Question

Alex and Bess have been in partnership for many years. The partners, who share profits and losses on a 60:40 basis, respectively, wish to retire and have agreed to liquidate the business. Liquidation expenses are estimated to be $7,000. At the date the partnership ceases operations, the balance sheet is as follows: Cash Noncash assets $ 66,000 250,000 Liabilities Alex, capital Bess, capital Total liabilities and capital $ 48,000 150,000 118,000 $ 316,000 Total assets $ 316,000 Part A: Prepare journal entries for the following transactions that occurred in chronological order: a. Distributed safe cash payments to the partners. b. Paid $28,800 of the partnership's liabilities. c. Sold noncash assets for $268,000. d. Distributed safe cash payments to the partners. e. Paid remaining partnership liabilities of $19,200. f. Paid $5,500 in liquidation expenses; no further expenses will be incurred. g. Distributed remaining cash held by the business to the partners. Part B: Prepare a final statement of partnership liquidation.

Answer 1

, Il 90 Ans. The partuership has 66,000 in cash liabilities 8 48000 Estimated liquidation Expense is pooo, This there is ( (66000 -48000 - 7000) that can be safely Paid to the Partners before the liquidation of un- ( cash arrests. This arount is allocated to the two Partners on the basis of their potential capital balances assuming that your cash Asses to sexapped for a less ef 250000 and liquidation Expenses are 7oeo. parthen Capital Balance shave el ef Maximum Loss Potencial calital Alex 15009 6015. of (250000 77000)=154200 (4200) Bess 11 800D 40.10 of 250oppet 700 ) 1-10280015200 buted to Bess As, Alex has a Potential deficit capital Balance, the entire amount of 7000 currently available is distria to Bess which reduces this partner's capital to ( 118000 - 7000) - 111007 (1) Bess capital yooo - to cash 70D (Distribution of safe payment }

To logos 7200 250000 Distribution of safe hay ment Cash 2 68000 Alex Capital (18000 X 600/1 ) To Best Capital (18909 X 4001.) To Nou - cash assest (To sall of Assest and share profit) calculation of new capital Balance Particulars Balance Before liquidation А Alex Bess ISO 900 118000 (7000 Distribution of Profit | 1080p 7200 10380 160 800 С Ending Balance 48000 (3) liabilities To cash ( liabilities faid) 48000

Moy Asset Bess (40*/02 7000 Balance 72eo 148910) 139200 10380p Final Balances casu -cash Liabilities | Alex (Goes) Begining Balance 66000 2 SODDO (48009) (150000) (1 18000) Distribution (7000) 59000 25080p (48000) 250.00) |(111200) Nou - cash Assest sold 268000 12 50090) 10892 Balance 327000 liabilities paid (48000) (48000) Balance 139209 ke3800 Maximum liabilities Max, liquidation Expo (7000 ) Safe Balances 272000 13502 101000 1 279000 142007 (2800 135000 19000 2360eo Alex Capital Bess capital TO cash ( safe payment) Alex capital 3300 Bess calital 2200 To cash sreo [ Liquidation Exleuse ) => There is an Excess ( Cash Balance of 101200) 36000 which Distributed between Partners in their profit Ratio. Aux (3 6800 X 6014) 21600 14400 (272000- 135000 Bess (36500 x 40%) -