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Accounting 202 Quiz # 3 The partnership of Adcock, Villa. and Davis decide to liquidate after all temporary accounts have been closed out and the partnership balance sheet is as follows: Adcock, Villa, Davis & Company Balance Sheet February 2, 2018 Assets Cash Accounts Receivable Inventory Plant Assets (Net of Depreciation) Total Assets S 60,000 40,000 100,000 200.000 S 400.000 Liabilities Accounts Payable $120,000 Partners Equity Adcock Capital Villa Capital Davis Capital Total Liabilities & Partner Equity 55,000 125,000 100,000 $400,000 Required: Prepare Journal entries and ledger accounts (T- Accounts) for the following activities, allocations of profit/loss, and distribution of cash to each partner on liquidation under the following two assumptions. 1. The following events took place during liquidation: A. Collected $35,000 of accounts receivable, the remaining is uncollectible. B. The inventory was sold for $110,000 cash. C. The plant assets were sold for $90,000. Plant assets have a historical cost of $450,000 and $250,000 of accumulated depreciation. Profits and losses are allocated Adcock, Villa, and Davis in a 3:3:4 ratio. In the alternative to #1 above, assume account receivable same as above, the inventory was sold for $40,000 and plant assets are sold for S 75,000. Also assume, any partner with a deficit capital account does not have personal funds to cover the deficiency. 2.

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Answer #1

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Liquidation Journal entries Debit Credit
Cash 35000
Adcock Capital(5000*3/10) 1500
Villa capital(5000*3/10) 1500
Davis capital(5000*4/10) 2000
Accounts receivables 40000
(A/cs. Receivable realised & loss 5000 (uncollectible) allocated to partners in p&l sharing ratio of 3:3:4)
Cash 110000
Inventory 100000
Adcock Capital(10000*3/10) 3000
Villa capital(10000*3/10) 3000
Davis capital(10000*4/10) 4000
(Inventory realised & profit 10000 allocated to partners in p&l sharing ratio of 3:3:4)
Cash 90000
Acc. Depn. 250000
Adcock Capital(110000*3/10) 33000
Villa capital(110000*3/10) 33000
Davis capital(110000*4/10) 44000
Plant assets 450000
(Loss on sale of plant assets,110000 allocated in P/shg. ratio)
Accounts payable 120000
Cash 120000
(Settlement of a/cs.payable)
Adcock Capital 23500
Villa capital 93500
Davis capital 58000
Cash 175000
(Distribution of balance cash to partners)
Workings: Adcock Villa Davis
Feb.2, 2018 capital 55000 125000 100000
Share of uncollectible receivables -1500 -1500 -2000
Share of profit on sale of inventory 3000 3000 4000
Share of loss on sale of plant assets -33000 -33000 -44000
Adjusted capital balance on liquidation 23500 93500 58000
Cash paid -23500 -93500 -58000
Balance 0 0 0
LEDGER ACCOUNTS Net Ledger balances
Debit Credit Debit Credit
Feb.2,'18 Balance 250000
Acc. Depn. 250000 0
Feb.2,'18 Balance 120000
Accounts payable 120000 0
Feb.2,'18 Balance 40000
Accounts receivables 40000 0
Feb.2,'18 Balance 55000
Adcock Capital 23500
Adcock Capital(10000*3/10) 3000
Adcock Capital(110000*3/10) 33000
Adcock Capital(5000*3/10) 1500 0
Feb.2,'18 Balance 60000
Cash 35000
Cash 110000
Cash 90000
Cash 120000
Cash 175000 0
Feb.2,'18 Balance 100000
Davis capital 58000
Davis capital(10000*4/10) 4000
Davis capital(110000*4/10) 44000
Davis capital(5000*4/10) 2000 0
Feb.2,'18 Balance 100000
Inventory 100000 0
Feb.2,'18 Balance 450000
Plant assets 450000 0
Feb.2,'18 Balance 125000
Villa capital 93500
Villa capital(10000*3/10) 3000
Villa capital(110000*3/10) 33000
Villa capital(5000*3/10) 1500 0
1545000 1545000 0 0
2….
Workings: Adcock Villa Davis
Feb.2, 2018 capital 55000 125000 100000
Share of uncollectible receivables -1500 -1500 -2000
Share of profit on sale of inventory -18000 -18000 -24000
Share of loss on sale of plant assets -37500 -37500 -50000
Adjusted capital balance on liquidation -2000 68000 24000
Loss from Adcock's deficit 2000 -857 -1143
Adj. Capital Balance for cash distribution 0 67143 22857
Cash paid -67143 -22857
Balance 0 0 0
Liquidation Journal entries Debit Credit
Cash 35000
Adcock Capital(5000*3/10) 1500
Villa capital(5000*3/10) 1500
Davis capital(5000*4/10) 2000
Accounts receivables 40000
(A/cs. Receivable realised & loss 5000 (uncollectible) allocated to partners in p&l sharing ratio of 3:3:4)
Cash 40000
Adcock Capital(60000*3/10) 18000
Villa capital(60000*3/10) 18000
Davis capital(60000*4/10) 24000
Inventory 100000
(Inventory realised & loss 60000 allocated to partners in p&l sharing ratio of 3:3:4)
Cash 75000
Acc. Depn. 250000
Adcock Capital(125000*3/10) 37500
Villa capital(125000*3/10) 37500
Davis capital(125000*4/10) 50000
Plant assets 450000
(Loss on sale of plant assets,125000 allocated in P/shg. ratio)
Accounts payable 120000
Cash 120000
(Settlement of a/cs.payable)
Villa capital(2000*3/7) 857
Davis capital (2000*4/7) 1143
Adcock Capital 2000
(Adjusted Capital deficit of Adcock split 3:4 to Villa & Davis)
Villa capital 67143
Davis capital 22857
Cash 90000
(Distribution of balance cash to partners)as per workings
LEDGER ACCOUNTS
Balance 250000
Acc. Depn. 250000 0
Balance 120000
Accounts payable 120000 0
Balance 40000
Accounts receivables 40000 0
Balance 55000
Adcock Capital 2000
Adcock Capital(125000*3/10) 37500
Adcock Capital(5000*3/10) 1500
Adcock Capital(60000*3/10) 18000 0
Balance 60000
Cash 35000
Cash 40000
Cash 75000
Cash 120000
Cash 90000 0
Balance 100000
Davis capital 22857
Davis capital (2000*4/7) 1143
Davis capital(125000*4/10) 50000
Davis capital(5000*4/10) 2000
Davis capital(60000*4/10) 24000 0
Balance 100000
Inventory 100000 0
Balance 450000
Plant assets 450000 0
Balance 125000
Villa capital 67143
Villa capital(125000*3/10) 37500
Villa capital(2000*3/7) 857
Villa capital(5000*3/10) 1500
Villa capital(60000*3/10) 18000 0
1452000 1452000 0 0
0 0
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