Fundamental Accounting Principles
Fundamental Accounting Principles
24th Edition
ISBN: 9781260158595
Author: Wild
Publisher: MCG
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Chapter 12, Problem 6BPSB
To determine

To prepare:

Journal entries for liquidation of partnership when Equipment is sold for $530,000

Expert Solution
Check Mark

Explanation of Solution

Journal entries for liquidation of partnership are as follows:

    S.No.Accounts titles and Explanation Debit Credit
    (a)Sale of inventory:

    Cash
    $ 530,000

    Loss on Sale
    $87,200


    Equipment

    $617,200

    (Being Equipment sold for cash)






    (b)Allocation of Gain or loss:






    Lasu's Capital
    $34,880


    Ramirez's Capital
    $17,440


    Toney's Capital
    $34,880


    Loss on Sale

    $ 87,200

    (Being loss shared by partners in the income sharing ratio)






    (c)Payment of Liabilities at book value:






    Accounts Payable
    $ 342,600


    Cash

    $342,600

    (being liabilities paid at their book value)






    (d)Distribution of cash:




    Lasu's Capital
    $ 265,520


    Ramirez's Capital
    $ 178,360


    Toney's Capital
    $92,120


    Cash

    $536,000

    (Being Cash distributed to partners)


Working Note:

The distribution of cash is calculated as follows:

    Lasu Ramirez Toney Total
    Cash



    $ 348,600
    Add: Sale of Equipment
    $ 530,000
    Less: Payment of Liabilities
    $(342,600)
    Net Cash Available $ 536,000





    Partner's Capital
    $300,400
    $195,800
    $127,000
    $ 623,200
    Less: Loss on Sale (Shared in the Ratio 2:1:2)
    $(34,880)
    $(17,440)
    $(34,880)
    $ (87,200)
    Capital Balance/ (Deficit)
    $265,520
    $178,360
    $ 92,120
    $ 536,000
    Distribution of Cash$ 265,520 $ 178,360 $92,120 $ 536,000

Requirement-3:

To determine

To prepare:

Journal entries for liquidation of partnership when Equipment is sold for $200,000 and the partner with deficit bring it in cash

Expert Solution
Check Mark

Explanation of Solution

Journal entries for liquidation of partnership are as follows:

    S.No.Accounts titles and Explanation Debit Credit
    (a)Sale of inventory:

    Cash
    $ 200,000

    Loss on Sale
    $ 417,200


    Equipment

    $617,200

    (Being Equipment sold for cash)






    (b)Allocation of Gain or loss:






    Lasu's Capital
    $ 166,880


    Ramirez's Capital
    $83,440


    Toney's Capital
    $ 166,880


    Loss on Sale

    $417,200

    (Being loss shared by partners in the income sharing ratio)






    (c)Payment of Liabilities at book value:






    Accounts Payable
    $ 342,600


    Cash

    $342,600

    (being liabilities paid at their book value)






    (d)Distribution of cash:






    Lasu's Capital
    $ 133,520


    Ramirez's Capital
    $ 112,360


    Toney's Capital

    $ 39,880

    Cash

    $206,000

    (Being Cash distributed to partners)


Working Note:

The distribution of cash is calculated as follows:

    Lasu Ramirez Toney Total
    Cash



    $ 348,600
    Add: Sale of Equipment
    $ 200,000
    Less: Payment of Liabilities
    $(342,600)
    Net Cash Available $ 206,000





    Partner's Capital
    $300,400
    $195,800
    $127,000
    $ 623,200
    Less: Loss on Sale (Shared in the Ratio 2:1:2)
    $ (166,880)
    $(83,440)
    $ (166,880)
    $(417,200)
    Capital Balance/ (Deficit)
    $133,520
    $112,360
    $(39,880)
    $ 206,000
    Distribution of Cash$ 133,520 $ 112,360 $ (39,880)$ 206,000

Requirement-4:

To determine

To prepare:

Journal entries for liquidation of partnership when Equipment is sold for $150,000 and the partner with deficit bring it in cash

Expert Solution
Check Mark

Explanation of Solution

Journal entries for liquidation of partnership are as follows:

    S.No.Accounts titles and Explanation Debit Credit
    (a)Sale of inventory:

    Cash
    $ 150,000

    Loss on Sale
    $ 467,200


    Equipment

    $617,200

    (Being Equipment sold for cash)






    (b)Allocation of Gain or loss:






    Lasu's Capital
    $ 186,880


    Ramirez's Capital
    $93,440


    Toney's Capital
    $ 186,880


    Loss on Sale

    $467,200

    (Being loss shared by partners in the income sharing ratio)






    (c)Payment of Liabilities at book value:






    Accounts Payable
    $ 342,600


    Cash

    $342,600

    (being liabilities paid at their book value)






    (d)Distribution of cash:






    Lasu's Capital
    $73,600


    Ramirez's Capital
    $82,400


    Cash

    $156,000

    (Being Cash distributed to partners)


Working Note:

The distribution of cash is calculated as follows:

    Lasu Ramirez Toney Total
    Cash



    $ 348,600
    Add: Sale of Equipment
    $ 150,000
    Less: Payment of Liabilities
    $(342,600)
    Net Cash Available $ 156,000





    Partner's Capital
    $300,400
    $195,800
    $127,000
    $ 623,200
    Less: Loss on Sale (Shared in the Ratio 2:1:2)
    $ (186,880)
    $(93,440)
    $ (186,880)
    $(467,200)
    Capital Balance/ (Deficit)
    $113,520
    $102,360
    $(59,880)
    $ 156,000
    Sharing of Deficit of Toney's Capital (In the ratio 2:1)
    $(39,920)
    $(19,960)
    $ 59,880






    Distribution of Cash$73,600 $82,400 $-$ 156,000

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