The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate its business property. A balance sheet drawn up at this time shows the following account balances: Cash . . . . . . . . . . . . . . . . . . . $ 60,000 Liabilities . . . . . . . . . . . . . . .. $ 40,000Noncash assets . . . . . . . . . 219,000 Frick, capital (60%) . . . . . . . . 129,000Wilson, capital (20%) . . . . . . . 35,000Clarke, capital (20%) . . . . . . . .75,000 Part APrepare a predistribution plan for this partnership.Part BThe following transactions occur in liquidating this business:1. Distributed cash based on safe capital balances immediately to the partners. Liquidation expenses of $8,000 are estimated as a basis for this computation.2. Sold noncash assets with a book value of $94,000 for $60,000.3. Paid all liabilities.4. Distributed cash based on safe capital balances again.5. Sold remaining noncash assets for $51,000.6. Paid actual liquidation expenses of $6,000 only.7. Distributed remaining cash to the partners and closed the financial records of the business permanently.Produce a final statement of liquidation for this partnership using the predistribution plan to determine payments of cash to partners based on safe capital balances.Part CPrepare journal entries to record the liquidation transactions reflected in the final statement of liquidation.
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.
The
Cash . . . . . . . . . . . . . . . . . . . $ 60,000 Liabilities . . . . . . . . . . . . . . .. $ 40,000
Noncash assets . . . . . . . . . 219,000 Frick, capital (60%) . . . . . . . . 129,000
Wilson, capital (20%) . . . . . . . 35,000
Clarke, capital (20%) . . . . . . . .75,000
Part A
Prepare a predistribution plan for this partnership.
Part B
The following transactions occur in liquidating this business:
1. Distributed cash based on safe capital balances immediately to the partners. Liquidation expenses of $8,000 are estimated as a basis for this computation.
2. Sold noncash assets with a book value of $94,000 for $60,000.
3. Paid all liabilities.
4. Distributed cash based on safe capital balances again.
5. Sold remaining noncash assets for $51,000.
6. Paid actual liquidation expenses of $6,000 only.
7. Distributed remaining cash to the partners and closed the financial records of the business permanently.
Produce a final statement of liquidation for this partnership using the predistribution plan to determine payments of cash to partners based on safe capital balances.
Part C
Prepare
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