Answered: Determine the amount received by Jenny…

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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Question

Prior to liquidating their partnership, Craig and Jenny had capital accounts of $60,570 and $116,570, respectively. The partnership assets were sold for $214,550. The partnership had $23,370 of liabilities. Craig and Jenny share income and losses equally.

Determine the amount received by Jenny as a final distribution from liquidation of the partnership.

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.

Expert Solution

Step 1: Introduction

Liquidation is the process of winding up the company by selling all the assets to generate funds to pay off the outstanding liabilities. The partners distribute the money derived from sale of assets if any assets are left after settlement of the liabilities and the partners are asked to get more capital if assets aren't enough to settle the dues.

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