The partnership of Frick, Wilson, and Clarke has elected to cease all operations
ID: 2482427 • Letter: T
Question
The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate its business property. A balance sheet drawn up at this time shows the following account balances:
Produce a final statement of liquidation for this partnership using the predistribution plan to determine payments of cash to partners based on safe capital balances. (Do not round intermediate calculations.)
The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate its business property. A balance sheet drawn up at this time shows the following account balances:
Explanation / Answer
(a) PREDISTRIBUTION PLAN Partner's Profit Sharing Ratio Capital's Account Frick Capital 60% 117000 195000 Wilson Capital 20% 32000 160000 Clarke Capital 20% 69000 345000 The assumption is made that $160000 loss occur Frick Capital Wilson Capital Clarke Capital Reported Balance 117000 32000 69000 Assumed loss -96000 -32000 -32000 Adjusted Balance 21000 0 37000 (b) ITEM Cash Non cash Assets Liabilities Frick Capital Wilson Capital Clarke Capital Balance before liquidation $ 60,000.00 $ 201,000.00 $ 43,000.00 $ 117,000.00 $ 32,000.00 $ 69,000.00 Sales of non cash assets and distribution of gain or loss $ 60,000.00 $ 88,000.00 $ (16,800.00) $ (5,600.00) $ (5,600.00) New Balance $ 120,000.00 $ 113,000.00 $ 43,000.00 $ 100,200.00 $ 26,400.00 $ 63,400.00 Payment of liabilities $ (43,000.00) $ (43,000.00) New Balance $ 77,000.00 $ 113,000.00 $ - $ 100,200.00 $ 26,400.00 $ 63,400.00 Sales of non cash assets and distribution of gain or loss $ 48,000.00 $ (113,000.00) $ (39,000.00) $ (13,000.00) $ (13,000.00) New Balance $ 125,000.00 $ - $ 61,200.00 $ 13,400.00 $ 50,400.00 Liquidation Expenses $ (7,000.00) $ (4,200.00) $ (1,400.00) $ (1,400.00) New Balance $ 118,000.00 $ - $ - $ 57,000.00 $ 12,000.00 $ 49,000.00 Current Cash Distribution $ (118,000.00) $ (57,000.00) $ (12,000.00) $ (49,000.00) Balance 0 © Journal Entries Cash A/c $ 60,000.00 Loss on sales of non current assets $ 28,000.00 To non current assets $ 88,000.00 Liabilities A/c $ 43,000.00 To Cash $ 43,000.00 Cash A/c $ 48,000.00 Loss on sale of non current assets $ 65,000.00 To Non Current Assets $ 113,000.00 Liquidation exp $ 7,000.00 To Cash $ 7,000.00 Ferick Capital account $ 4,200.00 Wilson Capital account $ 1,400.00 Clarke Capital Account $ 1,400.00 To Liquidation Exp $ 7,000.00
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