March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 2:3:1 basis, respectively. Recently, each partner has become personally insolvent and, thus, the partners have decided to liquidate the business in hopes of remedying their personal financial problems. As of September 1, the partnership’s balance sheet is as follows: Cash $ 18,000 Liabilities $ 66,000 Accounts receivable 98,000 March, capital 32,000 Inventory 75,000 April, capital 82,000 Land, building, and equipment (net) 42,000 May, capital 53,000 Total assets $ 233,000 Total liabilities and capital $ 233,000 Prepare journal entries for the following transactions: (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) Sold all inventory for $63,000 cash. Paid $9,600 in liquidation expenses. Paid $47,000 of the partnership’s liabilities. Collected $53,000 of the accounts receivable. Distributed safe payments of cash; the partners anticipate no further liquidation expenses. Sold remaining accounts receivable for 20 percent of face value. Sold land, building, and equipment for $24,000. Paid all remaining liabilities of the partnership. Distributed cash held by the business to the partners.

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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March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 2:3:1 basis, respectively. Recently, each partner has become personally insolvent and, thus, the partners have decided to liquidate the business in hopes of remedying their personal financial problems. As of September 1, the partnership’s balance sheet is as follows:


Cash	$	18,000	Liabilities	$	66,000
Accounts receivable		98,000	March, capital		32,000
Inventory		75,000	April, capital		82,000
Land, building, and equipment (net)		42,000	May, capital		53,000
Total assets	$	233,000	Total liabilities and capital	$	233,000

Prepare journal entries for the following transactions: (Do not round intermediate calculations. If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Sold all inventory for $63,000 cash.
Paid $9,600 in liquidation expenses.
Paid $47,000 of the partnership’s liabilities.
Collected $53,000 of the accounts receivable.
Distributed safe payments of cash; the partners anticipate no further liquidation expenses.
Sold remaining accounts receivable for 20 percent of face value.
Sold land, building, and equipment for $24,000.
Paid all remaining liabilities of the partnership.
Distributed cash held by the business to the partners.

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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