On November 1, 2016, the firm of Sails, Welch, and Greenberg decided to liquidat

Question

On November 1, 2016, the firm of Sails, Welch, and Greenberg decided to liquidate their partnership. The partners have capital balances of $58,200, $72,490, and $9,940, respectively. The cash balance is $31,570, the book values of noncash assets total $128,990, and liabilities total $19,930. The partners share income and losses in the ratio of 2:2:1.

Required: 1. Prepare a statement of partnership liquidation, covering the period November 1–30, 2016, for each of the following independent assumptions: a. All of the noncash assets are sold for $156,990 in cash, the creditors are paid, and the remaining cash is distributed to the partners.* b. All of the noncash assets are sold for $55,890 in cash, the creditors are paid, the partner with the debit capital balance pays the amount owed to the firm, and the remaining cash is distributed to the partners.* * Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers (balance deficiencies, payments, cash distributions, divisions of loss), use a minus sign. If there is no amount to be reported for sale of assets, payment of liabilities, receipt of deficiency, or cash distribution rows, the cell can be left blank. However, in the balance rows, a balance of zero MUST be indicated by entering "0". 2. Assume the partner with the capital deficiency in part (b) declares bankruptcy and is unable to pay the deficiency. Journalize the entries on Nov. 30 to (a) allocate the partner’s deficiency and (b) distribute the remaining cash. Refer to the Chart of Accounts for exact wording of account titles.

Explanation / Answer

Solution.

1a.

1b.

Q2.

SAILS, WELCH, GREENBERG Statement of partnership Liquidation For the period November 1-30, 2016 Capital Cash Non cash asset Liabilities Sails Welch Greenberg (2/5) (2/5) (1/5) Balance before realization           31,570                 128,990             19,930       58,200         72,490                9,940 Sale of asset and division of gain        156,990               (128,990)       11,200         11,200                5,600 Balance after realization        188,560                             -               19,930       69,400         83,690              15,540 Payment of liabilities        (19,930)           (19,930) Balance after payment of liabilities        168,630                             -                        -         69,400         83,690              15,540 Cash distributed to partners      (168,630)     (69,400)       (83,690)           (15,540) Final Balances                    -                               -                        -                  -                    -                         -  

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