The MFP Partnership is to be liquidated when the ledger shows the following:Cash $50,000Noncash Assets 200,000Liabilities 50,000Mossimo, Capital 75,000Fandango, Capital 100,000Plank, Capital 25,000Mossimo, Fandango, and Plank’s income ratios are 6:3:1, respectively.Prepare separate entries to record the liquidation of the partnership assuming that the noncash assets are sold for $140,000 in cash.

Loss on sale of Noncash Assets = Carrying value of Noncash Assets - Sale value = 200000-140000 = $60,000DATE ACCOUNTS DEBIT CREDIT Cash 140000 Loss on sale of Noncash Assets 60000 Noncash Assets 200000 Mossimo's capital A/c 36000 Fandango's capital A/c 18000 Plank's capital A/c 6000 Loss on sale of Noncash Assets 60000 Liabilities 50000 Cash 50000 Mossimo's capital A/c 52500 Fandango's capital A/c 70000 Plank's capital A/c 17500 Cash 140000

Answered: The MFP Partnership is to be liquidated…

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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The MFP Partnership is to be liquidated when the ledger shows the following:

Cash		$50,000
Noncash Assets		200,000
Liabilities		50,000
Mossimo, Capital		75,000
Fandango, Capital		100,000
Plank, Capital		25,000

Mossimo, Fandango, and Plank’s income ratios are 6:3:1, respectively.

Prepare separate entries to record the liquidation of the partnership assuming that the noncash assets are sold for $140,000 in cash.

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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