(1)
Prepare the
(1)
Explanation of Solution
(a) To record the sale of equipment.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Cash | 650,000 | ||
Equipment | 617,200 | ||
Gain on sale of equipment | 32,800 | ||
(To record the sale of equipment and gain on sale of equipment) |
Table (1)
- Cash is an asset account and it is increased. Therefore, debit cash with $650,000.
- Equipment is an asset account and it is decreased. Therefore, credit cash with $617,200.
- Gain on sale of equipment is a component of
stockholders’ equity and it is increased. Therefore, credit gain on sale of equipment with $32,800.
(b) To record the allocation of gain on sale of equipment to the partners’ capital account.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Gain on sale of equipment | 32,800 | ||
L’s Capital | 13,120 | ||
R’s Capital | 6,560 | ||
T’s Capital | 13,120 | ||
(To record the allocation of gain on sale of equipment to the partners’ capital account) |
Table (2)
- Gain on sale of equipment is a component of stockholders’ equity and it is decreased. Therefore, debit gain on sale of equipment with $32,800.
- L’s Capital is a capital account and it is increased. Therefore, credit L’s Capital with $13,120.
- R’s Capital is a capital account and it is increased. Therefore, credit R’s Capital with $6,560.
- T’s Capital is a capital account and it is increased. Therefore, credit T’s Capital with $13,120.
(c) To record the payment of liabilities at book value.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Accounts payable | 342,600 | ||
Cash | 342,600 | ||
(To record the payment of liabilities at book value) |
Table (3)
- Accounts payable is a liability account and it is decreased. Therefore, debit accounts payable with $342,600.
- Cash is an asset account and it is decreased. Therefore, credit cash account with $342,600.
(d) To record the distribution of cash:
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
L’s Capital | 313,520 | ||
R’s Capital | 202,360 | ||
T’s Capital | 140,120 | ||
Cash (1) | 656,000 | ||
(To record the distribution of cash) |
Table (4)
- L’s Capital is a capital account and it is decreased. Therefore, debit L’s Capital with $313,250.
- R’s Capital is a capital account and it is decreased. Therefore, debit R’s Capital with $202,360.
- T’s Capital is a capital account and it is decreased. Therefore, debit T’s Capital with $140,210.
- Cash is an asset account and it is decreased. Therefore, credit cash account with $656,000.
Working note:
Calculate the amount of cash for distribution:
(2)
Prepare the journal entry if the equipment is sold at $530,000.
(2)
Explanation of Solution
(a) To record the sale of equipment.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Cash | 530,000 | ||
Loss on sale equipment | 87,200 | ||
Equipment | 617,200 | ||
(To record the sale of equipment and loss on sale of equipment) |
Table (5)
- Cash is an asset account and it is increased. Therefore, debit cash with $530,000.
- Equipment is an asset account and it is decreased. Therefore, credit cash with $617,200.
- Loss on sale of equipment is a component of stockholders’ equity and it is decreased. Therefore, debit loss on sale of equipment with $87,200.
(b) To record the allocation of loss on sale of equipment to the partners’ capital account.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
L’s Capital | 34,880 | ||
R’s Capital | 17,440 | ||
T’s Capital | 34,880 | ||
Loss on sale of equipment | 87,200 | ||
(To record the allocation of loss on sale of equipment to the partners’ capital account) |
Table (6)
- L’s Capital is a capital account and it is decreased. Therefore, debit L’s Capital with $34,880.
- R’s Capital is a capital account and it is decreased. Therefore, debit R’s Capital with $17,440.
- T’s Capital is a capital account and it is decreased. Therefore, debit T’s Capital with $34,880.
- Loss on sale of equipment is a component of stockholders’ equity and it is increased. Therefore, credit loss on sale of equipment with $87,200.
(c) To record the payment of liabilities at book value.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Accounts payable | 342,600 | ||
Cash | 342,600 | ||
(To record the payment of liabilities at book value) |
Table (7)
- Accounts payable is a liability account and it is decreased. Therefore, debit accounts payable with $342,600.
- Cash is an asset account and it is decreased. Therefore, credit cash account with $342,600.
(d) To record the distribution of cash:
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
L’s Capital | 265,520 | ||
R’s Capital | 178,360 | ||
T’s Capital | 92,120 | ||
Cash (2) | 536,000 | ||
(To record the distribution of cash) |
Table (8)
- L’s Capital is a capital account and it is decreased. Therefore, debit L’s Capital with $265,520.
- R’s Capital is a capital account and it is decreased. Therefore, debit R’s Capital with $178,360.
- T’s Capital is a capital account and it is decreased. Therefore, debit T’s Capital with $92,120.
- Cash is an asset account and it is decreased. Therefore, credit cash account with $536,000.
Working note:
Calculate the amount of cash for distribution:
(3)
Prepare the journal entry if the equipment is sold at $200,000 and partners with deficits pay their deficits in cash.
(3)
Explanation of Solution
(a) To record the sale of equipment.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Cash | 200,000 | ||
Loss on sale equipment | 417,200 | ||
Equipment | 617,200 | ||
(To record the sale of equipment and loss on sale of equipment) |
Table (9)
- Cash is an asset account and it is increased. Therefore, debit cash with $200,000.
- Equipment is an asset account and it is decreased. Therefore, credit cash with $617,200.
- Loss on sale of equipment is a component of stockholders’ equity and it is decreased. Therefore, debit loss on sale of equipment with $417,200.
(b) To record the allocation of loss on sale of equipment to the partners’ capital account.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
L’s Capital | 166,880 | ||
R’s Capital | 83,440 | ||
T’s Capital | 166,880 | ||
Loss on sale of equipment | 417,200 | ||
(To record the allocation of loss on sale of equipment to the partners’ capital account) |
Table (10)
- L’s Capital is a capital account and it is decreased. Therefore, debit L’s Capital with $166,880.
- R’s Capital is a capital account and it is decreased. Therefore, debit R’s Capital with $83,440.
- T’s Capital is a capital account and it is decreased. Therefore, debit T’s Capital with $166,880.
- Loss on sale of equipment is a component of stockholders’ equity and it is increased. Therefore, credit loss on sale of equipment with $717,200.
To record the cash paid by Partner T to compensate the deficit:
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Cash | 39,880 | ||
T’s Capital | 39,880 | ||
(To record the payment of cash by Partner T to compensate the deficit) |
Table (11)
- Cash is an asset account and it is increased. Therefore, debit cash with $39,880.
- T’s Capital is a capital account and it is increased. Therefore, credit T’s Capital with $39,800.
(c) To record the payment of liabilities at book value.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Accounts payable | 342,600 | ||
Cash | 342,600 | ||
(To record the payment of liabilities at book value) |
Table (12)
- Accounts payable is a liability account and it is decreased. Therefore, debit accounts payable with $342,600.
- Cash is an asset account and it is decreased. Therefore, credit cash account with $342,600.
(d) To record the distribution of cash:
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
L’s Capital | 133,520 | ||
R’s Capital | 112,360 | ||
Cash (3) | 245,880 | ||
(To record the distribution of cash) |
Table (13)
- L’s Capital is a capital account and it is decreased. Therefore, debit L’s Capital with $133,520.
- R’s Capital is a capital account and it is decreased. Therefore, debit R’s Capital with $112,360.
- Cash is an asset account and it is decreased. Therefore, credit cash account with $245,880.
Working note:
Calculate the amount of cash for distribution:
(4)
Prepare the journal entry if the equipment is sold at $150,000 and partners with deficits do not pay their deficits.
(4)
Explanation of Solution
(a) To record the sale of equipment.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Cash | 150,000 | ||
Loss on sale equipment | 467,200 | ||
Equipment | 617,200 | ||
(To record the sale of equipment and loss on sale of equipment) |
Table (14)
- Cash is an asset account and it is increased. Therefore, debit cash with $150,000.
- Equipment is an asset account and it is decreased. Therefore, credit cash with $617,200.
- Loss on sale of equipment is a component of stockholders’ equity and it is decreased. Therefore, debit loss on sale of equipment with $487,200.
(b) To record the allocation of loss on sale of equipment to the partners’ capital account.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
L’s Capital | 186,880 | ||
R’s Capital | 93,400 | ||
T’s Capital | 186,880 | ||
Loss on sale of equipment | 467,200 | ||
(To record the allocation of loss on sale of equipment to the partners’ capital account) |
Table (15)
- L’s Capital is a capital account and it is decreased. Therefore, debit L’s Capital with $186,880.
- R’s Capital is a capital account and it is decreased. Therefore, debit R’s Capital with $93,400.
- T’s Capital is a capital account and it is decreased. Therefore, debit T’s Capital with $186,880.
- Loss on sale of equipment is a component of stockholders’ equity and it is increased. Therefore, credit loss on sale of equipment with $467,200.
To record the cash paid by Partner L and Partner R to compensate the deficit of Partner T:
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
L’s Capital | 39,920 | ||
R’s Capital | 19,960 | ||
T’s Capital | 59,880 | ||
(To record the payment of cash by Partner L and R to compensate the deficit of Partner T) |
Table (16)
- L’s Capital is a capital account and it is decreased. Therefore, debit L’s Capital with $39,920.
- R’s Capital is a capital account and it is decreased. Therefore, debit R’s Capital with $19,960.
- T’s Capital is a capital account and it is increased. Therefore, credit T’s Capital with $59,960.
(c) To record the payment of liabilities at book value.
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
Accounts payable | 342,600 | ||
Cash | 342,600 | ||
(To record the payment of liabilities at book value) |
Table (17)
- Accounts payable is a liability account and it is decreased. Therefore, debit accounts payable with $342,600.
- Cash is an asset account and it is decreased. Therefore, credit cash account with $342,600.
(d) To record the distribution of cash:
Date | Accounts title and explanation |
Debit ($) |
Credit ($) |
L’s Capital | 73,600 | ||
R’s Capital | 82,400 | ||
Cash (4) | 156,000 | ||
(To record the distribution of cash) |
Table (18)
- L’s Capital is a capital account and it is decreased. Therefore, debit L’s Capital with $73,600.
- R’s Capital is a capital account and it is decreased. Therefore, debit R’s Capital with $82,400.
- Cash is an asset account and it is decreased. Therefore, credit cash account with $156,000.
Working note:
Calculate the amount of cash for distribution:
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Chapter 12 Solutions
Principles of Financial Accounting.
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