The three partners of Summer Springs Medical Clinic agree to liquidate their partnership on September 15, 2021. At that point, the accounting records show the following balances:

The three partners share profit and loss 50%, 25%, and 25%, for Nokota, Taishuh, and Paso, respectively.

Instructions

a. Journalize the liquidation of the partnership on September 30 under each of the following independent assumptions:

1. The supplies are sold for $130,000 cash, the liabilities are paid, and the remaining cash is paid to the partners.

2. The supplies are sold for $25,000 cash and the liabilities are paid. Assume that any partners with a debit capital balance pay the amount owed to the partnership.

b. Refer to item 2 in part (a) above. Assume instead that any partners with a debit capital balance are unable to pay the amount owed to the partnership. Journalize the reallocation of the deficiency and final distribution of cash to the remaining partners.

Taking It Further

For what reasons would a partnership decide to liquidate?

Transcribed Image Text:

M. Nokota, capital S. Taishuh, capital A. Paso, capital Cash $70,000 30,000 20,000 $100,000 Supplies 110,000 Accounts payable