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:

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.

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.

Transcribed Image Text:

Premium Pool and Spa Balance Sheet June 30, 2020 Liabilities Accounts payable. Equity Jim Lui. Kent Montavo, capital. Dave Johnson, capital. Total equity. Total liabilities and equity. Assets Cash $ 68,750 $130,375 Machinery.. Less: Accumulated depreciation. $588,750 451,250 $ 76,250 200,875 112,500 137,500 Total assets $520,000 389,625 ...... $520,000 Kent Jim Lui, Dave Machinery Accounts (net) Montavo, Johnson, Capital Capital Cash Payable Capital Account balances June 30, 2020..