The Discount Partnership is being liquidated. The current balance sheet is shown

Question

The Discount Partnership is being liquidated. The current balance sheet is shown here. Discount Partnership Balance Sheet January 14, 2008 Assets Cash $ 25,000 Other assets 120,000 Total assets $145,000 Liabilities and Partners’ Equity Accounts payable $ 40,000 Dawson, capital 31,000 Feeney, capital 65,000 Hardin, capital 9,000 Total liabilities and partners’ equity $145,000 Dawson, Feeney, and Hardin share profits and losses in a 30:40:30 ratio.

January 14, 2008
Assets
Cash $ 25,000
Other assets 120,000
Total assets $145,000
Liabilities and Partners’ Equity
Accounts payable $ 40,000
Dawson, capital 31,000
Feeney, capital 65,000
Hardin, capital 9,000
Total liabilities and partners’ equity $145,000

Dawson, Feeney, and Hardin share profits and losses in a 30:40:30 ratio.

Required:
A. Prepare a schedule of partnership liquidation for each of the following three independent
cases.
(1) The noncash assets are sold for $60,000, and any partner with a deficit is unable to
eliminate any of the deficit.
(2) The noncash assets are sold for $60,000, and any partner with a deficit is able to invest
cash equal to the amount of the deficit.
(3) The noncash assets are sold for $50,000, and any partner with a deficit is able to invest
up to $8,000 cash in the partnership.
B. Prepare all necessary journal entries for case 2 above.

Explanation / Answer

B) Dawson ....Dr. $7500

Feeney .....Dr. $10000

Hardin .....Dr. $7500

To Cash A/C $25000

Dawson ....Dr. $36000

Feeney .....Dr. $48000

Hardin .....Dr. $36000

To Other Assets A/C $120000

Accounts Payable A/C ....Dr. $ 40000

To   Dawson $12000

Feeney $16000

Hardin $12000

Capital A/C ....Dr. $105000

To   Dawson $31000

Feeney $65000

Hardin $9000

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