Fred and George have been in partnership for many years. The partners, who share
ID: 2426799 • Letter: F
Question
Fred and George have been in partnership for many years. The partners, who share profits ad losses on a 60:40 basis, respecitvely, wish to retire and have agreed to liquidate the business. Liquidation expenses are estimated to be 10,000. At the date the partnership ceases operations, the balance sheet is as follows:
Cash 100,000
Noncash assets 200,000
Total assets 300,000
Liabilities 80,000
Fred, Capital 100,000
George, Capital 120,000
Total liabilities and capital 300,000
Prepare journal entries for the following transactions:
a. Distributed safe cash payments to the partners.
b. Paid $40,000 of the partnership's liabilities.
c. Sold noncash assets for 220,000.
d. Distibuted safe cash payments to the partners.
e. Paid all remaining partnership liabilities of 40,000.
f. Paid 8,000 in liquidation expenses; no further expenses will be incurred.
g. Distributed remaining cash held by the business to the partners.
Prepare a final statement of partnership liquidation.
Explanation / Answer
Journal Entries Sr.no. Particulars Debit Credit a Fred Capital 36000 George Capital 24000 Cash 60000 b Liabilities 40000 cash 40000 c Cash 220000 Noncash assets 200000 Profit on sale 20000 d Fred Capital 103200 George Capital 68800 Cash 172000 e Liabilties 40000 Cash 40000 f Liquidation exp 8000 cash 8000 Liquidation statement Receipts Sale of non cash assets 220000 Cash 100000 Total 320000 Payments Liabilities 80000 Liquidation exp. 8000 Fred Capital 139200 George Capital 92800 Total 320000
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