106 Part One Accouming or Parmeships and Branckes (Exercise 3.2) After the reali
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106 Part One Accouming or Parmeships and Branckes (Exercise 3.2) After the realization of all noncash assets and the payment of all liabilitics, the balance sheet of the liquidating Pon, Quan &Ron; LLP on January 31, 2005, showed Cash, $15,000 HECK FIGURE Pon, Capital,($9,000); Quan, Capital, $8,000; and Ron, Capital, $16,000, with () indicat- Debit Ron, capital, ing a capital deficit. The partners share net income and losses equally $11,500. Prepare a journal entry for Pon, Quan &Ron; LLP oa Janusary 31,2005, to show the pay- ment of $15,000 cash in a safe manner to the partners. Show computations in the explana- tion for the journal entry (Exercise 3.3) Archer and Bender, partners of Archer & Bender LLP, who share net income and losses a 60:40 ratio, respectively, decided to liquidate the partnership. A portion of the assets had been realized, but assets with a carrying amount of $42,000 realized. All liabilities had been paid, and cash of $20,000 noncash be were yet to CHECK FIGURE Cash to Archer, was available for distribution to partners. The partners' capital account credit balances were $40,000 for Archer and $22,000 for Bender. $14,800. Prepare a working paper to compute the amount of cash (totaling $20,000) to be dis- tributed to each partner Carlo and Dodge started Carlo & Dodge LLP s itably for several years. Recently, however, they lost a lawsuit r damages because of Carlo's negligence and incurred unexpected losses on trade accounts receivable and inventories. As a result, they decided to liquidate the partnership. After all noncash assets were realized, only $18,000 was available to pay liabilities, which amounted to $33,000. The partners capital account balances before the start of liquidation and their income-sharing percentages are shown below some years ago and managed to operate prof requiring payment of large (Exercise 3.4) CHECK FIGURE b Credit Dodge, capital, 59,675 Caplital Account Balances Carlo Dodge 23,000 13,500 55% 45% a Prepare a working paper to compute the total loss incurred on the liquidation of the Carlo & Dodge LLP b. Prepare a journal entry to record Carlo's payment of $15,000 to partnership creditors and to close the partners' capital accountsCarlo was barely solvent after paying the partnership creditors, but Dodge had net assets, axclusive of partnership interest, in ex (Exercise 3.5) The balance sheet of Rich, Stowe&Thorpe; LLP on the date it commenced liquidaion was as follows, with the partners' income-sharing ratio in parentheses: CHECK FIGURE Cash to Rich, $8,000. RICH, STOWE & THORPE LLP Balance Sheet September 24, 2005 Liabilities and Partners' Capital $240,000 Cash Other assets S 20,000 480,0 Rich, capital (40%) Stowe, capital (40%) Thorpe, capital (20%) 000 20,000 60,000 Total liabilities and partners capital Total assets $500,000 $500,000 on Sep.D4 2oos, other assets uith carrying cmount 3,00 regli zed 300,00 Couh owl 329 oo (20'000+300,000) Cash unf prepre jnerval eutrie entreExplanation / Answer
Exercise 3.2) Journal Entry (Amount in $)
As the Pon capital has deficit balance of $9,000 which is need to be adjusted from the Other two partners capital balance equally [i.e. Quan and Ron $4,500 each ($9,000/2)]. Therefore the balance of Quan and Ron capital will be paid to them in cash. The balance after adjustments is calculated as follows:-
Pon Quan Ron
Capital Balance before adjustments ($9,000) $8,000 $16,000
Adjustment for capital deficit $9,000 ($4,500) ($4,500)
Capital Balance after adjustments $0 $3,500 $11,500
Exercise 3.3) As there is a asset with carrying amount of $42,000 which is yet to be realized, if this asset is not realized then there will be a loss of $42,000 which will be debited to each partner's capiotal account in the ratio of 60:40 (i.e. $42,000*60/100 = $25,200 and $42,000*40/100 = $16,800).Then the balance left after that can be paid to each partner.
Calculation of cash to be distributed to each partner (Amount in $)
Thus out of $20,000, $14,800 cash will be distributed to Archer and $5,200 cash will be distributed to Bender.
Exercise 3.5) The other asset of carrying amount of $360,000 is sold for $300,000 and the balance other assets of $120,000 ($480,000 - $360,000) will still unrealized on 24 september, 2005. The total loss on realization of other assets will be $180,000 [($360,000-$300,000)+$120,000] which will be debited to all the partners capital accounts in the ratio of 40:40:20. (i.e. $180,000*40/100 = $72,000 to Rich and Stowe and $180,000*20/100 = $36,000 to Thorpe). Then the balance left after that can be paid to each partner.
Calculation of cash to be distributed to each partner (Amount in $)
Journal Entry (Amount in $)
Date Account title and explanation Debit Credit 31 Jan, 2005 Quan, Capital 3,500 Ron, Capital 11,500 Cash 15,000 (To record the safe cash payment to partners after adjusting deficit capital balance)Related Questions
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