After the accounts are closed on September 10, 2015, prior to liquidating the partner- ship, the capital accounts of Kris Harken, Brett Sedlacek, and Amy Eldridge are $31,000, $5,700, and $24,500, respectively. Cash and inventory total $7,800 and $61,400, respec- tively. Amounts owed to creditors total $8,000. The partners share income and losses in a ratio of 1:1:2. Between September 10 and September 30, the inventory is sold for $32,600, the partner with the capital deficiency pays his or her deficiency to the part- nership, and the liabilities are paid.

Instructions

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.

2. Assume the partner with the capital deficiency declares bankruptcy and is unable to pay the deficiency. Journalize the entries to (a) allocate the partner's deficiency and (b) distribute the remaining cash.