry form the distribution of the available cash. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit (To record payment of liabilities) (To record distribution to partners) SHOW LIST OF ACCOUNTS

Answer 1

Solution: (Amounts in $)

Particulars	Debit	Credit
1. For Payment of Liabilities Liabilities A/c Dr. To Cash A/c (Being liabilities paid fully)	34,000	34,000
2. For distribution of remaining cash to all partners Cook Capital A/c Dr. Parks Capital A/c Dr. Argo Capital A/c Dr. To Cash A/c (Being remaining cash distributed to all partners in their capital ratios)	5,491 1,765 2,744	10,000

Working Note: Distribution of remaining cash to all partners in their capital ratios:

Total cash balance = $ 44,000

Less: Paid to liabilities = ($ 34,000)

Available balance = $ 10,000

Distribution:

Cook Capital A/c = $ 10,000 x 28/51 = $ 5,491

Parks Capital A/c = $ 10,000 x 9/51 = $ 1,765

Argo Capital A/c = $ 10,000 x 14/51 = $ 2,744