Problem

Lump-Sum LiquidationMatthews, Mitchell, and Michaels are partners in the BG Land Developme...

Lump-Sum Liquidation

Matthews, Mitchell, and Michaels are partners in the BG Land Development Company and share losses in a 5:3:2 ratio. The balance sheet on June 30,20X1, when they decide to liquidate the business, is as follows:

Assets

Liabilities and Capital

Cash

$ 20,000

Accounts Payable $

30,000

Noncash Assets

150,000

Mitchell, Loan

10,000

 

 

Matthews, Capital

80,000

 

 

Mitchell, Capital

36,000

 

 

Michaels, Capital

     14,000

Total Assets

$170,000

Total Liabilities and Equities

$ 170,000

The noncash assets are sold for $110,000.

Required

a. Prepare a statement of partnership realization and liquidation.


b. Prepare the required journal entries to account for the liquidation of the BG Land Development Company.

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