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 60,000
Noncash assets 219,000
Liabilities 40,000
Frick, capital (60%) 129,000
Wilson, capital (20%) 35,000
Clarke, capital (20%) 75,000
Part A: Prepare a pre distribution plan for this partnership.
Part B: The following transactions occur in liquidating this business:
1. Distributed cash based on safe balances immediately to the partners. Liquidation expenses of $8,000 are estimated as a basis for this computation.
2. Sold noncash assets with a book value of $94,000 for $60,000.
3. Paid all liabilities
4. Distributed cash based on safe capital balances again
5. Sold remaining noncash assets for $51,000
6. Paid actual liquidation expenses
7. 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 based on safe capital balances.
Part C: Prepare journal entries to record the liquidation transactions reflected in the final statement of liquidation.