Question

March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 4:2:2 basis, respectively. Recently, each partner has become personally insolvent and, thus, the partners have decided to liquidate the business in hopes of remedying their personal financial problems. As of September 1, the partnership’s balance sheet is as follows:

 

Cash	$	26,000	Liabilities	$	95,000
Accounts receivable		114,000	March, capital		57,000
Inventory		104,000	April, capital		90,000
Land, building, and equipment (net)		59,000	May, capital		61,000
Total assets	$	303,000	Total liabilities and capital	$	303,000

 

Prepare journal entries for the following transactions: (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

 

1. Sold all inventory for $71,000 cash.

2. Paid $12,000 in liquidation expenses.

3. Paid $55,000 of the partnership’s liabilities.

4. Collected $63,000 of the accounts receivable.

5. Distributed safe payments of cash; the partners anticipate no further liquidation expenses.

6. Sold remaining accounts receivable for 30 percent of face value.

7. Sold land, building, and equipment for $32,000.

8. Paid all remaining liabilities of the partnership.

9. Distributed cash held by the business to the partners.

 

Answer 1

a)	Cash	$  71,000
	March, Capital (4/8 of loss)	$ 16,500
	April, Capital (2/8)	$ 8,250
	May, Capital (2/8)	$ 8,250
	Inventory		$  104,000

b)	March, Capital	$ 6,000
	April, Capital	$ 3,000
	May, Capital	$ 3,000
	Cash		$ 12,000

c)	Liabilities	$ 55,000
	Cash		$  55,000
d)	Cash	$ 63,000
	A/R		$  63,000

e)	April, Capital	$ 41,000
	May, Capital	$ 12,000
	Cash		$ 53,000
f)	Cash	$  15,300
	March, Capital	$  17,850
	April, Capital	$   8,925
	May, Capital	$   8,925
	A/R		$   51,000
g)	Cash	$  32,000
	March, Capital	$  13,500
	April, Capital	$    6,750
	May, Capital	$    6,750
	Land, Building and   Equipment		$ 59,000

h)	Liabilities	$ 40,000
	Cash		$ 40,000
i)	March, Capital	$ 3,150
	April, Capital	$ 22,075
	May, Capital	$ 22,075
	Cash		$ 47,300