Irby, Jalisco, and Whitehorse are partners in a video rental business, sharing profits and losses in a 2:1:1 ratio. Business has decreased due to the number of other rental stores in their area. They decide it would be best to liquidate. Their December 31, 20XX balance sheet information is as follows. Balance Sheet Information Cash $15,000 Video Inventory 75,000 Accounts Payable 25,000 Irby, Capital 25,000 Jalisco, Capital 20,000 Whitehorse, Capital 20,000 I n s t r u c t i o n s Prepare Liquidation statement and the related general journal entries to show: (1) the sale of the noncash assets; (2) the distribution of the losses or gains; (3) the payment to the creditors; and (4) the final distribution of cash under each of the following independent assumptions. a. The video inventory is sold for $63,000. b. The video inventory is sold for $25,000 c. The video inventory is sold for $20,000 and the partner with the deficit can and does pay from personal assets.
Irby, Jalisco, and Whitehorse are partners in a video rental business, sharing profits and losses in a 2:1:1 ratio. Business has decreased due to the number of other rental stores in their area. They decide it would be best to liquidate. Their December 31, 20XX balance sheet information is as follows. Balance Sheet Information Cash $15,000 Video Inventory 75,000 Accounts Payable 25,000 Irby, Capital 25,000 Jalisco, Capital 20,000 Whitehorse, Capital 20,000 I n s t r u c t i o n s Prepare Liquidation statement and the related general journal entries to show: (1) the sale of the noncash assets; (2) the distribution of the losses or gains; (3) the payment to the creditors; and (4) the final distribution of cash under each of the following independent assumptions. a. The video inventory is sold for $63,000. b. The video inventory is sold for $25,000 c. The video inventory is sold for $20,000 and the partner with the deficit can and does pay from personal assets.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Irby, Jalisco, and Whitehorse are partners in a video rental business, sharing profits and losses in a 2:1:1 ratio. Business has decreased due to the number of other rental stores in their area. They decide it would be best to liquidate. Their December 31, 20XX balance sheet information is as follows.
Balance Sheet Information
Cash $15,000
Video Inventory 75,000
Accounts Payable 25,000
Irby, Capital 25,000
Jalisco, Capital 20,000
Whitehorse, Capital 20,000
I n s t r u c t i o n s
Prepare Liquidation statement and the related general journal entries to show: (1) the sale of the noncash assets; (2) the distribution of the losses or gains; (3) the payment to the creditors; and (4) the final distribution of cash under each of the following independent assumptions.
a. The video inventory is sold for $63,000.
b. The video inventory is sold for $25,000
c. The video inventory is sold for $20,000 and the partner with the deficit can and
does pay from personal assets.
d. The same assumption as c above, except the partner with the deficit cannot pay.
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