Partners in Game Tech Partnership decided to liquidate the partnership on June 30, 2021, when the balances in the partnership?s accounts were as follows:

The partners share profit and loss 5:3:2 for Hunt, Lally, and Portman, respectively.

Instructions

a. Complete the schedule and prepare the journal entries for the liquidation of the partnership assuming the noncash assets were sold for $59,800, liabilities are paid, and the cash is distributed appropriately.

b. Complete the schedule and prepare the journal entries assuming the assets were sold for $45,000, liabilities are paid, and any deficiencies will be paid by the deficient partner. Include the journal entries to record the distribution of cash.

c. Complete the schedule and prepare the journal entries assuming the assets were sold for $30,000, liabilities are paid, and any deficiencies will be absorbed by the other partners. Include the journal entries to record the distribution of cash.

Taking It Further

When determining how the cash is distributed to partners in a liquidation, the profit and loss ratio should be used. Is this correct or incorrect? Why?

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Accounts Receivable Accumulated Depreciation K. Lally, Capital D. Portman, A. Hunt, Capital Accounts Item Equipment Payable Cash Capital Balances before liquidation $32,600 $28,000 $48,600 $16,800 $30,200 $42,100 $18,800 $1,300