Question

Liquidating Partnerships Prior to liquidating their partnership, Fowler and Gentry had capital accounts of $16,000 and $29,000, respectively. Prior to liquidation, the partnership had no cash assets other than what was realized from the sale of assets. These partnership assets were sold for $40,000. The partnership had $2,000 of liabilities. Fowler and Gentry share income and losses equally. Determine the amount received by Fowler as a final distribution from liquidation of the partnership. 19,500 X Feedback Check My Work 1. Begin with Fowler equity prior to liquidation. 2. Adjust the equity for the gain or loss on the sale of the assets. 3. Allocate the gain/loss to partner capital accounts based on the income-sharing ratio. 4. Add beginning equity plus allocated gain/loss to determine liquidation distribution.

Answer 1

Solution :Amount Received by fowler as final distribution=$ 12,500.

Capital A/c

Dr.		Cr.
Particulars	Fowler ($)	Gentry($)	Particulars	Fowler($)	Gentry($)
To Realisation A/c	3,500	3,500	By Balance b/d	16,000	29,000
ToBank A/c	12,500	25,500
	16,000	29,000		16,000	29,000

Working Notes:

Balance Sheet

Liabilities	Amount($)	Assets	Amount($)
Payables	2,000	Fixed Assets(Balancing Figure)	47,000
Capitals
Fowler	16,000
Gentry	29,000
	47,000		47,000

Realisation A/c

Dr.		Cr.
Particulars	Amount($)	Particulars	Amount($)
To Fixed Assets A/c	47,000	By Bank A/c(Assets Realised)	40,000
To Bank A/c	2,000	By Payables A/c	2,000
		By Loss on Realisation:
		Fowler's Capital A/c	3,500
		Gentry Capital A/c	3,500
	49,000		49,000