Lui, Montavo, and Johnson plan to liquidate their Premium Pool and Spa business. They have always shared

Question:

Lui, Montavo, and Johnson plan to liquidate their Premium Pool and Spa business. They have always shared profit and losses in a 1:4:5 ratio, and on the day of the liquidation their balance sheet appeared as follows:

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Required

Part 1

Under the assumption that the machinery is sold and the cash is distributed to the proper parties on June 30, 2020, complete the schedule provided below.

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Show the sale, the gain or loss allocation, and the distribution of the cash in each of the following unrelated cases:

a. The machinery is sold for $488,130.

b. The machinery is sold for $375,000.

c. The machinery is sold for $212,500, and any partners with resulting deficits can and do pay in the amount of their deficits.

d. The machinery is sold for $187,500, and the partners have no assets other than those invested in the business.

Part 2

Prepare the entry to record the final distribution of cash assuming case (a) above.

Distribution
The word "distribution" has several meanings in the financial world, most of them pertaining to the payment of assets from a fund, account, or individual security to an investor or beneficiary. Retirement account distributions are among the most...
Liquidation
Liquidation in finance and economics is the process of bringing a business to an end and distributing its assets to claimants. It is an event that usually occurs when a company is insolvent, meaning it cannot pay its obligations when they are due....
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Related Book For  book-img-for-question

Fundamental Accounting Principles Volume II

ISBN: 978-1260305838

16th Canadian edition

Authors: Kermit Larson, Tilly Jensen, Heidi Dieckmann

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