Problem
March, April, and May have been in partnership for a number of years. The partners allocate all profits and losses on a 2:3:1 basis, respectively. Recently, each partner has become personally insolvent and, thus, the partners have decided to liquidate the business in hopes of remedying their personal financial problems. As of September 1, the partnership's balance sheet is as follows:
|
Cash
|
32,000
|
Liabilities
|
135,000
|
|
Accounts receivable
|
126,000
|
March, capital
|
50,000
|
|
Inventory
|
116,000
|
April, capital
|
96,000
|
|
Land, building, and equipment (net)
|
74,000
|
May, capital
|
67,000
|
|
Total assets
|
348,000
|
Total liabilities and capital
|
348,000
|
Prepare journal entries for the following transactions:
a. Sold all inventory for $77,000 cash.
b. Paid $13,800 in liquidation expenses.
c. Paid $61,000 of the partnership's liabilities.
d. Collected $80,000 of the accounts receivable.
e. Distributed safe cash balances; the partners anticipate no further liquidation expenses.
f. Sold remaining accounts receivable for 25 percent of face value.
g. Sold land, building, and equipment for $38,000.
h. Paid all remaining liabilities of the partnership.
i. Distributed cash held by the business to the partners.