Please do part A above and Part B: journal entries to form the completion of the liquidation process.
3 | 5 | 2 | |||||
Trade Creditors | Parks Loan | Cook Capital | Park Capital | Argo Capital | Total | ||
Balances | 22000 | 10000 | 28000 | 10000 | 16000 | 86000 | |
Cash Available | 36000 | ||||||
Paid to outside liabilites and loans from partner | -32000 | 22000 | 10000 | ||||
Balance | 4000 | 0 | 0 | 28000 | 10000 | 16000 | 86000 |
Paid to Partners | -4000 | -4000 (please see note below) | |||||
Balance | Nil |
The Ratios and capital balances are as above. We calculate the capital in proportion to the profit sharing ratio. We use partner with lowest capital for the same. So its Park's capital a/c ie., 10000 and his ratio is 50%. So,
Partner | Capital Account Balance | Capital on basis of Park's capital | Excess |
Cook | 28000 | 10,000*3/5 = 6000 | 24000 |
Park | 10000 | 10000 | nil |
Argo | 16000 | 10000*2/5 = 4000 | 12000 |
Hence we distributed any cash up to first 12000 to Cook, next 12000 to Cook and Argo and balance to all partners in their profit sharing ratio.
Journal Entries are:
Creditors a/c Dr | 22000 | |
To Cash a/c | 22000 | |
Park's Loan a/c Dr |
10000 | |
To Cash a/c | 10000 | |
Cook's Capital a/c Dr | 4000 | |
To Cash a/c | 4000 |
Please do part A above and Part B: journal entries to form the completion of the...
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