Question

Required information

[The following information applies to the questions displayed below.]

Complete the following questions by preparing worksheet and journal entries given below.

The partnership of Butler, Osman, and Ward was formed several years as a local tax preparation firm. Two partners have reached retirement age and the partners have decided to terminate operations and liquidate the business. Liquidation expenses of $53,000 are expected. The partnership balance sheet at the start of liquidation is as follows:

Cash	$	49,000		Liabilities	$	189,000
Accounts receivable		79,000		Butler, loan		49,000
Office equipment (net)		69,000		Butler, capital (25%)		145,000
Building (net)		205,000		Osman, capital (25%)		49,000
Land		195,000		Ward, capital (50%)		165,000
Total assets	$	597,000		Total liabilities and capital	$	597,000

rev: 10_29_2019_QC_CS-188028

The following transactions transpire in chronological order during the liquidation of the partnership:

1. Collected 90 percent of the accounts receivable and wrote the remainder off as uncollectible.

2. Sold the office equipment for $29,500, the building for $154,000, and the land for $196,000.

3. Made safe capital distributions.

4. Paid all liabilities in full.

5. Paid actual liquidation expenses of $39,500 only.

6. Made final cash distributions to the partners.

Prepare journal entries to record these liquidation transactions.

Answer 1

Journal entries

	Journal entries	Debit	Credit
1	liquidation expenses	39500
	To cash		39500
2	cash	71100
	Bad debt	7900
	To accounts receivable		79000
3	Cash	379500
	Loss on sale	90500
	To office equipment		69000
	To building		205000
	To land		195000
	To profit on sale of land		1000
4	Butler capital	115025
	Osman Capital	115025
	Ward Capital	230050
	To cash		460100
	(Remaining cash distribution in the ratio of 25:25:50 49000+71100+379500-39500=460100 distributed to all partners.

It is assumed that no any other liabilities to pay.