The Discount Partnership is being liquidated. The current balance sheet is shown here. Discount Partnership Balance Sheet January 14, 2008. Assets Cash $ 25,000 Other assets 120,000 Total assets $145,000 Liabilities and Partners’ Equity Accounts payable $ 40,000 Dawson, capital 31,000 Feeney, capital 65,000 Hardin, capital 9,000 Total liabilities and partners’ equity $145,000 Dawson, Feeney, and Hardin share profits and losses in a 30:40:30 ratio.
January 14, 2008
Assets
Cash $ 25,000
Other assets 120,000
Total assets $145,000
Liabilities and Partners’ Equity
Accounts payable $ 40,000
Dawson, capital 31,000
Feeney, capital 65,000
Hardin, capital 9,000
Total liabilities and partners’ equity $145,000
Dawson, Feeney, and Hardin share profits and losses in a 30:40:30 ratio.
Required:
A. Prepare a schedule of partnership liquidation for each of the following three independent cases.
(1) The noncash assets are sold for $60,000, and any partner with a deficit is unable to eliminate any of the deficit.
(2) The noncash assets are sold for $60,000, and any partner with a deficit is able to invest cash equal to the amount of the deficit.
(3) The noncash assets are sold for $50,000, and any partner with a deficit is able to invest up to $8,000 cash in the partnership.
B. Prepare all necessary journal entries for case 2 above.