General Journal Account Titles and Explanation Date Ref. Debit Credit PROBLEM 5
ID: 2401801 • Letter: G
Question
General Journal Account Titles and Explanation Date Ref. Debit Credit PROBLEM 5 (13 points) At December 31. Ritz & Zimmer Company has cash $150,000, noncash assets $210,000, liabilities $125,000, and the following capital balances: Ritz $112000 and Zimmer $123,000. The firm decides to liquidate, and $190,000 in cash is received for the sale noncash assets. Ritz and Zimmer nome sharing ratios are 65% and 35%, respedively. Instructions: a) Prepare a cash payments schedule. Note: Write clearly and use complete account names [Do not abbreviatel. RITZ & ZIMMER COMPANY Schedule of Cash Payments NONCASH # LIABILITIES + CAPITAL RITZ ITEM + ZIMMER, ASSETS Bolante be?e 112000 ra.? z15??? b) Prepare joumal entries to record (a) The sale of noncash assets. (b) The allocation of the gain or loss on liquidation to the partners (c) Payment of creditors (d) Distribution of cash to the partners.Explanation / Answer
Answers
---Non Cash Assets are sold for cash: This will result in decrease in Non Cash Asset and Increase in Amount of Cash. If the Non Cash Assets are sold at a value higher or lower than their book value, there will be a “gain” or “loss” on sales respectively.
---The Gain or Loss on above sale is distributed to Partners in their Profit sharing ratio.
---The Cash assets are used to pay off Liabilities: Cash will decrease by the amount of liabilities paid.
---Remaining Cash Asset balance will be equal to combined total of partners’ capital.
Non Cash Asset = $ 210,000
Amount received on Sale = $ 190,000
Loss on Sale = 210000 – 190000 = $ 20,000
Loss distributed to partners, reducing their capital balances:
Ritz = $ 20,000 x 65% = $ 13,000
Zimmer = $ 20,000 x 35% = $ 7,000
Item
Cash
Non Cash Asset
Liabilities
Ritz Capital
Zimmer Capital
Beginning balance, before liquidation
$ 150,000.00
$ 210,000.00
$ 125,000.00
$ 112,000.00
$ 123,000.00
Sale of Non Cash Assets & Allocation of Loss *See working #1
$ 190,000.00
$ (210,000.00)
$ (13,000.00)
$ (7,000.00)
New Balances
$ 340,000.00
$ -
$ 125,000.00
$ 99,000.00
$ 116,000.00
Pay Liabilities
$ (125,000.00)
$ (125,000.00)
New balances
$ 215,000.00
$ -
$ -
$ 99,000.00
$ 116,000.00
Cash Distribution to partner
$ (215,000.00)
$ (99,000.00)
$ (116,000.00)
Total Balances
$ -
$ -
$ -
$ -
$ -
Transaction
Accounts title
Debit
Credit
a.
Cash
$ 190,000.00
Loss on Sale
$ 20,000.00
Non Cash Assets
$ 210,000.00
(sale of non cash assets)
b.
Ritz, Capital
$ 13,000.00
Zimmer, Capital
$ 7,000.00
Loss on Sale
$ 20,000.00
(allocation of the loss)
c.
Liabilities (Creditors)
$ 125,000.00
Cash
$ 125,000.00
(payment made to creditors)
d.
Ritz, Capital
$ 99,000.00
Zimmer, Capital
$ 116,000.00
Cash
$ 215,000.00
(cash distributed to partners)
Item
Cash
Non Cash Asset
Liabilities
Ritz Capital
Zimmer Capital
Beginning balance, before liquidation
$ 150,000.00
$ 210,000.00
$ 125,000.00
$ 112,000.00
$ 123,000.00
Sale of Non Cash Assets & Allocation of Loss *See working #1
$ 190,000.00
$ (210,000.00)
$ (13,000.00)
$ (7,000.00)
New Balances
$ 340,000.00
$ -
$ 125,000.00
$ 99,000.00
$ 116,000.00
Pay Liabilities
$ (125,000.00)
$ (125,000.00)
New balances
$ 215,000.00
$ -
$ -
$ 99,000.00
$ 116,000.00
Cash Distribution to partner
$ (215,000.00)
$ (99,000.00)
$ (116,000.00)
Total Balances
$ -
$ -
$ -
$ -
$ -
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