Fred and George have been in partnership for many years. The partners, who share
ID: 2520506 • Letter: F
Question
Fred and George have been in partnership for many years. The partners, who share profits and losses on a 60:40 basis, respectively, 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:
Prepare journal entries for the following transactions: (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
g. Distributed remaining cash held by the business to the partners.
Journal entry worksheet
Record the sale of noncash assets.
Note: Enter debits before credits.
Prepare a final statement of partnership liquidation.
Fred and George have been in partnership for many years. The partners, who share profits and losses on a 60:40 basis, respectively, 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:
Explanation / Answer
Journal Entries :
a) no entry
b) paid $ 40,000 partnership liabilities entry
Account Debit Credit
Liabilities $ 40,000
Cash $ 40,000
C) Sold non cash assets for $ 2,20,000
Account Debit Credit
Cash $ 2,20,000
Non cash Assets $ 2,00,000
Profit on sale $ 20,000
Allocation of profit on sale to partners
Account Debit Credit
Profit on sale $ 20,000
Fred capital (60%) $ 12,000
George capital (40%) $ 8,000
d) No entry
e) paid $ 40,000 partnership liabilities entry
Account Debit Credit
Liabilities $ 40,000
Cash $ 40,000
f) paid $ 8,000 in liquidation expenses
Account Debit Credit
Liquidation expenses $ 8,000
Cash $ 8,000
g) remaining cash distributed to patners
cash available to partnership ($ 1,00,000)plus cash from disposal of non assets ($ 2,20,000) which equals to ( $ 3,20,000) this cash is used to settle the liabilities and the remaining cash is
$ 1,00,000 + $ 2,20,000 - $ 80,000 = $ 2,40,000
Remaining cash distributed to partners
Account Debit Credit
Cash $ 2,40,000
Fred capital (60%) $ 1,44,000
George capital (40%) $ 96,000
2)
]
Statement of Partnership Liquidation
Cash
Noncash Assets
Liabilities
Fred, Capital
George, Capital
Beginning balances
$ 1,00,000
$ 2,00,000
$ - 80,000
$ 1,00,000
$ 1,20,000
Distribution to partners
Paid liabilities
$ - 40,000
$ 40,000
$ 0
Sold noncash assets
$ 220,000
$ -2,00,000
$ 12,000
$ 8,000
Updated balances
$2,80,000
$0
$-40,000
$1,12,000
$ 1,28,000
Distribution to partners
$ -8,000
Updated balances
Paid liabilities
$-40,000
$ 40,000
$0
Paid liquidation expenses
$- 8,000
$ 8000
Updated balances
$2,32,000
$0
$0
Distribution to partners
$-2,32,000
$ 1,39,200
$ 92,800
Closing balances
$ 2,51,200
$ 2,20800
]
Statement of Partnership Liquidation
Cash
Noncash Assets
Liabilities
Fred, Capital
George, Capital
Beginning balances
$ 1,00,000
$ 2,00,000
$ - 80,000
$ 1,00,000
$ 1,20,000
Distribution to partners
Paid liabilities
$ - 40,000
$ 40,000
$ 0
Sold noncash assets
$ 220,000
$ -2,00,000
$ 12,000
$ 8,000
Updated balances
$2,80,000
$0
$-40,000
$1,12,000
$ 1,28,000
Distribution to partners
$ -8,000
Updated balances
Paid liabilities
$-40,000
$ 40,000
$0
Paid liquidation expenses
$- 8,000
$ 8000
Updated balances
$2,32,000
$0
$0
Distribution to partners
$-2,32,000
$ 1,39,200
$ 92,800
Closing balances
$ 2,51,200
$ 2,20800
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