Question

Problem 10-21 (LO 10-2, 10-4) Alex and Bess have been in partnership for many years. The partners, who share profits and losses on a 70:30 basis, respectively, wish to retire and have agreed to liquidate the business. Liquidation expenses are estimated to be $5,500. At the date the partnership ceases operations, the balance sheet is as follows: Cash Noncash assets $ 48,000 135,000 Liabilities Alex, capital Bess, capital Total liabilities and capital $ 30,000 94,500 52,500 $ 183,000 Total assets $ 183,000 Part A: Prepare journal entries for the following transactions: a. Distributed safe cash payments to the partners. b. Paid $21,600 of the partnership's liabilities. c. Sold noncash assets for $147,000. d. Distributed safe cash payments to the partners. e. Pald remaining partnership liabilities of $14,400. f. Paid $4,100 in liquidation expenses; no further expenses will be incurred. g. Distributed remaining cash held by the business to the partners.

Answer 1

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Statement of Parternership liquidation before Journal entries: Cash Non Cash Liabilities Alex Capital 70% Bess Capital 30% Entry Reference $ 135,000 $ -36,000 $ -94,500 $ $ -52,500 6,500 $48,000-$36,000-$5,500 Working Entry-a a $ 21,600 12.000 in 70:30 -135,000 $ $ $ $ $ -14,400 Beginning Balance Distribution to Partners Paid Liabilities Sold Non Cash Assets Updated Balance Distribution to Partners Updated Balance Liabilities paid Liquidation expense Updated Balance Distribution to Partners Closing Balance $ 48,000 $ 6,500 $ 21,600 $ 147,000 $ 166,900 $ -147,000 $ 19,900 $ -14,400 $ -4,100 S 1,400 $ -1,400 -8,400 -102,900 99,050 -3,850 $ $ $ $ Working Entry-d -3,600c 49,600 47,950 d -1,650 S $ $ 14,400 14,400 2,870 $ -980 $ 980 $ 1,230 f -420 420 E 60:40 Event Account Debit Credit $ 6,500 Bess, Capital Cash $ 6,500 Working a Assuming Non cash assets are sold at loss of $135,000 and Liquidation Expense of $5,500 Current Capital Maximum Loss Potential Capital 94,500 $140,500*70% $ 98,350 $ -3,850 52,500 $140,500*30% $ 42,150 $ 10,350 Alex Bess Since there is deficit for Alex, whole will be distributed to Bess $ 21,600 Liabilities Cash $ 21,600 $ 147,000 Cash Alex, Capital (70% gain) Bess, Capital (30% gain) Non Cash Assets $ $ $ 8,400 3,600 135,000 Alex Capital Bess Capital Cash 99,050 47,950 $ 147,000 Cash Non Cash Liabilities Alex Capital 70% Bess Capital 30% -52,500 6,500 $48,000-$36,000-$5,500 Working-a 135,000 - - -135,000 Beginning Balance Distribution to Partners Paid Liabilities Sold Non Cash Assets Updated Balance Maximum Liabilities Maximum Liquidation exp Safe Balance $ $ S $ $ $ $ $ 12,000 in 70:30 48,000 $ -6,500 $ -21,600 S 147,000 $ 166,900 $ -14,400 5,500 147,000 $ $ -36,000 $ $ - $ $ 21,600 $ $ $ 14,400 $ $ 14,400 -94,500 $ - $ - S -8,400 $ 102,900 $ -3,600 -49,600 $ 3,850 -99,050 $ $ 1,650 -47,950 - $ $ 14,400 Liabilities Cash $ 14,400 Alex Capital (70%) Bess Capital (30%) Cash 2,870 1,230 $ $ 4,100 Alex Capital Bess Capital Cash $ $ 420 $ 1,400