On October 1, the firm of Ewing, Johnson, and Landry, decided to liquidate their

Question

On October 1, the firm of Ewing, Johnson, and Landry, decided to liquidate their partnership. The partners have capital balances of $100,000, $90,000, and $30,000 respectively. The cash balance is $20,000, the book values of noncash assets total $250,000 and liabilities total $50,000. The partners share income and losses in the ratio 2:2:1. Instructions Prepare a statement of partnership liquidation, covering the period October 1 through October 30 for each of the following assumptions. 1. All of the noncash assets are sold for $330,000 in cash, the creditors are paid, and the 2. All of the noncash assets are sold for $120,000 in cash, the creditors are paid, and the 3. All of the noncash assets are sold for $50,000 in cash, the creditors are paid, the paid, the remaining cash is distributed to the partners. remaining cash is distributed to the remaining partners. partner with the debit balance pays the amount owed to the firm, and the remaining cash is distributed to the partners.

Explanation / Answer

1 Partner's capital Cash + Non cash Assets = Lianbilities + Ewing + Johnson + Landry Before liquidation balance            20,000 250000 50000 100000 90000 30000 Sale of asset and profit disctribution ratio 2:2:1          330,000 -250000 32000 (330000-250000)*2/5 32000 (330000-250000)*2/5 16000 (330000-250000)*1/5 Payment of liability          (50,000) -50000 Blance after payment          300,000                             -                  -       132,000     122,000      46,000 Distribution of cash to partners       (300,000) (132,000) (122,000)    (46,000) 2 Partner's capital Cash + Non cash Assets = Lianbilities + Ewing + Johnson + Landry Before liquidation balance            20,000 250000 50000 100000 90000 30000 Sale of asset and profit disctribution ratio 2:2:1          120,000 -250000 -52000 (120000-250000)*2/5 -52000 (120000-250000)*2/5 -26000 (120000-250000)*1/5 Payment of liability          (50,000) -50000 Blance after payment            90,000                             -                  -          48,000        38,000         4,000 Distribution of cash to partners          (90,000)     (48,000)     (38,000)      (4,000) 3 Partner's capital Cash + Non cash Assets = Lianbilities + Ewing + Johnson + Landry Before liquidation balance            20,000 250000 50000 100000 90000 30000 Sale of asset and profit disctribution ratio 2:2:1            50,000 -250000 -80000 (50000-250000)*2/5 -80000 (50000-250000)*2/5 -40000 (50000-250000)*1/5 Payment of liability          (50,000) -50000 Blance after payment            20,000                             -                  -          20,000        10,000    (10,000) Defiency received            10,000      10,000 Balance after receipt            30,000        20,000        10,000                -   Distribution of cash to partners          (30,000)     (20,000)     (10,000)                -

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