Question

Exercise 12-09 Pharoah Company at December 31 has cash $23,400, noncash assets $102,000, liabilities $51,400, and the following capital balances: Floyd $48,000 and DeWitt $26,000. The firm is liquidated, and $110,000 in cash is received for the noncash assets. Floyd and DeWitt income ratios are 70% and 30%, respectively. Pharoah Company now decides to liquidate the partnership. Prepare the entries to record: (Credit account tities are automatically indented when amount is entered. Do not indent manually.) a. The sale of noncash assets. b. The allocation of the gain or loss on realization to the partners. c. Payment of creditors. d. Distribution of cash to the partners.

Answer 1

Answer

• Journal entries

	Accounts title	Debit	Credit
[a]	Cash	$110,000
	Gain on sale		$8,000
	Non Cash assets		$102,000
[b]	Gain on sale	$8,000
	Floyd Capital		$5,600
	Dewit Capital		$2,400
[c]	Liabilities - Creditors (Accounts Payable)	$51,400
	Cash		$51,400
[d]	Floyd Capital	$53,600
	Dewit Capital	$28,400
	Cash		$82,000

• Working for above amounts

Item	Cash	Non Cash Assets	Liabilities	Floyed Capital	Dewitt Capital
Balances before liquidation	$23,400	$102,000	$51,400	$48,000	$26,000
Sale of non cash, allocation of gain	$110,000	($102,000)		$5,600	$2,400
New balances	$133,400	$0	$51,400	$53,600	$28,400
Pay Liabilities	($51,400)		($51,400)
New balances	$82,000	$0	$0	$53,600	$28,400
Cash Distribution to partner	($82,000)			($53,600)	($28,400)
	$0	$0	$0	$0	$0