Lop partnership started the liquidation process in April. The partners closed th

Question

Lop partnership started the liquidation process in April. The partners closed the books and presented the following trial balance.

                        Cash                                        18,000

                        Accounts Rec.                           80,000

                        Inventory                                50,000

Plant Assets (net)                    104,000

                        Liabilities                                (80,000)

                        Smith, capital (40%)               (32,000)

                        Surro, capital (30%)               (60,000)

                        Sally, capital (30%)                (80,000)

The partners agreed that each could wait to receive cash until the liquidation is completed. The following events take place during the liquidation.

1.         The inventory is sold for $42,000.

2.         Plant assets are sold for $95,000.

3.         Accounts receivables are sold to a bank for their estimated market value, $75,000.

4.         The liabilities are fully paid.

5.         Liquidation expenses of $3,000 are incurred.

6.         All remaining assets are distributed to the partners.

REQUIRED: Complete the partnership’s Statement of Realization and Liquidation.

Explanation / Answer

The partnership’s Statement of Realization and Liquidation Realization Distribution Cash balance $18,000 Liabilities Paid $80,000 Sale of Inventory $42,000 Liquidation expenses paid $3,000 Sale of Plant assets $95,000 Payment to Partners Sale of Accounts Receivables $75,000 - Smith $22,000 - Surro $52,500 - Sally $72,500 Total $230,000 Total $230,000 Calculation of loss or gain on sale of assets and distribution of Loss / gain among partners Loss on sale of inventory ($42000-$50000) -$8,000 Loss on sale of Plant assets ($95000 - $104000) -$9,000 Loss on sale of Accounts Receivables ($75000-$80000) -$5,000 Total Loss on sale of assets -$22,000 Distribution loss among partners in their profit/loss sharing ratio Smith (40%) $8,800 Surro (30%) $6,600 Sally (30%) $6,600 Distribution liquidation expense among partners in their profit/loss sharing ratio Smith (40%) $1,200 Surro (30%) $900 Sally (30%) $900 Partners Capital balances after distribution of loss and liquidation expenses Smith ($32000 - $8800 - $1200) $22,000 Surro ($60000 - $6600-$900) $52,500 Sally ($80000 - $6600-$900) $72,500

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