Part AThe 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 $34,000 are expected. The partnership balance sheet at the start of liquidation is as follows: Cash . . . . . . . . . . . . . . . . . . . $ 30,000 Liabilities . . . . . . . . . . . . . . . $170,000Accounts receivable . . . . . 60,000 Butler, loan . . . . . . . . . . . .. . . . 30,000Office equipment (net) . . . . 50,000 Butler, capital (25%) . . . . . . . . . 50,000Building (net) . . . . . . . . . . . . 110,000 Osman, capital (25%) . . . . . . . . 30,000Land . . . . . . . . . . . . . . . . . . . 100,000 Ward, capital (50%) . . . . .. . . . . 70,000 Prepare a predistribution plan for this partnership.Part BThe following transactions transpire in chronological order during the liquidation of the partnership:1. Collected 90 percent of the accounts receivable and wrote the remainder off as uncollectible.2. Sold the office equipment for $20,000, the building for $80,000, and the land for $120,000.3. Made safe capital distributions.4. Paid all liabilities in full.5. Paid actual liquidation expenses of $30,000 only.6. Made final cash distributions to the partners.Prepare journal entries to record these liquidation transactions.
Partnership Accounting
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings, admission of a new partner, etc.
Partner Admission and Withdrawal
A partnership is a kind of arrangement between two or more people whereby they agree to manage the business operations and share its profits and losses in an agreed ratio between them. The agreement that is drafted and signed by the partners of the firm is termed as a partnership deed and contains various important clauses agreed between the partners such as profit/loss sharing, interest on capital, remuneration allocation of each partner, drawings of a partner, etc.
Part A
The
balance sheet at the start of liquidation is as follows:
Cash . . . . . . . . . . . . . . . . . . . $ 30,000 Liabilities . . . . . . . . . . . . . . . $170,000
Accounts receivable . . . . . 60,000 Butler, loan . . . . . . . . . . . .. . . . 30,000
Office equipment (net) . . . . 50,000 Butler, capital (25%) . . . . . . . . . 50,000
Building (net) . . . . . . . . . . . . 110,000 Osman, capital (25%) . . . . . . . . 30,000
Land . . . . . . . . . . . . . . . . . . . 100,000 Ward, capital (50%) . . . . .. . . . . 70,000
Prepare a predistribution plan for this partnership.
Part B
The following transactions transpire in chronological order during the liquidation of the partnership:
1. Collected 90 percent of the accounts receivable and wrote the remainder off as uncollectible.
2. Sold the office equipment for $20,000, the building for $80,000, and the land for $120,000.
3. Made safe capital distributions.
4. Paid all liabilities in full.
5. Paid actual liquidation expenses of $30,000 only.
6. Made final cash distributions to the partners.
Prepare
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