6) The Hylands Hotels are liquidating their partnership. Before selling the assets and paying liabilities, the capital balances for the partners are: Martha $45,000; Nathan $36,000 and Orin $26,000. The profit and loss sharing ratio has been 2:2:1 for Martha, Nathan and Orin respectively. The partnership has cash $68,000, $75,000 noncash assets and $36,000Accounts payable.
6a. Assume the partnership sells the non-cash assets and received $84,000 in cash.
6b. Assume the partnership sells the noncash assets and received $35,000.
Instructions
Under both assumptions, prepare the entries to record:
(a) The sale of noncash assets.
(b) The allocation of the gain or loss on liquidation to the partners.
(c) Payment of creditors.
(d) Distribution of cash to the partners.
7) Jack Jones, a Partner in the Hyland Company made the following capital cash contributions to the company in 2019.
. 01/01/17: $100,000
. 03/31/17: $35,000
. 07/01/17: $15,000
. 11/30/17: $20,000
The Partnership agreed to pay Jones a 12% interest on his weighted average capital balance as of December 31.
Instructions
a. Compute the interest paid to Jones on 31 December 2019.
8) James, Kenny and Larry have following capital balances 75,000; 45,000 and 30,000 respectively. Income distribution ratios are 3:2:1 for James, Kenny and Larry. Prepare journal entries to record the withdrawal under the following assumptions:
(a) Larry retires and the remaining partners, James and Kenny agree to pay him $20,000 each directly from their personal assets for one half of Larry's interest.
(b) Larry retires and receives $35,000 from the partnership. The ratio for James and Kenny is 3:2
6a. DR CASH $84000
DR LOSS ON SALE OF ASSETS $59000
CR NON CASH ASSETS $143000
(BEING ASSETS SOLD)
2.DR MARTHA $ 23600
DR NATHAN $ 23600
DR ORIN $11800
CR LOSS ON SALE OF ASSETS $ 59000
(BEING LOSS DISTRIBUTED AMONG THE PARTNERS IN THE RATION OF 2:2:1)
3. DR CREDITORS $ 36000
CR CASH $ 36000
(BEING CREDITORS PAID)
4. DR MARTHA$33600
DR NATHAN $ 33600
DR ORIN $ 16800
CR CASH $ 84000
(BEING CASH DISTRIBUTED AMONG THE PARTNERS IN THE RATION OF 2:2:1)
6B.DR CASH $35000
DR LOSS ON SALE OF ASSETS $108000
CR NON CASH ASSETS $ 143000
(BEING ASSETS SOLD)
2 DR..LOSS ON SALE OF ASSETS $108000
CR MARTHA $43200
CR NATHAN $43200
CR ORIN $ 21600
(BEING LOSS DISTRIBUTED AMONG THE PARTNERS IN THE RATIO OF 2:2:1)
3. DR CREDITORS $ 35000
CR CASH $ 35000
(BEING CREDITORS PAID )
4. NO CASH DISTRIBUTION ENTRY WILL BE PASSED BECAUSE NO CASH AVAILBLE IN THE FIRM
7A.
DATE | MONTH | AMOUNT | PRODUCT |
01/01/17 | 12 | 100000 | 1200000 |
31/03/17 | 9 | 35000 | 315000 |
01/07/17 | 6 | 15000 | 90000 |
30/11/17 | 1 | 20000 | 20000 |
WE ASSUME MONT IS WEIGHT
TOTAL OF PRODUCT IS $1625000
INTERST ON WEIGHTED AVERAGE CAPITAL IS $1625000*12/100*12=$16250
8A. DR LARRYS $40000
CR JAMES $ 20000
CR KENNY $ 20000
(BEING LARRYS AMOUNT PAID IN THE RATIO OF 1:1)
8B. DR LARRY $35000
CR JAMES $ 21000
CR KENNY $ 14000
(BEING LARRY AMOUNT PAID IN THE RATIO OF 3:2)
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