Question

Kendra, Cogley, and Mei share income and loss in a 3:2:1 ratio (in ratio form: Kendra, 3/6; Cogley, 2/6; and Mei, 1/6). The partners have decided to liquidate their partnership. On the day of liquidation, their balance sheet appears as follows.

Balance Sheet
Assets				Liabilities
Cash	$	180,800		Accounts payable	$	245,500
Inventory		537,200		Equity
				Kendra, Capital		93,000
				Cogley, Capital		212,500
				Mei, Capital		167,000
Total assets	$	718,000		Total liabilities and equity	$	718,000

  
Required:
For each of the following scenarios, complete the schedule allocating the gain or loss on the sale of inventory. Prepare journal entries to record the below transactions. (Do not round intermediate calculations. Enter losses and partner deficits, if any, as negative amounts.)
  
1. Inventory is sold for $600,000.
2. Inventory is sold for $500,000.
3. Inventory is sold for $320,000 and partners with deficits pay their deficits in cash.
4. Inventory is sold for $250,000 and partners with deficits do not pay their deficits.
  

Answer 1

Answer

S No.		Dr. $	Cr. $
1	Gain on Sale of Inventory = $62,800 ($600,000 - 537,200)
	Gain on Sale of Inventory	62,800.00
	Kendra Capital		31,400.00
	Cogley Capital		20,933.33
	Mei Capital		10,466.67
	(Being gain on sale of Inventory is distributed among partner in Profit sharing ratio)
2	Loss on Sale of Inventory = $37,200 ($537,200 - 500,000)
	Kendra Capital	18,600.00
	Cogley Capital	12,400.00
	Mei Capital	6,200.00
	Loss on Sale of Inventory		37,200.00
	(Being Loss on sale of Inventory is distributed among partner in Profit sharing ratio)
3	Loss on Sale of Inventory = $217,200 ($537,200 - 320,000)
	Kendra Capital	108,600.00
	Cogley Capital	72,400.00
	Mei Capital	36,200.00
	Loss on Sale of Inventory		217,200.00
	(Being Loss on sale of Inventory is distributed among partner in Profit sharing ratio)
	As Kendra Capital is not sufficient to borne the loss, so she will bring the deficient in cash
	Cash {$108,600(Loss) - 93,000(Existing Capital)}	15,600.00
	Kendra Capital		15,600.00
	(Being cash bought in by kendra)
4	Loss on Sale of Inventory = $287,200 ($537,200 - 250,000)
	Kendra Capital	143,600.00
	Cogley Capital	95,733.33
	Mei Capital	47,866.67
	Loss on Sale of Inventory		287,200.00
	(Being Loss on sale of Inventory is distributed among partner in Profit sharing ratio)
	As Kendra Capital is not sufficient to borne the loss, so deficiency will be distributed amount other partner in their profit sharing ratio
	Kendra Deficiency {$143,600(Loss) - 93,000(Existing Capital)} = $50,600
	Cogley Capital ($50,600 * 2/3)	33,733.33
	Mei Capital ($50,600 * 1/3)	16,866.67
	Kendra Capital		50,600.00
	(Being deficiency borne by other partner in their profit sharing ratio)

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