The Johnson-Smith partnership presented the following balance sheet on 12/31/11:
ID: 2348401 • Letter: T
Question
The Johnson-Smith partnership presented the following balance sheet on 12/31/11:
Assets:
Cash $40,000
Accounts Rec. $55,000
Inventory $43,000
Plant & Equip $190,000
Accum Dep'r ($50,000)
Total Assets $278,000
Liabilities and Owner Equity:
Accounts Payable $74,000
Johnson, Capital $104,000
Smith, Capital $100,000
Total Equities $278,000
On January 1st, 2012, the Johnson-Smith partnership was liquidated. The partners were able to get only $168,000 for its noncash assets. The partners share profits and losses in the ratio 5:3.
Present the journal entry or entries to record the liquidation of the partnership.
Explanation / Answer
Losses for assets liquidation = (278,000 - 40,000) - 168,000 = 70,000 Journal Entry: Debit: Cash $168,000 Johnson, Capital $43,750 (70,000*5/8) Smith, Capital $26,250 (70,000*3/8) Accumulated Depreciation $50,000 Credit: Account Receivables $55,000 Inventory $43,000 Plant & Equipment $190,000 Paid the cash to lender Debit: account payable $74,000 Credit: Cash $74,000 Debit: Johnson, Capital $60,250 (104,000-43,750) Smith, Capital $73,750 (100,000 - 26250) Credit: Cash $134,000
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