Question

March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 3:3:2 basis, respectively. Recently, each partner has become personally insolvent and, thus, the partners have decided to liquidate the business in hopes of remedying their personal financial problems. As of September 1, the partnership’s balance sheet is as follows:

Cash	$	16,000	Liabilities	$	74,000
Accounts receivable		94,000	March, capital		33,000
Inventory		85,000	April, capital		80,000
Land, building, and equipment (net)		43,000	May, capital		51,000
Total assets	$	238,000	Total liabilities and capital	$	238,000

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.)

Sold all inventory for $61,000 cash.

Paid $9,000 in liquidation expenses.

Paid $45,000 of the partnership’s liabilities.

Collected $55,000 of the accounts receivable.

Distributed safe cash balances; the partners anticipate no further liquidation expenses.

Sold remaining accounts receivable for 20 percent of face value.

Sold land, building, and equipment for $22,000.

Paid all remaining liabilities of the partnership.

Distributed cash held by the business to the partners.

Answer 1

S.No PARTICULARS DEBIT($) CREDIT($)

1. Cash A/c 61000

P&L A/c 24000

To Sales A/c 61000

To Inventory A/c 24000

2. For Liquidation Expenses

Liquidation Exp A/c 9000

To Cash A/c 9000

3. Payment for Liabilities

Liabilities A/c 45000

To Cash A/c 45000

4. Cash received on A/c of Accounts Receivables

Cash A/c 55000

To Accounts Receivables A/c 55000

5. No Entry

6. Sale of Accounts Receivables

Cash A/c 7800

P&L A/c 31200

To Accounts receivables A/c 39000

7. Sale of Fixed Assets

Cash A/c 22000

P&L A/c 21000

To Land, Building, Equi A/c 43000

8. Payment of Balance Liabilities

Liabilities A/c 29000

To Cash A/c 29000

9. Balance cash to partners

March A/c 29175

April A/c 29175

May A/c 19450

To Cash A/c 77800