12.8

On August 3, 2014, the firm of Chapelle, Rock, and Pryor decided to liquidate their partnership. The partners have capital balances of $14,000, $102,000, and $86,000, respectively. The cash balance is $65,000, the book values of noncash assets total $167,000, and liabilities total $30,000. The partners share income and losses in the ratio of 1:2:2.

Required:

1. Prepare a statement of partnership liquidation, covering the period August 329, 2014, for each of the following independent assumptions:

a. All of the noncash assets are sold for $217,000 in cash, the creditors are paid, and the remaining cash is distributed to the partners. Enter any subtractions (balance deficiencies, payments, cash distributions, divisions of loss) as negative numbers using a minus sign. If there is no amount or an amount is zero, enter "0".

Chapelle, Rock, and Pryor Statement of Partnership Liquidation For Period August 329, 2014

Cash

+

Noncash Assets

=

Liabilities

+

Capital Chapelle (1/5)

+

Capital Rock (2/5)

+

Capital Pryor (2/5)

Balances before realization

$

$

$

$

$

$

Sale of assets and division of gain

Balance after realization

$

$

$

$

$

$

Payment of liabilities

Balance after payment of liabilities

$

$

$

$

$

$

Cash distributed to partners

Final balances

$

$

$

$

$

$

b. All of the noncash assets are sold for $72,000 in cash, the creditors are paid, the partner with the debit capital balance pays the amount owed to the firm, and the remaining cash is distributed to the partners. Enter any subtractions (balance deficiencies, payments, cash distributions, divisions of loss) as negative numbers using a minus sign. If there is no amount or an amount is zero, enter "0".

Chapelle, Rock, and Pryor Statement of Partnership Liquidation For Period August 329, 2014

Cash

+

Noncash Assets

=

Liabilities

+

Capital Chapelle (1/5)

+

Capital Rock (2/5)

+

Capital Pryor (2/5)

Balances before realization

$

$

$

$

$

$

Sale of assets and division of loss

Balance after realization

$

$

$

$

$

$

Payment of liabilities

Balance after payment of liabilities

$

$

$

$

$

$

Receipt of deficiency

Balances

$

$

$

$

$

$

Cash distributed to partners

Final balances

$

$

$

$

$

$

2. Assume the partner with the capital deficiency in part (b) above declares bankruptcy and is unable to pay the deficiency.

a. Journalize the entry to allocate the partner's deficiency. For a compound transaction, if an amount box does not require an entry, leave it blank.

ACCOUNT	DEBIT	CREDIT
SelectCashChapelle, CapitalChapelle, DrawingPryor, DrawingRock, CapitalRock, Drawing
SelectCashChapelle, CapitalChapelle, DrawingPryor, CapitalPryor, DrawingRock, Drawing
SelectCashChapelle, CapitalChapelle, DrawingPryor, CapitalRock, Capital

b. Journalize the entry to distribute the remaining cash. For a compound transaction, if an amount box does not require an entry, leave it blank.

ACCOUNT	DEBIT	CREDIT
SelectCashPryor, DrawingChapelle, CapitalChapelle, DrawingRock, CapitalRock, Drawing
SelectCashChapelle, CapitalChapelle, DrawingPryor, CapitalPryor, DrawingRock, Drawing
SelectCashChapelle, CapitalChapelle, DrawingPryor, CapitalRock, Capital