The partnership of Folly and Frill is in the process of liquidation. On January 1, 2021, the books show account balances as follows: Cash 10,000 Accounts Payable 15,000 Accounts Receivable 25,000 Folly Capital 40,000 Lumber Inventory 40,000 Frill Capital 20,000 On January 10, 2021, the lumber inventory is sold for $25,000. During January, Accounts Receivable of $21,000 are collected. No further collections on the receivables are expected. Profits are shared 60% to Folly and 40% to Frill. 1) Compute the final distribution to Folly 2) Compute the final distribution to Frill
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.
The
show account balances as follows:
Cash 10,000 Accounts Payable 15,000
Accounts Receivable 25,000 Folly Capital 40,000
Lumber Inventory 40,000 Frill Capital 20,000
On January 10, 2021, the lumber inventory is sold for $25,000. During January, Accounts
Receivable of $21,000 are collected. No further collections on the receivables are expected.
Profits are shared 60% to Folly and 40% to Frill.
1) Compute the final distribution to Folly
2) Compute the final distribution to Frill
Meaning of Liquidation of Partnership :
It is the process of closing the partnership. Assets are sold, liabilities are paid off, and any remaining cash is distributed to the partners.
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