Question

The partnership of Wingler, Norris, Rodgers, and Guthrie was formed several years ago as a local architectural firm. Several partners have recently undergone personal financial problems and have decided to terminate operations and liquidate the business. The following balance sheet is drawn up as a guideline for this process:

Cash	$	21,000	Liabilities	$	70,000
Accounts receivable		88,000	Rodgers, loan		41,000
Inventory		107,000	Wingler, capital (30%)		129,000
Land		88,000	Norris, capital (10%)		94,000
Building and equipment (net)		171,000	Rodgers, capital (20%)		77,000
			Guthrie, capital (40%)		64,000
Total assets	$	475,000	Total liabilities and capital	$	475,000

  

When the liquidation commenced, liquidation expenses of $18,000 were anticipated as being necessary to dispose of all property.

Part A

Prepare a predistribution plan for this partnership.

Part B

The following transactions transpire during the liquidation of the Wingler, Norris, Rodgers, and Guthrie partnership:

1. Collected 90 percent of the total accounts receivable with the rest judged to be uncollectible.
2. Sold the land, building, and equipment for $153,000.
3. Distributed safe payments of cash.
4. Learned that Guthrie, who has become personally insolvent, will make no further contributions.
5. Paid all liabilities.
6. Sold all inventory for $75,000.
7. Distributed safe payments of cash again.
8. Paid actual liquidation expenses of $15,000 only.
9. Made final cash disbursements to the partners based on the assumption that all partners other than Guthrie are personally solvent.

Prepare journal entries to record these liquidation transactions.

I DID THE PREDISTRIBUTION PLAN ALREADY , CAN YOU PLEASE HELP ME WITH THE JOURNAL ENTRIES?

THANK YOU

Answer 1

Solution

1. Realisation A/c Dr $79,200

To accounts receivable A/c $ 79,200 (88000*90/100)

2. Realisation A/c Dr $153000

To land, building,and equipment A/c $153000

loss occured due to sale of land, building and equipment is

value of land, building and equipment as per books is ($88000+$171000) =$259000

sale value of land, building and equipment is$153000

loss on sale of   land, building and equipment is $259000-$153000=$106000

loss should be taken by patners as per their capital ratio i.e 3:1:2:4 for  Wingler, Norris, Rodgers, and Guthrie

3. Realisation A/c Dr $75000

To inventory A/c $75000

loss on sale of inventory is $107000-$75000=$32000

this loss also should has to be taken by the partners as per their capital ratio 3:1:2:4 for  Wingler, Norris, Rodgers, and Guthrie

liquidation  expenses has to be bare by the partners only