Partnership Liquidation exercise
After the accounts are closed on July 3, 2012, prior to liquidating the partnership, the capital accounts of Rebecca Adams, Austin Cooper, and Ricardo Ruiz are $31,500, $5,700, and $23,700, respectively. Cash and noncash assets total $7,200 and $61,300, respectively. Amounts owed to creditors total $7,600. The partners share income and losses in the ratio of 1:1:2. Between July 3 and July 29, the noncash assets are sold for $32,500, the partner with the capital deficiency pays his or her deficiency to the partnership, and the liabilities are paid.
1. Prepare a statement of partnership liquidation, indicating
(a) the sale of assets and division of loss,
(b) the payment of liabilities,
(c) the receipt of the deficiency (from the appropriate partner), and
(d) the distribution of cash.
Enter any subtractions (balance deficiencies, payments, cash distributions, divisions of loss) as negative numbers using a minus sign. If there is no amount or an amount is zero, enter "0".
2. Assume the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency.
a. Journalize the entry to allocate the partner's deficiency. If an amount box does not require an entry, leave it blank.
b. Journalize the entry to distribute the remaining cash. If an amount box does not require an entry, leave it blank.
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