The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate its business property. A balance sheet drawn up at this time shows the following account balances: Cash $ 64,000 Liabilities $ 44,000 Noncash assets 225,000 Frick, capital (60%) 132,000 Wilson, capital (20%) 36,000 Clarke, capital (20%) 77,000 Total assets $ 289,000 Total liabilities and capital $ 289,000 Part A Prepare a predistribution plan for this partnership. Part B The following transactions occur in liquidating this business: Distributed safe payments of cash immediately to the partners. Liquidation expenses of $9,000 are estimated as a basis for this computation. Sold noncash assets with a book value of $96,000 for $64,000. Paid all liabilities. Distributed safe payments of cash again. Sold remaining noncash assets for $52,000. Paid actual liquidation expenses of $7,000 only. Distributed remaining cash to the partners and closed the financial records of the business permanently. Produce a final statement of liquidation for this partnership using the predistribution plan to determine payments of cash to partners. Part C Prepare journal entries to record the liquidation transactions reflected in the final statement of liquidation.

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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Question

The partnership of Frick, Wilson, and Clarke has elected to cease all operations and liquidate its business property. A balance sheet drawn up at this time shows the following account balances:


Cash	$	64,000	Liabilities	$	44,000
Noncash assets		225,000	Frick, capital (60%)		132,000
			Wilson, capital (20%)		36,000
			Clarke, capital (20%)		77,000
Total assets	$	289,000	Total liabilities and capital	$	289,000

Part A

Prepare a predistribution plan for this partnership.

Part B

The following transactions occur in liquidating this business:

Distributed safe payments of cash immediately to the partners. Liquidation expenses of $9,000 are estimated as a basis for this computation.
Sold noncash assets with a book value of $96,000 for $64,000.
Paid all liabilities.
Distributed safe payments of cash again.
Sold remaining noncash assets for $52,000.
Paid actual liquidation expenses of $7,000 only.
Distributed remaining cash to the partners and closed the financial records of the business permanently.

Produce a final statement of liquidation for this partnership using the predistribution plan to determine payments of cash to partners.

Part C

Prepare journal entries to record the liquidation transactions reflected in the final statement of liquidation.

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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