Question

The events that follow pertain to a partnership formed in February 2013 by Mercian Zadoney and Michael Slater to operate a floor-cleaning company:

Feb. 14, 2013	The partnership was formed. Zadoney transferred to the partnership $160,000 cash, land worth $160,000, a building worth $960,000, and a mortgage on the building of $480,000. Slater transferred to the partnership $80,000 cash and equipment worth $320,000.
Dec. 31, 2013	During 2013, the partnership earned income of just $168,000. The partnership agreement specifies that income and losses are to be divided by paying salaries of $80,000 to Zadoney and $120,000 to Slater, allowing 8 percent interest on beginning capital investments, and dividing any remainder equally.
Jan. 1, 2014	To improve the prospects for the company, the partners decided to take in a new partner, George Nissan, who had experience in the floor-cleaning business. Nissan invested $312,000 for a 25 percent interest in the business. A bonus was transferred in equal amounts from the original partners’ Capital accounts to Nissan’s Capital account.
Dec. 31, 2014	During 2014, the company earned income of $174,400. The new partnership agreement specified that income and losses would be divided by paying salaries of $120,000 to Slater and $160,000 to Nissan (no salary to Zadoney), allowing 8 percent interest on beginning capital balances after Nissan’s admission, and dividing the remainder equally.
Jan. 1, 2015	Because it appeared that the business could not support the three partners, the partners decided to liquidate the partnership. The asset and liability accounts of the partnership are as follows:
	Cash	$814,400
	Accounts Receivable, net	136,000
	Land	160,000
	Building, net	896,000
	Equipment, net	472,000
	Accounts Payable	176,000
	Mortgage Payable	448,000

The equipment was sold for $400,000. The accounts payable were paid. The loss was distributed equally to the partners’ Capital accounts. A statement of liquidation was prepared, and the remaining assets and liabilities were distributed. Zadoney agreed to accept cash plus the land and building at book value and the mortgage payable as payment for his share. Slater accepted cash and the accounts receivable for his share. Nissan was paid in cash. Prepare journal entries to record all of the facts above.

Answer 1

Date	Paticulars	Dr.	Cr.
Feb 14 2013	Cash A/c Dr.	160000
	Land A/c Dr.	160000
	Building A/c Dr.	960000
	To Mortgage Loan A/c		480000
	To Zadoney Cpital's A/c		800000
Feb 14	Cash A/c Dr.	80000
	Equipmnt A/c Dr.	320000
	To Slater Capital's A/c		400000
Dec 31 2013	Profit and loss appropriation A/c Dr.	200000
	To Z's Capital A/c		80000
	To S's capital A/c		120000
	(Salary paid to partners)
Dec 31	P&l Appropriation A/c Dr.	96000
	To Z's cpital A/c		64000
	To S's Capital A/c		32000
	(Being Intt on Capital Distributed)
	Z's Capital A/c Dr.	64000
	S's Capital A/c Dr.	64000
	To. P&l Appropriation A/c		128000
	(being loss distributed)
Jan 1 2014	Cash A/c Dr.	312000
	To George Nissan cap A/c		312000
dec 31 2014	p&l Appn A/c Dr.	280000
	To S,s Capital A/c		120000
	To GN Capital A/c		160000
	P&L Appn A/c Dr.	135040
	To Z,s Capital A/c		70400
	To s Capital A/c		39040
	To GN Cap A/c		25600
	(Being Interest on capital Distributed)
	Z capital A/c Dr.	80213
	S capital Ac Dr.	80213
	GN a/c DR.	80213
	To P&L Appropriation A/c Dr.		240700