Question

Marta, Barta and Carta formed a partnership with profit ratios of 3:3:4. The partnership agrees to dissolve at year-end. The current balance sheet shows cash = $50,000; A/R = $75,000; inventory = $125,000; Note receivable from Marta for $10,000; Equipment (net) = $200,000; Bldg = 50,000; A/P = $175,000; Note Payable to Carta = $20,000. Capital balances are Marta = $85,000; Barta = $100,000; Carta = $130,000. During the year, the following activity occurred:

• Oct: sold $100,000 of inventory for $80,000; paid liquidation expenses of $5,000; collected A/R of $60,000; paid creditors as possible, reserving $5000
• Nov: sold remaining inventory for $5,000; collected $5,000 more in A/R and wrote off balance; sold all equipment for $220,000; paid $3,000 in liquidation expenses; paid creditors as possible, reserving $5,000
• Dec: sold building for $15,000; paid $3,000 in liquidation expenses, then dissolved partnership distributing any remaining cash
• Situation 1: Assume that partners are personally insolvent

Answer 1

REALISATION ACCOUNT

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
A/R	75000	A/P	175000
INVENTORY	125000	N/P	20000
N/R	10000	CASH	385000
EQUIPMENT	200000	MARTA	10000
BUILDING	50000	LOSS	68000
CASH	190000
LIQUIDATION EXPENSES	8000
TOTAL	658000	TOTAL	658000

CASH ACCOUNT

PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
OPENING BALANCE	50000	REALISATION	190000
REALISATION	385000	LIQUIDATION EXPENSES	8000
		PARTNERS	237000
TOTAL	435000	TOTAL	435000

PARTNERS CAPITAL ACCOUNT

PARTICULARS	MARTA	BARTA	CARTA	PARTICULARS	MARTA	BARTA	CARTA
REALISATION	10000	0	0	OPENING BALANCE	85000	100000	130000
REALISATION LOSS	20400	20400	27200
CASH	54600	79600	102800
TOTAL	85000	100000	130000	TOTAL	85000	100000	130000