The partnership of Butler, Osman, and Ward was formed several years as a local t
ID: 2334441 • Letter: T
Question
The partnership of Butler, Osman, and Ward was formed several years as a local tax preparation firm. Two partners have reached retirement age and the partners have decided to terminate operations and liquidate the business. Liquidation expenses of $50,000 are expected. The partnership balance sheet at the start of liquidation is as follows:
Prepare a predistribution plan for this partnership - I have already done this part: see below
The following transactions transpire in chronological order during the liquidation of the partnership:
1. Collected 90 percent of the accounts receivable and wrote the remainder off as uncollectible.
2. Sold the office equipment for $28,000, the building for $142,000, and the land for $184,000.
3. Made safe capital distributions.
4. Paid all liabilities in full.
5. Paid actual liquidation expenses of $38,000 only.
6. Made final cash distributions to the partners.
-- I really only need help with number 3 and number 6. Thank you.
Cash $ 46,000 Liabilities $ 186,000 Accounts receivable 76,000 Butler, loan 46,000 Office equipment (net) 66,000 Butler, capital (25%) 130,000 Building (net) 190,000 Osman, capital (25%) 46,000 Land 180,000 Ward, capital (50%) 150,000 Total assets $ 558,000 Total liabilities and capital $ 558,000Explanation / Answer
Journal Entries 1 Cash A/c Dr 68400 To Realisation 68400 ( 90% of Account receivable) 2 Cash A/c Dr 354000 To Realisation 354000 ( Realised from office equip, building and land) 3 Butler Loan a/c Dr 46000 To Cash 46000 (first bulter loan to be paid) 4 Realisation a/c Dr 186000 To Cash 186000 ( Liabilities paid) 5 Reliasation a/c dr 38000 To Cash 38000 6 loss entry Bulter capital a/c Dr (25%) 31900 Osman Capital a/c Dr (25%) 31900 Ward Capital a/c Dr (50%) 63800 To Realisation 127600 Final cash distributions Bulter capital a/c Dr 98100 Osman Capital a/c Dr 14100 Ward Capital a/c Dr 86200 To Cash 198400 STATEMENT OF LIABILITIES DISTRIBUTION Laibilities Bulter loan Balance 186,000 46,000 Total availabiltiy Cash 46,000 Collections 422,400 468,400 Less: Expected exp 50,000 Laibilities 186,000 186,000 - Balance 232,400 - 46,000 Less : Bulter loan 46,000 - 46,000 Balance carry forward to partners 186,400 - - STATEMENT OF CAPITAL DISTRIBUTION BUTLER OSMAN WARD CAPITAL BALANCE 130,000 46,000 150,000 Available balance 186,400 Add: exp saved 12,000 (50000 - Actual 38000) last balance 198,400 CAPITAL BALANCE 326,000 maximum loss (25:25:50) 127,600 31,900 31,900 63,800 Distribution to partners 98,100 14,100 86,200 Journal Entries 1 Cash A/c Dr 68400 To Realisation 68400 ( 90% of Account receivable) 2 Cash A/c Dr 354000 To Realisation 354000 ( Realised from office equip, building and land) 3 Butler Loan a/c Dr 46000 To Cash 46000 (first bulter loan to be paid) 4 Realisation a/c Dr 186000 To Cash 186000 ( Liabilities paid) 5 Reliasation a/c dr 38000 To Cash 38000 6 loss entry Bulter capital a/c Dr (25%) 31900 Osman Capital a/c Dr (25%) 31900 Ward Capital a/c Dr (50%) 63800 To Realisation 127600 Final cash distributions Bulter capital a/c Dr 98100 Osman Capital a/c Dr 14100 Ward Capital a/c Dr 86200 To Cash 198400 Realisation A/c To Assets By Laibilities 186000 Account Receivable 76000 office euip 66000 By Bank (Realised assets) Building 190000 Account Receivable 68400 Land 180000 office equi 28000 building 142000 To Bank land 184000 Laibilities 186000 exp 38000 By Loss 127600 736000 736000
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