The ABC partnership reports the following condensed balance sheet: Cash $2,020,0
ID: 2580370 • Letter: T
Question
The ABC partnership reports the following condensed balance sheet: Cash $2,020,000 Liabilities $1,800,000 Noncash assets 3,670,000 Partner A, capital 1,750,500 Partner B, capital 1,750,500 Partner C, capital 389,000 Total assets $5,690,000 Total liabilities and partner capital $5,690,000 The partners wish to liquidate the partnership. The noncash assets are sold for $2,500,000 with the loss distributed to the partners in the ratio of 30%/30%/40% to partner A, B, and C, respectively. The liabilities are paid in full. Partners make any capital contribution that is necessary to offset a negative balance in their respective Capital Accounts. Required: Prepare a schedule detailing the liquidation of the assets, repayment of the liabilities, and distribution of the remaining cash to the partners.
Explanation / Answer
ABC Statement of Partnership Liquidation 1 Cash + NonCash Assets = Liabilities + Capital A + B + C 2 Balances before realization 2,020,000 + 3,670,000 = 1,800,000 + 1,750,500 + 1,750,500 + 389,000 3 Sales of assets and division of Loss 2,500,000 + (3,670,000) = - + (351,000) + (351,000) + (468,000) 4 Balances after relization 4,520,000 + - = 1,800,000 + 1,399,500 + 1,399,500 + (79,000) 5 Payment of Liabilities (1,800,000) + - = (1,800,000) + - + - + - 6 Balance after payment of liabilities 2,720,000 + - = - + 1,399,500 + 1,399,500 + (79,000) 7 Receipt of deficiency from C 79,000 + - = - + - - + 79,000 8 Balances 2,799,000 + - = - + 1,399,500 1,399,500 + - 9 Cash distributed to partners (2,799,000) + - = - + (1,399,500) + (1,399,500) + - 10 Final Balances - + - = - + - + - + -
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