The partnership of Butler, Osman, and Ward was formed several years as a local t

Question

The partnership of Butler, Osman, and Ward was formed several years as a local tax preparation firm. Two partners have reached retirement age and the partners have decided to terminate operations and liquidate the business. Liquidation expenses of $38,000 are expected. The partnership balance sheet at the start of liquidation is as follows:

Prepare journal entries to record these liquidation transaction

Collected 90 percent of the accounts receivable and wrote the remainder off as uncollectible.

Sold the office equipment for $22,000, the building for $94,000, and the land for $136,000.

----Made safe capital distributions.

Paid all liabilities in full.

Paid actual liquidation expenses of $32,000 only.

Made final cash distributions to the partners.

-Made safe capital distributions.

Cash $ 34,000 Liabilities $ 174,000 Accounts receivable 64,000 Butler, loan 34,000 Office equipment (net) 54,000 Butler, capital (25%) 70,000 Building (net) 130,000 Osman, capital (25%) 34,000 Land 120,000 Ward, capital (50%) 90,000 Total assets $ 402,000 Total liabilities and capital $ 402,000

Explanation / Answer

I

Date General Journal Debit Credit 1 Realisation a/c. Dr. 368,000 To Account receivable 64,000 To office equipment 54,000 To building 130,000 To Land 120,000 2. Liabilities. Dr. 164,000 Butler's loan. Dr. 34,000 To Realisation a/c 198,000 3. Realisation a/c. Dr. 32,000 To cash 32,000 (Liquidation expense paid) 4. Cash. Dr. 309,600 To Realisation a/c 309,600 (Assets realised) 5. Realisation a/c 208,000 To cash 208,000 (. Liabilities paid) 6. Butler capital a/c. Dr 22,600 Osman capital a/c. Dr. 22,600 Ward capital. Dr. 45,200 To Realisation a/c 90,400 (Loss transfer to partners)

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