Chapter 12, Problem 6APSA

To determine

To prepare:

Journal entries for liquidation of partnership when inventory is sold for $500,000

Explanation of Solution

Journal entries for liquidation of partnership are as follows:

S.No.	Accounts titles and Explanation	Debit	Credit
(a)	Sale of inventory:
	Cash	$ 500,000.00
	Loss on Sale	$ 37,200.00
	Inventory		$ 537,200.00
	(Being inventory sold for cash)
(b)	Allocation of Gain or loss:
	Kendra's Capital	$ 18,600.00
	Cogley's Capital	$ 12,400.00
	Mei's Capital	$ 6,200.00
	Loss on Sale		$ 37,200.00
	(Being loss shared by partners in the income sharing ratio)
(c)	Payment of Liabilities at book value:
	Accounts Payable	$ 245,500.00
	Cash		$ 245,500.00
	(being liabilities paid at their book value)
(d)	Distribution of cash:
	Kendra's Capital	$ 74,400.00
	Cogley's Capital	$ 200,100.00
	Mei's Capital	$ 160,800.00
	Cash		$ 435,300.00
	(Being Cash distributed to partners)

Working Note:

The distribution of cash is calculated as follows:

	Kendra	Cogley	Mei	Total
Cash				$180,800.00
Add: Sale of Inventory				$500,000.00
Less: Payment of Liabilities				$(245,500.00)
Net Cash Available				$ 435,300.00
Partner's Capital	$93,000.00	$212,500.00	$167,000.00	$472,500.00
Less: Loss on Sale (Shared in the Ratio 3:2:1)	$ (18,600.00)	$ (12,400.00)	$(6,200.00)	$(37,200.00)
Capital Balance/ (Deficit)	$74,400.00	$200,100.00	$160,800.00	$435,300.00
Distribution of Cash	$74,400.00	$ 200,100.00	$ 160,800.00	$ 435,300.00

Requirement-3:

To determine

To prepare:

Journal entries for liquidation of partnership when inventory is sold for $320,000 and the partner with deficit bring it in cash

Explanation of Solution

Journal entries for liquidation of partnership are as follows:

S.No.	Accounts titles and Explanation	Debit	Credit
(a)	Sale of inventory:
	Cash	$ 320,000.00
	Loss on Sale	$ 217,200.00
	Inventory		$ 537,200.00
	(Being inventory sold for cash)
(b)	Allocation of Gain or loss:
	Kendra's Capital	$ 108,600.00
	Cogley's Capital	$ 72,400.00
	Mei's Capital	$ 36,200.00
	Loss on Sale		$ 217,200.00
	(Being loss shared by partners in the income sharing ratio)
(c)	Payment of Liabilities at book value:
	Accounts Payable	$ 245,500.00
	Cash		$ 245,500.00
	(being liabilities paid at their book value)
(d)	Distribution of cash:
	Cogley's Capital	$ 140,100.00
	Mei's Capital	$ 130,800.00
	Kendra's Capital		$ 15,600.00
	Cash		$ 255,300.00
	(Being Cash distributed to partners)

Working Note:

The distribution of cash is calculated as follows:

	Kendra	Cogley	Mei	Total
Cash				$180,800.00
Add: Sale of Inventory				$320,000.00
Less: Payment of Liabilities				$(245,500.00)
Net Cash Available				$ 255,300.00
Partner's Capital	$93,000.00	$212,500.00	$167,000.00	$472,500.00
Less: Loss on Sale (Shared in the Ratio 3:2:1)	$ (108,600.00)	$ (72,400.00)	$ (36,200.00)	$(217,200.00)
Capital Balance/ (Deficit)	$ (15,600.00)	$140,100.00	$130,800.00	$255,300.00
Distribution of Cash	$ (15,600.00)	$ 140,100.00	$ 130,800.00	$ 255,300.00

Requirement-4:

To determine

To prepare:

Journal entries for liquidation of partnership when inventory is sold for $320,000 and the partner with deficit bring it in cash

Explanation of Solution

Journal entries for liquidation of partnership are as follows:

S.No.	Accounts titles and Explanation	Debit	Credit
(a)	Sale of inventory:
	Cash	$ 250,000.00
	Loss on Sale	$ 287,200.00
	Inventory		$ 537,200.00
	(Being inventory sold for cash)
(b)	Allocation of Gain or loss:
	Kendra's Capital	$ 143,600.00
	Cogley's Capital	$ 95,733.33
	Mei's Capital	$ 47,866.67
	Loss on Sale		$ 287,200.00
	(Being loss shared by partners in the income sharing ratio)
(c)	Payment of Liabilities at book value:
	Accounts Payable	$ 245,500.00
	Cash		$ 245,500.00
	(being liabilities paid at their book value)
(d)	Distribution of cash:
	Cogley's Capital	$ 83,033.33
	Mei's Capital	$ 102,266.67
	Cash		$ 185,300.00
	(Being Cash distributed to partners)

Working Note:

The distribution of cash is calculated as follows:

	Kendra	Cogley	Mei	Total
Cash				$180,800.00
Add: Sale of Inventory				$250,000.00
Less: Payment of Liabilities				$(245,500.00)
Net Cash Available				$ 185,300.00
Partner's Capital	$93,000.00	$212,500.00	$167,000.00	$472,500.00
Less: Loss on Sale (Shared in the Ratio 3:2:1)	$ (143,600.00)	$ (95,733.33)	$ (47,866.67)	$(287,200.00)
Capital Balance/ (Deficit)	$ (50,600.00)	$116,766.67	$119,133.33	$185,300.00
Sharing of Deficit pf Kendra's Capital (In the ratio 2:1)	$50,600.00	$ (33,733.33)	$ (16,866.67)
Distribution of Cash	$-	$83,033.33	$ 102,266.67	$ 185,300.00