The following balancesheet was prepared for Haye & Lee LLP immediately prior to
ID: 2433922 • Letter: T
Question
The following balancesheet was prepared for Haye & Lee LLP immediately prior toliquidation:
HAYE& LEE LLP
BalanceSheet (unaudited)
March31,2005
Assets Liabilitiesand Partners’ Capital
Cash $10,000 Liabilities $27,000
Investments inmarketable Haye,capital 72,000
equity securities(available Lee,capital 31,000
forsale) 44,000
Accumulatedother
Otherassets 100,000 comprehensiveincome 24,000
Total $154,000 Total $154,000
Haye and Lee shared operating income or losses in a 2 : 1 ratio andgains and losses on invest-
ments in a 3 : 1 ratio. The transactions and events to complete theliquidation were as follows:
2005
Apr. 1 Haye withdrew themarketable equity securities at the agreed current fair value
of$44,000.
3 Other assets andthe trade name, Haley’s, were sold to Wong Products for
$200,000 face amount of 12% bonds with a current fair value of$180,000. The
gain on this transaction was an investment gain. The bonds wereclassi?ed as
available for sale.
Apr. 7 Wong Products 12%bonds with a face amount of $40,000 were sold for
$35,600 cash. The loss on this transaction was an investmentloss.
8 Liabilities were paid.
10 Haye withdrew $100,000 face amountand Lee withdrew $60,000 face amount
of Wong Products 12% bonds at carrying amounts.
15 Available cash was paid to Hayeand to Lee.
Instructions
Prepare journal entries for Haye & Lee LLP to record theforegoing transactions and
events. Disregard interest on the bonds of WongProducts.
The following balancesheet was prepared for Haye & Lee LLP immediately prior to
liquidation:
HAYE& LEE LLP
BalanceSheet (unaudited)
March31,2005
Assets Liabilitiesand Partners’ Capital
Cash $10,000 Liabilities $27,000
Investments inmarketable Haye,capital 72,000
equity securities(available Lee,capital 31,000
forsale) 44,000
Accumulatedother
Otherassets 100,000 comprehensiveincome 24,000
Total $154,000 Total $154,000
Haye and Lee shared operating income or losses in a 2 : 1 ratio andgains and losses on invest-
ments in a 3 : 1 ratio. The transactions and events to complete theliquidation were as follows:
2005
Apr. 1 Haye withdrew themarketable equity securities at the agreed current fair value
of$44,000.
3 Other assets andthe trade name, Haley’s, were sold to Wong Products for
$200,000 face amount of 12% bonds with a current fair value of$180,000. The
gain on this transaction was an investment gain. The bonds wereclassi?ed as
available for sale.
Apr. 7 Wong Products 12%bonds with a face amount of $40,000 were sold for
$35,600 cash. The loss on this transaction was an investmentloss.
8 Liabilities were paid.
10 Haye withdrew $100,000 face amountand Lee withdrew $60,000 face amount
of Wong Products 12% bonds at carrying amounts.
15 Available cash was paid to Hayeand to Lee.
Instructions
Prepare journal entries for Haye & Lee LLP to record theforegoing transactions and
events. Disregard interest on the bonds of WongProducts.
Explanation / Answer
Date
Debit
Credit
2005
April, 1
$44,000
$24,000
$44,000
$18,000
$6,000
April, 3
$180,000
$100,000
$60,000
$20,000
April, 7
$35,600
$300
$100
$36,000
April, 8
$27,000
$27,000
April, 10
$90,000
$54,000
$144,000
April, 15
$15,700
$2,900
$18,600
Date
Debit
Credit
2005
April, 1
Haye Capital$44,000
Accumulated other comprehensiveincome$24,000
Investments inmarketable equity securities$44,000
Haye Capital (24,000 x 3 / 4)$18,000
Lee Capital (24,000 x 1 / 4)$6,000
April, 3
Investments in Wong Products 12%Bonds$180,000
Other Assets$100,000
Haye Capital (80,000 x 3 / 4)$60,000
Lee Capital (80,000 x 1 / 4)$20,000
To record realization of other assets and trade name. Investment gain of $80,000 divided in 3:1 betweenpartnersApril, 7
Cash$35,600
Haye Capital (400 x 3 / 4)$300
Lee Capital (400 x 3 /4)$100
Investments in WongProducts 12% Bonds$36,000
To record realization of $40,000 faceamount (purchased at $36,000 i.e. $40,000 x $180,000 / $200,000).Invest ment loss of $400 shared in 3:1April, 8
Liabilities$27,000
Cash$27,000
Payment of liabilitiesApril, 10
Haye Capital ($100,000 x $180,000 /$200,000)$90,000
LeeCapital ($60,000 x $180,000 / $200,000)$54,000
Investments in WongProducts 12% Bonds$144,000
To record distribution of Wong Products12% bonds at carrying amount.April, 15
Haye Capital(72000-44000+18,000+60,000-300-90000)$15,700
LeeCapital (31,000+6,000+20,000-100-54,000)$2,900
Cash$18,600
To record final settlement of partnersrespective capital balances in order to complete liquidation of thepartnership.Related Questions
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