On october 1, 2012, the firm of Sams, Price and Ladd decided to liquidate their
ID: 2419271 • Letter: O
Question
On october 1, 2012, the firm of Sams, Price and Ladd decided to liquidate their partnership. The partners have a capital balance of $54,000, $77000, and $12,000, respectively. the calsh balance is $26,000, the book value of noncash assets total $155,000, and liabilities total $38,000. the patnership share income and losses in the ratio of 2:2:1.
1) Prepare a statement of partnership liquidation, covering the period October 1-30 2012, for each of the following independent assumptions
a) All of the noncash assests are sold for $212,000 in cash, the creditors are paid and the remaining cash is distributed to the partners.
b) All of the noncahs assets are sold for $70,000 in cash, the creditors are paid, the partners with the debit capital balance pays the amount owed to the firm and the remaining cahs is distrubuted to the partners.
2) Assume the partners with the capital deficiency in part B) above declares bankruptcy and is unalbe to pay the deficiency. Journalize the entries to A) alllocare the partners deficiency and B) distribute the remaining cash.
Explanation / Answer
SAMS,PRICE,AND LADD POST CLOSING TRIAL BALANCE DEBIT BALANCE CREDIT BALANCE Cash $ 26,000.00 Non Cash Assets $ 155,000.00 Liabiities $ 38,000.00 Sam's Capital A/c $ 54,000.00 Prince Capital A/C $ 77,000.00 Ladd's Capital A/C $ 12,000.00 $ 181,000.00 $ 181,000.00 SAMS,PRICE,AND LADD Statement of Partnership Liquidation For Period 30.10.2012 Capital CASH + NON CASH = LIABILITIES+ SAMS + PRICE + LADD Balance before realization $ 26,000.00 $ 155,000.00 $ 38,000.00 $ 54,000.00 $ 77,000.00 $ 12,000.00 Sale of Assets and division of gain $ 212,000.00 $ (155,000.00) $ 22,800.00 $ 22,800.00 $ 11,400.00 Balance after realization $ 238,000.00 $ - $ 38,000.00 $ 76,800.00 $ 99,800.00 $ 23,400.00 Payment to creditor $ (38,000.00) $ (38,000.00) Balance after payment of liabilities $ 200,000.00 $ - $ - $ 76,800.00 $ 99,800.00 $ 23,400.00 Cash distribution to partner's $ (200,000.00) $ - $ - $ (76,800.00) $ (99,800.00) $ (23,400.00) Final Balance $ - $ - $ - $ - $ - $ - SAMS,PRICE,AND LADD Loss on realization For Period 30.10.2012 Capital CASH + NON CASH = LIABILITIES+ SAMS + PRICE + LADD Balance before realization $ 26,000.00 $ 155,000.00 $ 38,000.00 $ 54,000.00 $ 77,000.00 $ 12,000.00 Sale of Assets and division of loss $ 70,000.00 $ (155,000.00) $ (34,000.00) $ (34,000.00) $ (17,000.00) Balance after realization $ 96,000.00 $ - $ 38,000.00 $ 20,000.00 $ 43,000.00 $ (5,000.00) Payment to creditor $ (38,000.00) $ (38,000.00) Balance after payment of liabilities $ 58,000.00 $ - $ - $ 20,000.00 $ 43,000.00 $ (5,000.00) Distribute deficiency $ (2,500.00) $ (2,500.00) $ 5,000.00 Balance $ 58,000.00 $ - $ - $ 17,500.00 $ 40,500.00 $ - Cash distributed to partner's $ (58,000.00) $ (17,500.00) $ (40,500.00) Final Balance $ - $ - $ - $ - $ - $ - Journal Entries Remove Deficiency Particular Debit Balance Credit Balance Sam's A/c $2,500 Price's A/c $2,500 To LADD's A/C $5,000 Distribution of cash Particular Debit Balance Credit Balance Sam's A/C $17,500 Price's A/C $40,500 To Cash A/C $58,000
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