Question

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 $38,000 are expected. The partnership balance sheet at the start of liquidation is as follows:

Cash	$	34,000		Liabilities	$	174,000
Accounts receivable		64,000		Butler, loan		34,000
Office equipment (net)		54,000		Butler, capital (25%)		70,000
Building (net)		130,000		Osman, capital (25%)		34,000
Land		120,000		Ward, capital (50%)		90,000
Total assets	$	402,000		Total liabilities and capital	$	402,000

Prepare journal entries to record these liquidation transaction

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

Sold the office equipment for $22,000, the building for $94,000, and the land for $136,000.

----Made safe capital distributions.

Paid all liabilities in full.

Paid actual liquidation expenses of $32,000 only.

Made final cash distributions to the partners.

-Made safe capital distributions.

Transaction	General Journal	Debit	Credit
3	Butler, loan	34,000
	Butler, capital	?
	Osman, capital	?
	Ward, capital	?
	Cash		131,600

Answer 1

I

Date	General Journal	Debit	Credit
1	Realisation a/c. Dr.	368,000
	To Account receivable		64,000
	To office equipment		54,000
	To building		130,000
	To Land		120,000
2.	Liabilities. Dr.	164,000
	Butler's loan. Dr.	34,000
	To Realisation a/c		198,000
3.	Realisation a/c. Dr.	32,000
	To cash		32,000
	(Liquidation expense paid)
4.	Cash. Dr.	309,600
	To Realisation a/c		309,600
	(Assets realised)
5.	Realisation a/c	208,000
	To cash		208,000
	(. Liabilities paid)
6.	Butler capital a/c. Dr	22,600
	Osman capital a/c. Dr.	22,600
	Ward capital. Dr.	45,200
	To Realisation a/c		90,400
	(Loss transfer to partners)

Date	General Journal	Debit	Credit
7.	Butler capital a/c	47,400
	Osman capital a/c	11,400
	Ward capital a/c	44,800
	To cash		103,600