Question

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 60,000 40,000 100,000 200,000 S 400,000 Liabilities Payable Partners' Equity $120,000 Adcock Capital Villa Capital Davis Capital Total Liabilities & Partner Equity 55,000 125,000 100,000 S400,000 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. 2. 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 $ 75,000. Also assume, any partner with a deficit capital account does not have personal funds to cover the deficiency.

Answer 1

Ans: Journal Entries

Particulars Amount ($)

Debit Credit

Bank A/c Dr. 35,000

Profit & loss A/c Dr. 5,000

To Account receivable A/c 40,000

( Being Account receivable released )

Bank A/c Dr. 110,000

To Profit & loss A/c . 10,000

To Inventory A/c   100,000

( Being Inventory sold)

Bank A/c Dr. 90,000

Accumulated Depreciation A/c Dr. 250,000

Profit & loss A/c Dr. 110,000

To Plant Asset A/c 450,000  

( Being Plant Assets sold)

Account Payable A/c Dr. 120,000

To Bank A/c 120,000

( Being Account Payable paid)

Ledger

	Cash & Bank A/c
Particulars	Debit ($)	Particulars	Credit ($)
Opening Balance	60000	Account Payable	120000
Account Receivable	35000	Adcock partner's Capital A/c	23500
Plant Assets	90000	Villa partner's Capital A/c	93500
Inventory	110000	Davis partner's Capital A/c	58000
	295000		295000
	Account Payable
Particulars	Debit ($)	Particulars	Credit ($)
Bank	120000	Opening Balance	120000
	120000		120000
	Account Receivable
Particulars	Debit ($)	Particulars	Credit ($)
Opening Balance	40000	Bank	35000
		Profit and loss	5000
	40000		40000
	Plant Asset
Particulars	Debit ($)	Particulars	Credit ($)
Opening Balance	450000	Accumalated Depreciation	250000
		Bank	90000
		Profit and loss	110000
	450000		450000
	Inventory
Particulars	Debit ($)	Particulars	Credit ($)
Opening Balance	100000	Bank	110000
Profit and loss	10000
	110000		110000
	Profit and Loss A/c
Particulars	Debit ($)	Particulars	Credit ($)
Account Receivable	5000	Inventory	10000
Plant Asset	110000	Partners capital A/c	105000
	115000		115000

		Partner's Capital A/c
Particulars	Debit ($)			Particulars	Credit ($)
	Adcock	Villa	Davis		Adcock	Villa	Davis
Profit and Loss A/c	31500	31500	42000	Opening Balance	55000	125000	100000
Cash and Bank	23500	93500	58000
	55000	125000	100000		55000	125000	100000

2) Journal Entries

Particulars Amount ($)

Debit Credit

Bank A/c Dr. 40,000

Profit & Loss A/c 60,000

To Inventory A/c 100,000

( Being Inventory Sold )

Bank A/c Dr. 75,000

Profit & loss A/c Dr. 125000

Accumulated Depreciation A/c Dr. 250,000

To Plant Asset A/c 450,000

(Being Plant Assets sold)

Ledgers

	Cash & Bank A/c
Particulars	Debit ($)	Particulars	Credit ($)
Opening Balance	60000	Account Payable	120000
Account Receivable	35000	Adcock partner's Capital A/c	0
Plant Assets	75000	Villa partner's Capital A/c	67143
Inventory	40000	Davis partner's Capital A/c	22857
	210000		210000
	Account Payable
Particulars	Debit ($)	Particulars	Credit ($)
Bank	120000	Opening Balance	120000
	120000		120000
	Account Receivable
Particulars	Debit ($)	Particulars	Credit ($)
Opening Balance	40000	Bank	35000
		Profit and loss	5000
	40000		40000
	Plant Asset
Particulars	Debit ($)	Particulars	Credit ($)
Opening Balance	450000	Accumalated Depreciation	250000
		Bank	75000
		Profit and loss	125000
	450000		450000
	Inventory
Particulars	Debit ($)	Particulars	Credit ($)
Opening Balance	100000	Bank	40000
		Profit and loss	60000
	100000		100000
	Profit and Loss A/c
Particulars	Debit ($)	Particulars	Credit ($)
Account Receivable	5000	Partners capital A/c	190000
Plant Asset	125000
Inventory	60000
	190000		190000

		Partner's Capital A/c
Particulars	Debit ($)			Particulars	Credit ($)
	Adcock	Villa	Davis		Adcock	Villa	Davis
Profit and Loss A/c	57000	57000	76000	Opening Balance	55000	125000	100000
Sharing Loss Of Adcock (3:4)		857	1143	Villa partner's Capital A/c	857
Cash and Bank	0	67143	22857	Davis partner's Capital A/c	1143
	57000	125000	100000		57000	125000	100000