After the accounts are closed on February 3, prior to liquidating the partnership, the capital accounts of William Gerloff, Joshua Chu, and Courtney Jewett are $19,460, $4,520, and $22,780, respectively. Cash and noncash assets total $4,740 and $57,380, respectively. Amounts owed to creditors total $15,360. The partners share income and losses in the ratio of 2:1:1. Between February 3 and February 28, the noncash assets are sold for $35,700, the partner with the capital deficiency pays the deficiency to the partnership, and the liabilities are paid. Required: 1. Prepare a statement of partnership liquidation, indicating (a) the sale of assets and division of loss, (b) the payment of liabilities, (c) the receipt of the deficiency (from the appropriate partner), and (d) the distribution of cash. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers (balance deficiencies, payments, cash distributions, divisions of loss), use a minus sign. If there is no amount to be reported for items (a) - (d), the cell can be left blank. However, in the balance rows, a balance of zero MUST be indicated by entering "0". 2. Assume the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency. Journalize the entries on Feb. 28 to (a) allocate the partner’s deficiency and (b) distribute the remaining cash. Refer to the Chart of Accounts for exact wording of account titles.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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After the accounts are closed on February 3, prior to liquidating the partnership, the capital accounts of William Gerloff, Joshua Chu, and Courtney Jewett are $19,460, $4,520, and $22,780, respectively. Cash and noncash assets total $4,740 and $57,380, respectively. Amounts owed to creditors total $15,360. The partners share income and losses in the ratio of 2:1:1. Between February 3 and February 28, the noncash assets are sold for $35,700, the partner with the capital deficiency pays the deficiency to the partnership, and the liabilities are paid.

	Required:
1.	Prepare a statement of partnership liquidation, indicating (a) the sale of assets and division of loss, (b) the payment of liabilities, (c) the receipt of the deficiency (from the appropriate partner), and (d) the distribution of cash. Refer to the lists of Labels and Amount Descriptions for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers (balance deficiencies, payments, cash distributions, divisions of loss), use a minus sign. If there is no amount to be reported for items (a) - (d), the cell can be left blank. However, in the balance rows, a balance of zero MUST be indicated by entering "0".
2.	Assume the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency. Journalize the entries on Feb. 28 to (a) allocate the partner’s deficiency and (b) distribute the remaining cash. Refer to the Chart of Accounts for exact wording of account titles.

Definition Definition Arrangement between two or more people whereby they agree to manage business operations and share its profits and losses in an agreed ratio. The agreement 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, and drawings of a partner.

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