John, Jake and Joe are partners with capital accounts of $90,000, $78,000 and $6
ID: 2492628 • Letter: J
Question
John, Jake and Joe are partners with capital accounts of $90,000, $78,000 and $64,000 respectively. They share profits and losses in the ration of 30:40:30. When the partners decide to liquidate, the business has $70,000 in cash, noncash assets totalling $260,000 and $98,000 in liabilities. The noncash assets sold for $270,000 and the creditors are paid.
A)Prepare a schedule of partnership liquidation.
B) Prepare journal entries to record each of the following transactions:
1) The sale of the noncahs assets.
2) The payment to the creditors.
3) The distribution of cash to the partners.
Explanation / Answer
Answer A. Schedule of Partnership Liquidation Cash + Non Cash Assets = Liabilities + John Capital Account + Jake Capital Account + Joe Capital Account Balance before Liquidation 70,000 + 260,000 = 98,000 + 90,000 + 78,000 + 64,000 Sale of non cash assets & allocation of Gain 270,000 + (260,000) = - + 3,000 + 4,000 + 3,000 New Balances 340,000 + - = 98,000 + 93,000 + 82,000 + 67,000 Pay Liabilities (98,000) + = (98,000) + - + - + - New Balances 242,000 + - = - + 93,000 + 82,000 + 67,000 Cash distribution to partners (242,000) + = + (93,000) + (82,000) + (67,000) Final Balances - + - = - + - + - + - Answer B. Journal Entry Date Particulars Dr. Amt CR. Amt 1 Cash Dr. 270,000 To Non Cash assets 260,000 To Gain on realization 10,000 2 Liabilities Dr. 98,000 To cash 98,000 3 John Capital A/c Dr. 93,000 Jake Capital A/c Dr. 82,000 Joe Capital A/c Dr. 67,000 To Cash 242,000
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