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 balances are as follows: Cash . . . . . . . . . . . . . . . . . . . $ 11,000 Liabilities . . . . . . . . . . . . . . . $ 61,000Accounts receivable . . . . . 84,000 March, capital . . . . . . . . . . . . 25,000Inventory . . . . . . . . . . . . . . . 74,000 April, capital . . . . . . . . . . . . 75,000Land, building, and equipment (net) . . . . . . . 38,000 May, capital . . . . . . . . . . . . 46,000 Prepare journal entries for the following transactions:a. Sold all inventory for $56,000 cash.b. Paid $7,500 in liquidation expenses.c. Paid $40,000 of the partnership’s liabilities.d. Collected $45,000 of the accounts receivable.e. Distributed safe cash balances; the partners anticipate no further liquidation expenses.f. Sold remaining accounts receivable for 30 percent of face value.g. Sold land, building, and equipment for $17,000.h. Paid all remaining liabilities of the partnership.i. Distributed cash held by the business to the partners.
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.
March, April, and May have been in
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 balances are as follows:
Cash . . . . . . . . . . . . . . . . . . . $ 11,000 Liabilities . . . . . . . . . . . . . . . $ 61,000
Inventory . . . . . . . . . . . . . . . 74,000 April, capital . . . . . . . . . . . . 75,000
Land, building, and
equipment (net) . . . . . . . 38,000 May, capital . . . . . . . . . . . . 46,000
Prepare
a. Sold all inventory for $56,000 cash.
b. Paid $7,500 in liquidation expenses.
c. Paid $40,000 of the partnership’s liabilities.
d. Collected $45,000 of the accounts receivable.
e. Distributed safe cash balances; the partners anticipate no further liquidation expenses.
f. Sold remaining accounts receivable for 30 percent of face value.
g. Sold land, building, and equipment for $17,000.
h. Paid all remaining liabilities of the partnership.
i. Distributed cash held by the business to the partners.
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